Rome Heavy candlesticks on the tables, the ceiling covered with frescoes, art framed in gold on the walls. The main actors of the evening, to which Andrea Illy invited guests in one of the most beautiful palazzi in Rome, are almost lost in all the pomp: coffee farmers from all over the world who are being awarded prizes for their bean harvest. They come from Brazil, Colombia, India, a total of nine countries from which Illy and his espresso company of the same name import their raw materials.
The family company from north-east Italy is doing well, despite the pandemic and the war in Ukraine, despite rising energy and transport costs. In 2021, sales were half a billion euros, an increase of 17.4 percent compared to the previous year. And the first half of 2022 was also strong, with sales increasing by 21 percent compared to the same period last year.
The catering and hotel industry is making a comeback and has grown by 30 percent in Italy alone. The home division, which has become increasingly important since Corona, also continued to grow. In China, total sales climbed 16 percent. In the USA by around a third – thanks to a cooperation with Amazon.
In terms of profits, Illy assumes that shortly before the end of the year, the company will even exceed 2019, i.e. the time before the pandemic. But the 58-year-old, whose company will be celebrating its 90th birthday next year, is still concerned about the future – mainly because of the climate.
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“Coffee is a tropical crop, so it is only grown in countries below the equator and is suffering greatly from climate change,” says Illy, who has been on the board of directors since 2005. Coffee cultivation urgently needs to be adapted to climate change.
>> Read here: How the ex-boss of the Illy coffee brand pulls the strings in the background
The problem: Half of the coffee-growing areas can no longer be cultivated by 2050 as a result of climate change. “We realized that we need to increase investment in resilience,” says Illy.
It needs better irrigation, shading, biological diversity. “The second insight is that we need to develop new hybrid varieties that are better adapted to ecosystems and can survive high temperatures and droughts.”
25 million families work in coffee cultivation
Illy works directly with the coffee farmers on site and has founded a “coffee university” with more than 20 locations, where the know-how collected during cultivation is passed on. “And we pay a significant surcharge, around 30 percent, to reward coffee farmers’ investments in sustainable quality,” emphasizes Illy.
He calls sustainability his “obsession”.
(Photo: Illycaffè SpA)
But the company from Trieste cannot turn the entire industry upside down. Compared to US coffee giants like Starbucks with around 29 billion dollars in sales or Italy’s industry leader Lavazza with 2.3 billion euros in sales, Illy is a medium-sized player.
But one who wants to keep growing: The company is to go public by 2026, that is the plan of the new CEO Cristina Scocchia, who has been in office since the beginning of the year. For 2023, she predicts “increasing uncertainty and volatility” due to the faltering global economy and geopolitical conflicts. The coming year will be “complex and challenging”.
According to the International Coffee Organization (ICO), around 25 million families in more than 50 countries are involved in coffee cultivation. More than three billion cups of coffee are drunk around the world every day.
In order to enable the entire industry to adapt to climate change, Andrea Illy is now proposing an international fund. The “Coffee Resilience Fund” is intended to collect money from institutions and the private sector to finance the necessary investments. Illy has been dealing with sustainability for 40 years, calling it his “obsession”. The Italian is actually a chemist and recently took a sabbatical to work on “virtuous agriculture”.
The aim is to practice cultivation sustainably, to regenerate arable land, enrich it with organic carbon and at the same time reduce pollutants. “The soil becomes more fertile, more resistant, needs less mineral fertilizers and pesticides,” explains Illy.
He is already using the new concept on three plantations. The results of the farms are to be passed on to the partner farmers via the coffee university. “The next step will be to reward the farmers with a higher price for ecological services.” Illy believes that consumers are also ready for this – despite the high inflation. “Organic food is a niche market, but consumers pay between 10 and 20 percent more for the environment.”
She has been in office since early 2022.
(Photo: Illycaffè SpA)
Two years ago, Illy founded the Regenerative Society Foundation together with other Italian companies. Illy runs the foundation together with the US economist and sustainability expert Jeffrey Sachs.
Their ideal model is based on nature: every new product must also be compostable again, an eternal circular economy. “We must develop the world economy according to these principles in order to regenerate the biosphere,” says Illy. Because everything depends on it: the air, the drinking water, the food. “Without biodiversity there are diseases, we saw that with Corona.”
Illy sees a quick learning curve with the new Meloni government
Illy doesn’t believe in the rhetoric that ecological change comes at a great cost. “Yes, it is a big investment, but it pays off,” he is convinced. He sees more and more movement in his industry, with some companies leading the way, also financially – but all of them are committed to the topic. “Those who do not implement the ecological change endanger their survival.”
Illy looks calmly at Italy’s new right-wing government led by Prime Minister Giorgia Meloni. “A few weeks ago I was even more worried than I am now,” he admits. The alliance went through a rapid learning curve. Much will depend on what kind of reforms Meloni and Co. seek. “If these do not serve the security and stability of the country, but are aimed at political dominance, this could further destabilize the country.”
Italian entrepreneurs would have to be very flexible anyway because of the frequent changes in government. Italy’s greatest weakness, political instability, can also be seen as a strength. “If a country still manages to remain one of the world’s greatest powers, even though there has been a new government every 18 months for 60 years, then the country seems to be functioning fundamentally.”
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