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How one coffee brand's online sales grew 200% amid COVID-19

illy CEO Massimiliano Pogliani joins Yahoo Finance’s On The Move to discuss the company’s plans for reopening and how the company handled production amid the coronavirus.

Video Transcript

ADAM SHAPIRO: Joining us to discuss what's happening in the coffee industry and what's happening with their sales is Massimiliano Pogliani. He is the CEO of a brand everyone knows very well, illy. It's good to see you again.

MASSIMILIANO POGLIANI: Thank you, Adam, for inviting me. Hi.

ADAM SHAPIRO: I think a lot of us want to get back into the store. So tell us what's going on with your sales and when can we get back into your stores?

[LAUGHTER]

MASSIMILIANO POGLIANI: Well, thank god we could continue to produce since the very beginning, so we were not impacted by the shutdown of the factory level, so we could continue to ship our products in Italy and abroad. Of course, feeding those channels were open so online and the grocery retailer. Then, of course, the horeca sector, so hotel, restaurants, and cafe were closed, and so we have to wait for the gradual reopening that's happening, for example, in Italy right now, is happening in other countries, and will hopefully up and also there in US.

JULIE HYMAN: Massimiliano, it's Julie here.

MASSIMILIANO POGLIANI: Hi, Julie.

JULIE HYMAN: illy's business, how much of it is wholesale versus retail through your own cafes? And I wonder how much that wholesale business has been affected by all of the other places that sell coffee shutting down.

MASSIMILIANO POGLIANI: Well, you know, illy is a historical brand. We exist since 87 years, and our core business is horeca, so out of home business. But we develop the latest here in the last 20 years, also the retail and the grocery, and especially the online business. So our core business has been impacted on a worldwide basis. Thank god we have our person for the turnover, which is done abroad. So 65% is done abroad. US is our second biggest market after Italy. We enjoy a very high growth, even more than the category during this COVID period in the channels which remain open for us.

So we have, for example, online says grew 200% compared to the average of the category was under percent. The same happened in modern trades, so in the grocer retail. Of course, the all the rest was impacted. We now are following the part of the grand reopening, and we see already that some customer that reopened here in Europe are now reordering the coffee. And we probably will go back to normal in probably one year time, because we would take time when the people will go back to the stores.

JULIA LA ROCHE: Massimiliano, it's Julia. When I was in Milan, I loved getting espresso. I loved that experience at the bar having the barista pull the shot pour for you, and it's just such a unique experience. I'm wondering as we start to reopen, how do you think that might change in a world where we are socially distant, where we're wearing masks, those sorts of things. How do you think that experience might fundamentally change?

MASSIMILIANO POGLIANI: Well, you mentioned the key word, which is experience. I mean, you know, we have all been used to stay home, working at home, consuming our coffee at home. Now there must be, you know, a new reason for people to go out into stores. And for me, one first key things I was given for granted before was safety. So health and safety, so stores have to reassure the customer that is safe to be there. Of course, applying all the social distancing measures. You know, all the things that we know we have to apply, but they have to go beyond that. So meaning going to a store, you don't go to a store just because it's safe to go there, no, so you have to revisit a little bit the meaning. We all enjoy the fact that we can have coffee at home. Why you should go out and have coffee in a bar, in a cafe?

So I think our customer, ourself, we need to really work on the experience and try to give a different meaning. It's not, you know, home consumption versus out of home, they're both two ways we love to drink our coffee, but we have to work a little bit more on the experience. And probably also using digital tools, for example you know, people are afraid now to touch menus, so if you can offer digital menus, and these are small signs that to improve the experience. Also using things that now everybody can offer. But this is probably also a focus for the point of sale to concentrate on the quality of the product, on the quality of the experience, and of the pleasure of resharing with all the, you know, social discomfort measure, resharing this pleasure moment with your friends.

ADAM SHAPIRO: Well, you answered the question right there. I mean, coffee shops, coffee bars are today's pubs, and we all miss that. But I want to ask you, and this is a selfish question because I love coffee. I drink it throughout the day. When you talk on the way out, the thing that stands out to me, the headline was back to normal in about a year for your business, and I'm hoping it's actually quicker than that. But what about the coffee growing regions of the world? Because this virus is having a different impact at different times, and could that in the future jeopardize the return to normalcy? Because we're seeing the southern hemisphere, it's now picking up down there, the virus.

MASSIMILIANO POGLIANI: Yeah. Well, I said in the beginning, there is one positive element of the COVID situation, which is a kind of accelerator of two key trains that for us are already in our hearts since the very beginning. So the first one is sustainability and the second one is digital. So being our approach of being sustainable but not all in terms we operate but also in terms tools we interact with our growers, so trying to pay the right price, sustain the community, et cetera. We only have long term relationship with them. So we have enough supply of coffee, you know, to continue our production and we do not have shortage.

And right now there are no, let's say, big impact in the supply chain. We have a lot of product here in Italy that we have imported, first of all, because we would like to, you know, immediately buy the coffee when he's produced so we can sustain the local community. Second, because by bringing in the green coffee here in Italy, we can preserve in the best condition possible in our house. We have 60,000 square meter of wells only dedicated to green coffee. And the other part is by ensuring that you paid the right price to these growers and farmers, then you have a long term relationship with them. You probably are more, you know, protected by these ups and downs of the market. We don't have to buy coffee on the spot. We have enough coffee to sustain our production.

ADAM SHAPIRO: At that moment, we say [SPEAKING ITALIAN]. Massimiliano Pogliani, thank you very much, the CEO of illy joining us. We're going to be back right after this. Go grab another cup of coffee everybody.

MASSIMILIANO POGLIANI: Thank you.