Illy cafe-and-illy-group a case study

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Maria Stefanou ([email protected])Hoang Pham Hai ([email protected])

Lui Lan ([email protected])Buru Meressa Abraha ([email protected])Achamyeleh Dagnaw ([email protected])

Illy Cafe and Illy Group Case

winning mix of Illy's marketing activities

the right product• single, unique, perfect blend of coffee with consistant taste cup after

cup, year per year• 100% Arabica beans, the compony employed a master blender

(liquorer)• three main products: espresso and cappucino products, brewed coffee

(U.S.A), moka pot (morning italian habit)plus 3-klg tin of coffee beans for commercial use (novel packaging technique)

• E.S.E espresso pods and E.S.E compatible espresso machine, Metodo Iperespresso (next generation espresso capsule technology)

• In 2005 exept from its niche product line Illy Cafe formed a new entity, Gruppo Illy SpA, provides also premium food products: tea, chocolate, candied fruit,wine

• ''Illy Issimo line'' (ready-to-drink product)

winning mix of Illy's marketing acrivities

sold at the right price• Illy makes one brand, best in the world but is an accessible luxury for

millions

''It's like making a Ferrari, but not making any cheaper version of the same car''

• price relatively higher than its competitors but this is compensated by high quality products, innovation, focus-on-education orientation offering high levels of expirience to the customers


in the right place• away-from-home market:

I. Illycaffe's market consisted of franchising: ''espressamente illy cafes'' (230 espressamente illy cafes in 34 countries on 5 continents), restaurants and hotels

II. Illycaffe aligned itself with coffee shops such as Greco Cafe (San Francisco),

Cafe Nineteen in Atlanta (Georgia)

III. 25% U.S. retail stores including stores such as Willians-Somona, Sur La Table, Whole Foods (upscale locathion)

IV. 800 Safeway Stores selected by Illy (because their customers were predisposed to quality)

• Italy and abroad: cafes agreed to serve illy exclusively (program Artisti del Grupo)


using the most suitable promotion• 1999 Universita del Caffe: training and educational activities, courses

for the consumers, tasting events, coffe-themed dinners• North America: ''experiential marketing'' a complete coffee experience

(Soho New York art gallery: art and shop combined with coffe seminars)

• e-store at illyUSA.com (illy offered a coffe machine for a subscribtion of coffe)

• Safeway stores's illy team members (helped retailers develop an effective program in terms of product and solutions for teaching consumers how to make better coffee at home)

• partnership with Williams-Somona offering sessions on coffee at shops with training facilities


using the right people and processes• people: thrigh generation of managers with common goals

ethical dimention of the company (the brand had to be designed and created on the basis of a promise given to the consumer)

focused on investment in research and innovation

endless pursuit of quality

• process: for illy the delivery of its services its integral part for its success

what illy offers to customers in beyond product itself is experience, is lifestyle

Illy's strategy to challenge assignments in the Global Market

Illy has involved into a global brand

I. By targeting the right markets, areas of business and line of products

understanding different ethic and cultural segments

U.S.→highly developed consumers-at-home segment (brewed coffee)

South Europe→highly developed coffee bar culture (cafes serve Illy exclusively)

Italy→moka pot coffee (Italian's morning habit)


Illy has involved into a global brandII. By choosing to invest heavily in quality and in scientific and

technological innovation and education

quality: Illy pay Brazilian producers a higher premium if their product matches their high standarts (a clear example of growing the pie larger)

scientific and technological innovation: innovative shipping containers, bi-chromatic system detecting and eliminating beans that do not meet color standarts, qualified technologies to control all aspects of production, collaboration with universities and scientific centers

education: a fontamental Illycaffe and Groupo Illy's strategy was the Universita del Caffe


Illy has involved into a global brandIII. By enlisting artist and designers to produce beautiful espresso machines

and cups ''The Illy brand has always been assotiated with the arts'' said Fea

Soho New York art gallery helped to built the brand by using publing relations efforts and experiential marketing over traditional advertising

IV. By charging higher price in partnership with Coca-Cola Ilko Coffee International, bringing a line of Italian ready-to-dring

products entered in a dominated by Japan market (with three-quarters of the global market) and in one year achieved 30% market share globaly''we are not company that makes rash desitions when it comes to our

coffee''


Illy has involved into a global brand

V. By following strategic acquisitions:

40% share in Agrimontana, 80% share of Domori, a stake in Damman Freres and in Mastrojanni

reinforce positioning on the top quality segment

strengthen internationalization

facilitate the procedures and reduce costs for distribution and organization

long-term growth oriented by acquistion & cross selling

Illy and Nespresso's marketing strategy

Simillarities Both focused on high-quality coffee experience.

Having stores at the best locations.

Sharing their knowledge (not an act of charity but a business model)

Differences Illy also offers open products like E.S.E. (easy serving espresso)

Whereas, Nespresso has been following a closed strategy. Its coffee

capsules or pods are restricted to be used only by its own coffee

machines.


Differences When Nespresso is a part of Nestle group then Illy has acquired a share

in small companies (in order to reduces risk, divers portfolio…etc).

Therefore, Nespresso can use resources from Nestle while Subsidiaries of

Illy are able to use resources and sharing technology from Illy in term of

building sustainable capability and competences.

Nespresso “seems” to focus on promoting their brand by using social media and digital marketing. Nespresso has a huge plan as its advertising campaigns are concerned mainly by using star's endorsment and George Clooney as an Ambassandor


DifferencesOn the other hand, Illy believes that in order to really convert a consumer

in drinking Illy, they need to actively engage them. The company launched plenty of projects, in which customers can try the Illy coffee(or machines) then assosciated members talk to them a little bit and educate them about the coffee.

Distribution:

Nespresso: focus on certain channels (e-shop)

Illy: many different channels.

Price:

Nespresso is really expensive compare with Illy.

lessons can be learned from Illy case

A strategic planning based on corporate's culture increases loyalty between the company and its customers

By investing in quality, education and scientific and technological innovation strengthens your brand and your corporate value

Market segmentation and targeting are of paramount importance for producing tailored-made products fitting in the markets needs and tendencies

A loylty relationship with your suppliers, avoiding middlemen, save you more money to invest in other sectors

A long-term plan helping you to avoid obstacles and diversify when it is required by creating the right partnerships

''we don't make coffee, we deliver the passion for quality lifestyle and expirience''

suggestions for Illy's future marketing activities

Illy is tagged along with fine dining

suggestion: collabotation with premium-beer and fine-wine companies in order to bring its customers a full-proof experience

The illy brand has always been assotiated with arts

suggetion: new progects as for illy to discover the artists who will be the great masters of futeres

There is always room for further expansion

suggetion: long-term planning for potetional markets illy could invest

Illy is constantly focused in research and its braning

suggestion: should keep following its uncompromising quest to provide the perfect coffee, from bean to cup

The is no doupt illycaffe is a lucrative business that pursues excellence.

the huge success of italian companies in the Global Market

Main reasons: Reducing lack of Consumers Awareness

Focus on History and Art

"Coffee isn't grown in Italy, so why should we buy Italian coffee?”

Italian coffee companies as Illy, Lavazza have overcome this obstacle bystressing their commitment to quality, tradition, years of experience asmaster roasters and dedication to the "art" of authentic Italianespresso. For example:

the huge success of italian companiesin the Global Market

In case of Illy, by 2010, there were 230 espressamente illy cafes in 34countries on 5 continents. Each cafe provided “an authentic Italiancoffee experience starting with its design where the art of Italian cafeculture meets the love of all things beautiful. In other words, the''ultimate coffee experience''.

Or with Lavazza, the company has catchphrases, illustrate this marketingstrategy: "a century in a cup" and "a world of experience." Lavazza usesthe slogan, "For more than 100 years, Danesi has meant coffee withpassion, dedication and excellence.” or : "Danesi Caff means history,tradition and quality." By contrast, many U.S. roasters have only beenin business for about 10 years-not long enough to make these claims.


Creating a Recognizable Brand

The biggest challenge faced by Italian coffee companies is creating a recognizable brand. Breaking into the psyche and behavior of consummers takes time. Those companies being willing to put in the effort to educate distributors and consumers, the reward is an increase in market share. Italian coffee companies have extended their brand image in the United States by opening caffe. Illy Caffe and Lavazza Caffe are two examples. Lavazza caffe have been particularly helpful in building market share and creating brand awareness for Lavazza coffee in middle America. Segafredo is unique in that it offers franchises.


Creative marketing is also an important element of success for Italian companies. Many companies make point-of-sale items, ceramic cups and accessories available to their distributors and customers. These items reinforce their brand and the rich tradition of Italian coffee. Illy Caffe is one such company. In addition to its distinctive logo cups, the company offers signed and numbered limited-edition cup collections designed by famous and emerging artists, including Jeff Koons and James Rosenquist.


Expanding Total Market Demand

Coffee competition has caused a few of the major coffee producers to diversify the distribution channels such as vending machines and home or espresso office-machines (e.g. espresso machines 'My Way' Lavazza or 'Nespresso' Nestlè).

Developing Blends to Suit customer Tastes, that is a success story of Lavazza. They offer a full line of products, including espresso, filter coffee, pods and even Rainforest Alliance-certified coffee that appeals to the American audience. Lavazza has not changed its blends for the American market but has added new blends to suit American tastes.

Expanding into the Ready-to-Drink Canned Coffee Product. A story of Illy in Japan is an example.

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