Espressamente Case Study

Overview                

Illy is an Italian coffee roasting company that specializes in the production of espresso in 140 countries and 50,000 high-end restaurants and coffeehouses. The company is well known for its world’s finest tasting coffee, great quality, culture and contemporary Italian design. Illy established Espressamente, its own franchised coffee bar that has more than 200 locations in over 30 countries and has begun to expand to premium markets. Stating strategic goals for 2010-12 Espressamente indicated that they want to be recognized as the only authentic Italian bar chain which provides superior customer satisfaction to coffee lovers. Their second goal was to become profitable strong stand-alone brand.

At that time the global coffee industry was booming. The coffee market has been highly saturated and has shown aggressive competition. Coffee was the second most heavily traded commodity in the world. Demand for coffee has grown in both developed and emerging markets. Moreover it was expected that speciality coffee sales will increase. Illy wants to broaden the reach of Espressamente and decided to focus on markets of Brazil, China, Germany, India, Japan, UK and US. In order to choose the best countries company needs to choose an entry mode strategy for each market. It is necessary to analyze environmental and legal issues and main industry competitors, which are Starbucks, McDonald’s Mc Café, Costa Coffee, Lavazza, Tchibo, Segafredo, and The Coffee Bean and Tea Leaf.

Brazil

Brazil is world’s second largest consumer coffee market with increased interest in premium coffee and American-style coffee shops. Brazil is also economically growing and due to expanding middle class that can afford higher prices, the consumption and demand for higher coffee standards also increased. In addition, Starbucks has been very successful in Brazilian market and projected the continuation of growing demand for higher value gourmet coffee varieties. Since Brazilians are used to Italian style espresso, it won’t be necessary to educate potential customers. Franchise sector has been growing but mainly local brands, while foreign-based franchisers represented only 11% in Brazil (the ease of doing business ranks 126 among 183 countries). According to the analysis, we recommend that Illy enter the Brazilian market. They can prepare for the major challenge which is strength of local brands by localizing the product and keeping very good brand reputation. We believe that Illy should implement sequential franchising and joint-venture partnerships with local companies. The company should grow relationships with non-competing businesses.