July 4, 2019 / 1:02 PM / 2 months ago

Illycaffe chairman says open to partnership to expand cafe network

MILAN (Reuters) - Italian premium coffee maker illycaffe is open to a strategic partnership to help accelerate the growth of its retail network and could consider selling a minority stake for the first time in its 86-year history, Chairman Andrea Illy told Reuters.

FILE PHOTO: Andrea Illy, Chairman and CEO of Illycaffe, talks to Reuters at the World Coffee Producers Forum in Medellin, Colombia July 11, 2017. REUTERS/Federico Rios/File Photo

The group wants to expand its network of branded cafes at home and abroad, especially in the United States where bigger rivals like Starbucks (SBUX.O) and JAB are jumping on a trend away from regular coffee bars toward high-end cafes.

Illycaffe - which serves up 7 million cups of its brew in restaurants and cafes each day - has 219 illy-branded outlets outside Italy, including 23 in North America.

In comparison, Seattle-based Starbucks has around 14,000 U.S. outlets and recently unveiled a new up-market “roastery” in New York. JAB owns several chains, including hipster favorite Intelligentsia Coffee, with well over 10,000 U.S. stores.

In a phone interview, Illy said the premium roaster had so far used a cautious approach to expanding retail outlets globally, with 20 openings every year, net of closures.

“If we find a traveling companion who knows the retail industry very well we could speed up growth,” Illy said, adding a partner with a U.S. expertise could be valuable.

“We are bombarded with proposals from investors and banks ... if the right partner shows up we could even open up our capital to let them get a return on their investment,” he said, adding the group could sell a “small slice” of its equity.

The remarks by Illy, grandson of founder Francesco Illy, hint to a potential shift in the future for the company, which is 100% owned by the family’s holding company. In October, Andrea Illy poured cold water on the idea of selling a minority stake.

BOARD OVERHAUL

Matthew Barry, senior beverages analyst at market research firm Euromonitor International, said illycaffe needed to look beyond its home turf which was small and slow-growing.

The premium brand of illycaffe, which produces a blend made by nine varieties of Arabica beans, gives it an edge over rivals, the analyst said.

“Though pretty crowded, I think it is easier for Illy to distinguish itself (in the U.S.) coffee shop business since its offerings are very different than a Starbucks, a Dunkin, or an independent third-wave shop,” Barry said.

Illy made clear the roaster was not in need of financial support and would not open its capital to private equity firms or competitors, such as JAB, with which the group signed a licensing deal on pods last year.

No concrete talks with a partner were under way, he said, adding that, with or without an ally, the company would open up more to attract talent from outside the founding family.

To meet this goal, illycaffe recently overhauled its governance, appointing seven directors who are not family members to its 10-member board. Six of them are independent.

Illy also set up a board committee on sustainability issues and the group plans to become carbon free by 2033.

“Sustainability is an endless effort embracing all our activities, from the lamp bulbs to the cars we use,” Illy said.

The group posted sales of 483 million euros ($545 million), up 5% at constant exchange rates in 2018. Adjusted core profit rose 10.7% to 75.3 million euros.

Editing by Deepa Babington

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below