Case Study on Illy Cafe

Illy Caffe   is one of the ten best companies in the coffee industry in Europe. It was founded in1933 by Francesco Illy, and in 1994 was given over to Andrea Illy. Since its formation, Illy Caffe’s main goal was to deliver the best quality coffee to its customers. Th e company wascareful when choosing its suppliers and always made sure it receives the best quality coffeebeans. However, after the last CEO has joined the company in 1994, Illy Caffe decided to changeits strategy and to become more responsible in the area of its business. The circumstances, whichthe coffee industry appeared to be under in 1989, was the first step toward the strategic changesmade in some companies, like Illy Caffe. Now, Illy Caffe buys highest-quality Arabica beansdirectly from Brazil, Central America, India, and Africa. The company has restructured itssupply chain completely, and has brought many innovations into the coffee industry in Brazil,making it the exporter of the best-quality coffee beans grower and producer in the world. Thefollowing paper aims at analyzing the changes made in Illy Caffe in 1989 and identifying the key issues and their potential solutions in the company’s new strategy. Changes in Illy Caffe’s supply chain describes the strategy and its benefits In 1989 Illy Caffe’s management decided to change its supply chain from a regular one to adirect purchasing. The quality of the coffee played a significant role in Illy Caffe’s business.Company’s CEO and managers believed that coffee loses its quality after going th rough differentstages in the supply process. They believed that the more intermediaries they would have, theworse would be the quality of their coffee. Therefore, changing this situation through refusing tohave a single intermediary appeared to be the most appropriate thing to do. Illy Caffe became thefirst company in the coffee industry, which started buying directly from farmers. In return tohigh premiums, company expected to receive higher quality coffee beans from Braziliangrowers. Brazil was the largest producer of coffee at that time, however, had poor reputationbecause of the bad quality of their products. Illy Caffe was aware of the situation in Brazil,however, it could find required amount of growers only in that country. The company, therefore,decided to teach Brazilian farmers, how to become its suppliers. Since Illy Caffe was good atinnovation throughout its existence, it found a good way to attract coffee growers (not only fromBrazil but from all over the world) and to make them produce higher-quality coffee. The Illycaffe Brazil Quality Espresso Coffee Award was designed in order to find company’s potential suppliers among the farmers from Brazil. The main idea of this project was to create afeeling of mutual benefit from the partnership and to motivate growers to start producing higher-quality goods. Getting an award and winning a competition meant receiving a good opportunityfor the company in the future.The project became very successful, and hundreds of Brazilian farmers were accepted toparticipate in it. Illy Caffe succeeded in finding good producers and to make them become even better through selecting them among other participants to become company’s long -term partners.Illy Caffe wanted to make sure its relationship with Brazilian partners would be strong and longlasting