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Illy Chairman: People drink coffee even when the economy slows

Illycaffe chairman Andrea Illy is pretty confident Americans will drink coffee in good times and bad.

“Coffee is quite anti-cyclical so even if the economy slowed down, there is still a good reason to drink coffee.” Illy says in an appearance on Yahoo Finance’s On the Move.

Illy is banking on reaching more American coffee drinkers in the coming years, no matter which direction the U.S. economy goes. The Italian coffee company, which posted $528 million in sales last year, hopes to have 200 operating cafes in the U.S. in the next five years.

“We see retail in big trouble here in the U.S.,” he says. “This is why hospitality can be an alternative to many of the stores which are now empty... All of this creates an opportunity, a moment for us.”

The market is immense. According to the National Coffee Association USA, a trade group that has tracked consumer behaviors and coffee trends in the U.S. for almost 70 years, 63% of American adults drink coffee daily. Those Americans who are coffee drinkers consume about three cups a day on average.

It’s a crowded field already with the likes of Starbucks (SBUX) and JAB, which owns Peet’s Coffee and Stumptown Coffee Roasters. But Illy says there is room for Illycaffe to take off.

A display of cans of Illy coffee is shown, Tuesday, Nov. 23, 2010 in New York. (AP Photo/Mark Lennihan)

“We know the American market very well...before the beginning of the gourmet coffee revolution. Actually a lot of the gourmet coffee revolution has been inspired by Italy.”

He points to terminology like “barista” and “latte” as Italian words that have become part of the gourmet coffee culture.

Illycaffe has tapped Goldman Sachs (GS) to advise the company in the U.S. and help it find a retail partner or an investor. It’s the first time the company is willing to sell a minority stake to a strategic partner in its 83-year history.

“It’s time to grow now. Most of these gourmet coffee brands have been sold now to European groups and we are here now, not so big because we are just half a billion dollars but have substantial room for growth,” he says.

Illycaffe currently has found early success in its seven directly-operated cafes in the San Francisco area.

Joanna Campione is a producer at Yahoo Finance.


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