Group 4 Giulia Benincasa Guglielmo Cammino Giulia Greco Chiara Lo Cascio Stefano Renna

1. Feasibility Analysis Illy’sUS Expansion Group 4 Giulia Benincasa Guglielmo Cammino Giulia Greco Chiara Lo Cascio Stefano Renna Costanza Sebastiani

2. The Company History • Founded by Francesco Illy in 1933 in Trieste • During the 30s Francesco develops some crucial innovations allowed geographic expansion of sales (first phase) • With the arrival of Ernesto in the company after World War II, Illy started to export significantly and consolidated it’s position as high-quality coffee reseller • The second phase of development provided a significant acceleration in growth both geographical and organic • In 1975 Illy joins the North American market • In 1992 Illy further expanded it’s offering with the launch of the Illy Collection cups • The third phase of Illy’s history is characterized by the appointment as CEO of Andrew • Last and actual phase Illy combines its technological guideline with changes in society and perseption of consumers 2003 “EspressamenteIlly” • Illycaffé finally opens its first US coffee bar Espressamenteilly in Las Vegas, in 2008 +joint venture with coca cola company

3. The Company Mission and... “We aim to delight people allover the worldwhovalue the qualityof life byoffering the best possible coffee nature can provide, enhancingitsperfectionthrough the mostinnovative technologies, and inspiringemotional and intellectualinvolvementbyseekingbeauty in everythingwe do.” …vision Weaimtobe the world referencefor coffee culture and excellence. An innovative company offering the finestproducts in the best places, growingtobecome the high-end segment leader and creatingsuperiorstakeholdervalue.

4. The Company The organizationalstructure

5. The Product Coffee’sHistoryand… • Coffeegrowing came into being in the 15th century in Yemen, subsequently it has been imported by Dutch merchants in Europe, Central and North America in the 17th century. • After WWII coffee represented one of the most valuable primary products in world trade, for many years second in value only to oil as a source of foreign exchange to producing countries. • Nowadays, coffee is vital to the economies and politics of many developing countries; for many of the world’s Least Developed Countries, such as Uganda, Kenya, Rwanda and Burundi, exports of coffee account for more than 50% of their foreign exchange earnings. …CoffeeToday • The American coffee is an infusion, the espresso is an emulsion. • The differencebetween american coffee and espresso isassociated with a different form of consumption. • The coffee filter is definitely the most drunk coffee in the world but not in Italy

6. The Product Illy’sproducts • The professional products • 3 kg format of coffee • Illy bar concept • “at the workplace” segment: iteca espresso sistem • Home products • Ground coffee • Coffee beans • Decaffeineted coffee • Servings • Readyto drink (Ilko coffee international) • Caffè • Cappuccino • Latte macchiato Illy collection Espressamente Illy Universityof coffee

7. Market & Industry Hot drinksindustryand… Coffee is the largest segment of the global hot drink industry, accounting for 54.2% ($ 36.9 billion) of the industry’s total value. …market Europe is the main segment of the market, representing 44.6% of the total value, whilst zones as America and Asia have a higher forecasted growth rates for the period 2009 – 2014, respectively with CAGR of 2.7% and 5.3%, with future values equal to $ 20.9 billion and $ 25.2 billion dollars.

8. Coffee industries... Market & Industry Coffee is one of the world’s most widely traded commodities, and is produced in over 60 countries, many of which are heavily dependent on coffee. In the last year (April 2010 – May 2011) coffee prices rose steeply reaching their historical peak of 231.24 US cents/lb. This level represents the average of the two main types of coffee: Arabicas, composed by Colombian milds, Brazilian naturals and other milds, and Robustas. …and Market Size The coffee market size for year 2010/2011 is estimated to be around 133 million bags, with a remarkable increase of 8.1% face to crop year 2009/2010. Eight out of ten of the main, exporting countries (Brazil, Vietnam, Colombia, Ethiopia, Guatemala, Mexico, Honduras and Uganda) recorded production increases in the period 2007/2009. Exports extended to 101 million bags in March 2011, the maximum amount ever recorded. Ibid. Players in the coffee industry try to distinguish their products to some extent by stressing the taste, quality, and even health benefits.

9. Hot drinks market Italy vs USA Market & Industry • Market size in termofvalue: 2,658 milliondollar(2009) with a 5,5% CAGR • Market size in termof volume: 242,2 million Kg(2009) with a 5,2% CAGR • Segmentation: • 1,8 billiondollarrevenues(2009), 67,7% of the hot drink industryoverallvalue • Italy itself accounts for 9.2% of the whole European hot drinks industry value. • Market size in termofvalue: 9,672.6 milliondollar(2009) with a 3,1% CAGR • Market size in termof volume: 793,8 billion Kg(2009) with a 2,2% CAGR • Segmentation: • 6,6 billiondollarrevenues (2009) 68,7% of the hot drink industryoverallvalue

10. PESTLE analysis Market & Industry

11. Consumer Profile Italy vs USA Market & Industry 56%of coffee drinkers are men 81,1%of coffee consumers drink up to3 coffee per day 57,3% ofItaliansdrinks coffee withother people 22,2%ofItalianshas at leastonecupof coffee at a cafè. 75,2%ofcoffees are consumedduring the morning 74% of coffee consumersprefers espresso 1.65numberofcupsconsumedby1adulteveryday at a cafè Around49% of the population drinks coffee Duringdaytime Mendrink 1,7 cup of coffees per day, women 1,5 Strongerconsumers of coffee consume about 3,3 cups coffee per day 37% of consumers drink plain coffee, without sweeteners, milk or cream 57% consumed at breakfast,34% at mealtimes and 13% during the rest of the day We can conclude that Illy’s attention will shift from the a mojor attention to business men towards an increased focus on women with the introduction of the ‘Artisti del Gusto’ program and the ‘EspressamenteIlly’ franchising bars.

12. Directcompetitors Competition Starbuck Corporation represents the major competitor in the US in the high quality brewed coffee business and the EspressamenteIlly store-business Starbuck Corporation’s principal activity is to purchase and roast high-quality whole bean coffee and sell it along with fresh brewed coffees, cold blended beverages, Italian-style espresso, coffee-related accessories and equipment, an assortment of diverse food items and a selection of premium teas. The company is downstream vertically integrated mainly to maintain the control on high quality at least in the last part of the supply chain. The firm’s mission is very similar to the one of Illy. Lavazza is the first single-productbrandof coffee of the world, accounting their commercial presence in over 80 Countries, and brand leader in Italy with 47% of the market share. Lavazza develops a communicationstrategywith the aimofcelebrating the traditionof coffee, a strategythathasgone on for 100 yearswith the first logo in 1946 and the first imagecampaign in 1950 with the slogan “Miscela Lavazza”

13. Directcompetitors Competition SegafredoZanetti (Segafredo) is a subsidiary of Massimo Zanetti Beverage Group, involved in producing espresso coffee. The group has long pursued a strategy of vertical integration within the world of coffee, from growing green coffee, creating blends and roasting, through to marketing. “SegafredoZanetti is, in fact, the only coffee-roasting company in the world to cultivate green coffee on its own plantations. The Segafredo’s coffee shops have a dystonic personalization. Nestle is the largest food and beverage company in the world. Its key coffee product brands include Nescafe, Nespresso, Taster's Choice, Ricore, Ricoffy, Bonka, Zoégas, and Loumidis. Nescafe, the flagship soluble coffee product of this division, is one of the leading brands in the world.The company's coffee range also includes Nespresso .

14. Illy’s SWOT Competition

15. Starbucks’s SWOT Competition

16. Illy’sFiveForcesAnalysis Strategy

17. Ansoff Matrix Strategy

18. BCG Matrix Strategy

19. Abel matrix Strategy

20. Branddevelopmentstrategy Strategy • Increase awareness and trial via • experiential marketing, PR, social media, • circolo, and direct marketing; • Expand brand advocacy by increasing relevancy and desire for the brand; • Expand to coffee lovers and younger users to include a greater percentage of 25-39 year olds; • Increase frequency of purchase and share of requirements among current base. Tactics • Increase retail programming to drive consumer behavior (trial, frequency of use) • Sustain direct channel investment focusing on systems; B/E 2012 • Accelerate and invest in Artisti del Gusto (AdG) program • Synergize with issimo with consumers and trade • Launch Circoloilly as digital platform to increase consumer database and build brand affinity, engagement and advocacy • Develop stronger visual merchandising and improve brand communication at the point of purchase

21. Balancedchannelstrategy: fewer, bigger, better, deeper Strategy Increase home channels share from 50% to 58% of subsidiary turnover Increase distribution and penetration of systems Launch Mitaca in mid sized offices via distribution partnership Expand national and scalable distribution in cafes and hotels with in Horeca

22. Productstrategy Strategy • Coffee • Develop and launch Origins line • Develop next generation of iper capsules; monodose capsules for hotels • Distribute Mitaca2 in OCS with partner • Develop 400g packaging for club channel • Optimize Dammannpackaging and range • Develop route to market plans for Gruppoilly products • Develop ready to use and next generation formats Machines • Expand range of machines with partners (home and horeca) • Offer range of machines for ESE/Ground and IPSO • Develop dedicated machines for direct channel • Distribute Mitaca2 system with partner

23. Strategicobjective Strategy 1 Develop a robust and profitable global direct channel, controlling it directly in strategic markets and supporting through tools and best practices in secondary markets. Establish direct one-to-one relationships with our customers, leveraging Circoloilly and the social web to grow awareness, acquire prospects, build loyalty and drive sales across all-channels. 3 Provide a seamless, cohesive and compelling user experience across illy sites, shops and social networks. 4 Integrate commerce and content platforms to support targeted direct marketing and rich, interactive brand experiences across the web Create a single, unified global B2C database with CRM overlay. 6 Extend commerce and content to key emerging markets 7 Identify and leverage global synergies in agency relationships 8 Build direct channel competency and human resources

24. Mktgstrategy Strategy Focalisation In the “espresso” and in the premium segment Globality The same marketing mix worldwide Differentiation Quality, oneuniqueproduct, price supplyofallproductsforpreparation, setting and service Coherence Product, positioning, packaging, distribution, public relation, internetpos, advertising, corporate identity

25. Financials In the financial analysis, we looked at both situations as if Illy did not implement internationalization strategy and with its implementation.

26. Instead, for calculating the financials of the internationalization strategy applied we referred to balance sheets for the period 2004-2009. This calculation focuses only to analyse in details the impact of the strategy implementation over operating profits, without looking at the leverage coming from financial debts. Financials

27. Conclusion

28. Thankyouforyourattention… …nowitistimefor a coffee!!