In their quest to create the perfect coffee, Italian powerhouse illycaffe has pushed for a different business model. Choosing to invest heavily in technological and agricultural innovation, and sharing those secrets with the world, enlisting artists and designers to produce beautiful espresso machines and cups, and charging higher prices, illycaffe has evolved into a global brand sold in more than 140 countries and with revenues of nearly half a billion dollars.
The challenge now for Andrea Illy, the third generation CEO who is a chemist by trade, is to continue that expansion amid increased competition from the likes of Starbuck and Nespresso, and an inherently…show more content… In this case, the illycafe drive the price since it is the only company that buy from this group of Brazilian coffee bean farmers
Disadvantage of direct supply from Brazil farmers
The cost of coffee will go up or increase
The cost of management, training and supervision will be greater than the cost of supply chain( wholeseller and distributors)
Illycaffe pay a premium price higher than what the wholeseller or middleman pay the farmers.
Risks of Direct Supply from one country (Brazil)
The new competitors in Brazil coffee bean: The new competitors had grown as big as to compare it to 1990s and early 2000s.For example Starbuck, Coffee Time, Mac Donald. These new players in coffee industry are desperate in looking for a reliable, dependable and high quality bean (coffee).The Brazilian farmers are known to produce high standard bean. The new competitors have seen Brazil as best place to get its coffee bean.
Change in governmental Policies: As we seen over the years how government policies affect businesses. For example if the government of Brazil recently engaged in economic or trade conflict with the government of Italy. The government of Brazil will issue order or make a policy that will prevent the coffee industry in Brazil from trading with Italian industry. Imagine if the Illycaffee find itself in that situation.
Natural Disaster or Art of God: Natural disaster may strike coffee farm and