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    Jeriline Rian
    Andrea Illy, CEO of Illycaffè, dreams of transforming the global coffee market into one similar to the wine market, where connoisseurs appreciate high quality origin coffees and roasters/growers are fairly compensated. Currently, coffee growers struggle at subsistence levels and have little connection to roasters or customers. Illy believes a "virtuous circle" is needed where growers, roasters, baristas, and customers are connected and premiums paid by customers flow back to growers. While specialty coffee represents progress, it remains a small market, and new trends may not emphasize origin or fair trade. Illy hopes an innovation can solidify specialty coffee and reshape the global market

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    Case Study

    Uploaded by

    Jeriline Rian
    736 views2 pages
    Andrea Illy, CEO of Illycaffè, dreams of transforming the global coffee market into one similar to the wine market, where connoisseurs appreciate high quality origin coffees and roasters/growers are fairly compensated. Currently, coffee growers struggle at subsistence levels and have little connection to roasters or customers. Illy believes a "virtuous circle" is needed where growers, roasters, baristas, and customers are connected and premiums paid by customers flow back to growers. While specialty coffee represents progress, it remains a small market, and new trends may not emphasize origin or fair trade. Illy hopes an innovation can solidify specialty coffee and reshape the global market

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    Andrea Illy, CEO of Illycaffè, dreams of transforming the global coffee market into one similar to the wine market, where connoisseurs appreciate high quality origin coffees and roasters/growers are fairly compensated. Currently, coffee growers struggle at subsistence levels and have little connection to roasters or customers. Illy believes a "virtuous circle" is needed where growers, roasters, baristas, and customers are connected and premiums paid by customers flow back to growers. While specialty coffee represents progress, it remains a small market, and new trends may not emphasize origin or fair trade. Illy hopes an innovation can solidify specialty coffee and reshape the global market

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    736 views2 pages

    Case Study

    Uploaded by

    Jeriline Rian
    Andrea Illy, CEO of Illycaffè, dreams of transforming the global coffee market into one similar to the wine market, where connoisseurs appreciate high quality origin coffees and roasters/growers are fairly compensated. Currently, coffee growers struggle at subsistence levels and have little connection to roasters or customers. Illy believes a "virtuous circle" is needed where growers, roasters, baristas, and customers are connected and premiums paid by customers flow back to growers. While specialty coffee represents progress, it remains a small market, and new trends may not emphasize origin or fair trade. Illy hopes an innovation can solidify specialty coffee and reshape the global market

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    Coffee 2016

    Overview:

    Andrea Illy is CEO of the global premium coffee company that bears his family’s name. As one
    might expect, he is passionate about coffee – its science, its health benefits, its taste, its beauty.
    Illy also has a dream that someday soon the coffee market might be transformed into
    something approaching the market for wine. Where connoisseurs discuss the fine points of
    various origin coffees and blends, where customers are willing to pay a premium for the finest
    examples of the coffee-making art, and where the growers, roasters and baristas will be
    compensated fairly for the expertise they contribute to every cup.

    Unfortunately, the current coffee market differs from such an ideal. Coffee growers in most
    parts of the globe work at a barely subsistence level. One bad harvest (made all the more likely
    by the ravages of climate change) or a sudden decline in the commodity price of coffee can
    drop them below subsistence to hunger. Even in good times, growers have little incentive to
    improve their operation – they have minor contact with the roasters or customers and no
    knowledge of how their crops get translated into the cup. This disadvantages not only the
    grower but also the consumer – coffee sourced from good quality beans is hard to find.

    lly believes that the solution to the sad state of affairs is to initiate a “virtuous circle” that draws
    the grower, the roaster, the barista and customer together. Growers with better knowledge of
    the market will work to improve their crops or experiment with new varieties. Roasters and
    preparers will educate their customers as to the qualities of various beans, roasts and
    preparations. Customers, in turn, will be willing to pay more for the best beans and that
    premium will be sent back up the chain to pay for even more quality and variety. And so on.

    Certainly, there have been some positive signs. Indeed, many observers argued that a “third-
    wave” of transformation in the coffee market was already starting. (The first wave is said to
    have occurred when Maxwell House and Folgers made coffee a mass commodity, the second
    wave when Starbucks initiated a move to quality and higher prices.) Specialty coffee roasters
    had worked to build cafes and brands around origin-based beans sold directly to the roasters
    without reference to the commodity prices of coffee. With these third-wave roasters, every
    coffee came with a story of its origins and growers could count on occasionally eye-popping
    premiums for their beans.
    As yet, specialty coffee represented a small sliver of the overall market and there were other
    signs that it might not ever grow beyond a small circle. New trends like coffee-based drinks and
    single-portion coffee in pods (e.g. K-cups, Nespresso) actually shifted more of the value-added
    towards roasters without a premium for growers. A consolidation was taking place among mass
    roasters that was even sweeping-up third-wave roasters in its wake. Observers argued that
    could lead to greater uniformity with even less emphasis on origin-based, direct-traded coffee.

    Illy’s hope is that someone would come up with an innovation that would solidify the
    beginnings of the third wave and help reshape the market. Such a change would not necessarily
    have to involve illycaffè; Andrea Illy believes as the world’s premium brand, an increased
    emphasis on quality in the market would only help his company. The most important thing was
    to make the coffee supply chain more equitable and coffee better-tasting.

    Source: https://som.yale.edu/case/2016/coffee-2016
    Suggested Citation:
    Cathy Forman, Jaan Elias, Todd Cort and Jean Rosenthal “Coffee 2016,” Yale SOM Case 16-013,
    April 1, 2016

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