Development of ILLY Coffee in China

Grinding illy

We only need (Starbucks) 3% to 5% of the market, and that's a lot. " Zhang Guojun, general manager of Italy's illy Group in China, told Global Entrepreneur. Of course, he was talking about the expectations of the illy coffee brand for the Chinese market.

Don't simply think of illy and Starbucks as competitors-unlike the world's largest US coffee shop chain, illy Coffee, as the most important business unit of the illy Group, produces and sells coffee beans, powdered coffee, capsule coffee, coffee machines and accessories of all sizes.

In Italy, illy Coffee is the first brand used by the hotel and restaurant industry, while in China, in addition to supplying coffee to five-star hotels such as Peace Hotel and Portman Ritz-Carlton, illy Coffee is also the exclusive coffee provider for many catering brands, including Haagen-Dazs and wagas. Worldwide, illy sells 7 million cups of coffee a day and operates in more than 140 countries around the world. For coffee lovers, as long as there is a conspicuous red background and white character "illy" sign hanging in front of a store, it means that the quality of the coffee in the store is quite guaranteed.

However, Zhang Guojun mentioned Starbucks is reasonable. If Nestl é instant coffee has played an enlightening role in the history of Chinese consumers drinking coffee, then Starbucks, as a pioneer, has really popularized coffee culture in the Chinese market-especially in China's big cities. Starbucks is becoming a place for daily consumption rather than a status symbol. "now China is at an important moment of transformation, and coffee culture has gradually changed into coffee consumption." Wang Jinlong, chairman of Starbucks Greater China, told Global Entrepreneur. Figures show that Chinese mainland has opened more than 450 stores since 1999, while Chinese consumers' coffee consumption has grown by an average of 12-15 per cent a year over the past decade.

"Starbucks is slowly expanding the market," and illy is smelling opportunity. "5 to 10 per cent of consumers in these markets want other coffee options-illy is one of them." Zhang Guojun said.

Borrow a boat to go to sea

In fact, illy Coffee has not been idle since it separated from the agent and began to expand in China in 2001. When Starbucks opened its shop, illy was busy selling its coffee beans, coffee powder and coffee machines to five-star hotels, cafes and restaurants, large and small. At the same time, illy Coffee hangs its LOGO in red and white to places suitable for selling coffee, from five-star hotels to Haagen-Dazs to carving, from upscale to petty bourgeoisie-with Haagen-Dazs, even in about the same size.

Although illy Coffee stresses that when these partner customers buy illy coffee products, they can apply to illy to buy various promotional materials such as light boxes and hanging tags with their LOGO printed on them, and place them in stores to tell consumers that the coffee here comes from illy. It is natural to do so in these places, because "people who know coffee know illy".

But there is no doubt that this is the strategy of illy Coffee.

These Chinese consumers who have just come into contact with coffee culture, even if they don't really know what illy is, or even the relationship between illy and Haagen-Dazs, they have obviously remembered the LOGO on a red background and white characters, and created the associative memory that the illy brand has always been associated with five-star high-end hotels and high-end restaurants.

This is only the first step for illy Coffee to establish a high-end coffee brand in the Chinese market. Illy also needs to let Chinese consumers know that high-end is not just talk, but more important to provide matching quality and taste. Illy Coffee University, which arrived in Shanghai in 2007, was originally set up to help customers who buy illy coffee make better quality coffee for their consumers, ensuring that they will not damage the brand of illy Coffee, but also help them sell more and more expensive coffee. Andrea Illy, the third-generation heir to the Italian illy group, revealed that globally, 25 per cent of customers who attended coffee university training sold coffee, while less than 10 per cent did not.

If the above is not enough to show the high-end taste of illy coffee, then art endorsement may be the best choice. In 1992, illy introduced the white espresso magnetic cup designed by designer Matteo Thun. Since then, illy Coffee has invited artists to design coffee cups every year, the most famous of which is the 2009 series inspired by the films of the famous Spanish director Pedro Almodovar. In 2006, these classic designer coffee cups were shown to Chinese consumers at the Shanghai Museum of Contemporary Art.

In a sense, this is why illy can be an alternative to Starbucks. According to data provided by illy Coffee, 75 per cent of its business in China comes from professional cafe channels, including hotel catering.

Retail run

However, the practice of building high-end brands to raise brand awareness in professional channels is making illy coffee profitable in retail channels.

"over the past two or three years, retail channels have grown rapidly by 30% to 40% every year." "the reason is that (Chinese) used to go to coffee shops to drink coffee, but now they are gradually starting to make coffee at home," Andrea Illy told Global Entrepreneur. " In fact, illy coffee was also on retailers' shelves from the day it was sold to hotels and cafes-but it was only sold in supermarkets with imported goods at that time.

Nowadays, with the increasing acceptance of the illy coffee brand, illy can be seen in many supermarkets frequented by Chinese consumers, such as Carrefour and Metro. Andrea Illy revealed that because of the brand effect of illy and the high gross profit obtained from the price of illy, retailers can get more added value, so in these retail channels, illy is often placed in a more conspicuous shelf position and easier to attract consumers to buy.

Obviously, illy is no longer satisfied with the channel expansion of large supermarkets. It is understood that illy also put its products on the shelves of convenience stores, especially those near high-end residential areas and white-collar areas, to provide consumers with the possibility of buying illy coffee anytime and anywhere. "more retail channels close to the daily lives of young people are also beginning to have coffee services, which is a trend. The more places consumers can drink coffee, the bigger the market will be. " Zhang Guojun told   Home, a global enterprise.

Another important decision is that illy will open a brand retail concept experience store this year. "experience" and "cognition" will be the main features of the store: when customers walk into the store, the clerk will show how to use the illy coffee machine to make illy coffee capsules into a cup of pure Italian-flavored expresso coffee; if they like, they can make a cup of their own. "in terms of sight and taste, consumers can feel that this is illy coffee from Italy and get our full service." More importantly, Zhang Guojun said, "brick-and-mortar stores are easy to understand what consumers think and give us a better understanding of how to promote them in the market."

The official online store of illy was officially opened in March to test consumer preferences. The online store offers a full range of illy products, including cups, spoons and other coffee utensils, and encourages coffee lovers to discuss it, and activists will be invited to illy's coffee university to learn how to make lattes.

Today, illy sells 60, 000 cups of coffee a day in China through partner stores and retail channels, accounting for less than 1 per cent of illy's global sales. Mr Zhang's goal is to achieve 10 per cent of illy's global sales in the Chinese market. "in the Chinese market, it's not difficult."