Andrea Illy says that his family firm produces the best coffee in the world. He is opening a string of designer coffee bars - so could a partial float of the business be next?
WE meet at Locanda Locatelli, one of London's best Italian restaurants. I am early, and Andrea Illy -grey crew-cut, slim build, black suit -walks in exactly on time, as you would expect from a man of precision.
Illy, 43, a chemist by training, is renowned for his obsessive attention to detail. His Trieste-based firm, Illycaffe, claims to produce the world's best coffee. "For us," says Illy, kicking off the conversation in accented English, "coffee's not just a product, it's a mission."
And that's a mission that is moving Illy, the third generation of his family to run the firm, into new markets -positioning its coffee as a style leader, and taking on giants like Starbucks by opening Illy Espressamente, a string of designer coffee bars worldwide.
It all costs money, and a partial float of the business could be on the cards.
Illycaffe faces fierce international competition from Italian rivals Lavazza and Segafredo, and pressure below from the multinational Nestle, whose Nespresso coffee pods -an idea pioneered by Illycaffe -are gobbling upstream to take an ever-increasing share of the premium coffee market.
Such is business. But wait, celebrity chef Giorgio Locatelli is already at the table, asking if there is anything special he can cook us. Illy goes into a long description in Italian of the pasta dish he loves, made with fava beans and pecorino.
Locatelli, tousled and tentative, stands in his chef's whites with hands clasped in respectful supplication. The Illy family's reputation is well known throughout Italy -they have been shipping premium coffee overseas since the second world war. Locatelli allows his guest to finish, before pointing out, very politely, that fava beans are not in season.
Illy frowns, his thin hands straightening the cutlery in front of him. Then he orders fish from the menu. Inviting me to lunch in a restaurant where main courses cost Pounds 29 is a statement in itself, when the poverty of many coffee growers is now a political issue. You get the sense that Illy is an Italian of determined hue.
"Actually, my grandfather Francesco was Hungarian, he came to Trieste when it was part of the old Austro-Hungarian empire, so we are different to most Italians," he smiles. "There is a sense of responsibility, precision, and also less sentiment and warmth."
Some rate Illycaffe, founded in 1933, among Europe's great one-product family firms. Luke Johnson, serial investor and Patisserie Valerie owner, describes the business as a world-beater. "Very thorough, very serious, great purity of purpose."
Francesco Caio, chairman of Lehman Brothers' advisory board, is another fan. He says the firm's strategic decision to operate like a luxury-goods brand -the Armani of coffee -is smart. "I've followed what Illycaffe has done for over 10 years. It punches well above its weight in terms of relevance in the industry, and there is this relentless focus."
That focus is on quality before all else, producing a distinctive blend that Illy compares with fine wine. Illycaffe's Pounds 170m turnover is hardly huge, yet its brand recognition is high, and the emphasis on style and culture -it is sponsoring a London show by photographer Sebastian Salgado -gives it added cachet.
It also has a long history of technical innovation: inventing the first espresso machine, pioneering those pods, replacing air with inert gas in sealed coffee bags. Illy himself is an expert in the science of coffee flavours, writing his university thesis on "the quality of espresso from a chemical perspective".
It is a perfect brew -provided consumer taste for fine coffee continues to grow.
But coffee is not just about taste these days. Illy has already annoyed some by criticising the Fair Trade movement, which aims to guarantee a decent price for growers in the Third World these days. The growers' share of the money paid for coffee by Western consumers has actually diminished in recent years.
Illy knows he is on sensitive ground. "I am not critical of Fair Trade," he says firmly. "I am very positive. It's excellent as a first step, it builds awareness - but it's not sustainable."
Nor does it reward quality. It has become simply "a marketing business", he says.
"It cannot grow over time. Does it make coffee a more pleasurable experience for consumers? No. They buy it for a charitable reason."
And growers learn little from the Fair Trade experience. "On the day they cannot sustain the cost of certification, they are out of the system, and go back to where they came from. This can be dramatic."
His firm, on the other hand, prides itself on buying direct from growers, promoting education -it has its own "university of coffee" -and developing long-term relationships that guarantee growers get good returns. The commodity nature of the coffee market, he adds, is what holds everything back.
Shouldn't he promote Illycaffe's good works more? He sips his mineral water slowly, then replies. "If our brand reputation is high, people implicitly expect that things are done well."
Illycaffe has long done things its own way. It regularly bats off approaches from food and drink multinationals. "We don't even take the calls," shrugs Illy.
But he knows Illycaffe cannot stand still, hence the expansion from supplying bars to licensing its own bar format and pushing the Illy name into virtually every country in the world. He says he has no desire to take on Starbucks (13,000 outlets worldwide), but simply wants to control the environment his product is sold in -one of the keys to luxury-brand success.
He aims for 200 bars by 2010, designed with an ambitious eye on style and heritage. He has 150 bars open already, stretching from Europe to Australia and China.
"It will be a holistic brand message with all our search for beauty and the coffee experience," he says floridly, "because coffee culture is very rich, like wine from plant to glass, it's also the official beverage of all culture, particularly European culture -Illuminism, the Belle Epoque -there is that strong relationship between coffee and creativity, and socialisation."
Then he flips to the pragmatic. "You'll see the bars in any good place," he says, "airports, shopping malls. We're the first chain in Italy, too -how do they expect us to be credible if we're not successful in our own country?"
That jump from poetry to prose is an Illy trait. Behind the "mission" lies a gimlet-eyed focus on science and numbers. Each generation of Illys has pushed the one-product business further, and Andrea Illy and his three siblings look like being the most ambitious yet, expanding distribution from 29 countries to 140, and leaping into new ventures.
And outside coffee, the family's holding company, Gruppo Illy, is now buying up more luxury brands in France and Italy -tea company Dammann Freres, chocolate firm Domori and jam-maker Agrimontana are recent investments. It is part of a strategy that allows family interests to expand, without overstretching the core coffee brand.
"We have high-end positioning, if we stretch the brand too much, it will become mass market," says Illy, "so we know there is an optimum size for the coffee business, maybe three or four times what it is now. Then what do we do? Another coffee brand and a portfolio? No, because then we would lose the reputation of producing only the best..."
The same pragmatism was reflected in Andrea Illy's rise to Illycaffe chairman at the age of 33. Brought up in Trieste, he is the youngest of three brothers -he also has a sister -and took the top slot because he is the only sibling trained in chemistry.
"My brothers told me I had to read chemistry, and so I said, 'if I do, what next?'
They said, 'you'll take the position of our father'."
Now Andrea runs the business, while his 82-year-old father, Ernesto, sits in the office opposite in an honorary role. His sister, Anna, runs Illycaffe's development projects. One brother, Francesco, is vice-president of Illycaffe.
Anoither, Riccardo, a former mayor of Trieste and president of the Friuli Venezia Giulia region, concentrates on politics, and is president of Gruppo Illy.
The key, says Illy, is that the family has allowed a professional executive team to manage the businesses.
"But the No1 motivation of our managers is not money -the typical greedy approach of American managers. Even in our American subsidiary it's not the case. There is a love of the product and the values..."
Illy is not short of such sharp views. He is equally scathing of the Italian state. "It is not an efficient market, it is not organised, so we have no help at all."
At times he seems frighteningly intense -the burden of carrying a family firm must be heavy. Others agree. "I don't think he relaxes very easily," says Caio.
Illy himself admits that he is a "systemic" thinker, who analyses business in depth. His arguments are made with numbered reasons and pithy question-and answer constructions.
"It comes from chemistry. You take this and this, and you get a reaction. I tend to create lists, breaking things into compounds. It's how I describe the brand."
Anyway, time is nearly up. Will he float Illycaffe? Coffee addicts might want a slice.
"It's an option," he says, "floating 25% to 33% of the shares, while maintaining control. It would be a tremendous thing to further professionalise the relationship between the family and the company."
But he won't say when -simply adding that he has studied the history of family firms, and he knows the problems they face in recruitment and providing incentives. A float would help.
Then, right on cue, our espresso arrives. The waiter looks suitably nervous, setting down the cups. Illy lifts his, sniffs and tastes. We all wait. "Superb," he nods. Thank goodness for that.
ANDREA ILLY'S WORKING DAY
THE Illycaffe chairman wakes at 6.30am at his home in Trieste. "I have a jog with my labrador, Watson," says Andrea Illy, "then have breakfast with my daughters."
He drops his children at school, then drives to Illycaffe's base in Trieste's industrial quarter. He starts meetings at 9.30am.
"Then it's a 12-hour day. I have nine executives reporting to me, and I don't go out much. We have two coffee bars and a cafeteria with a great chef." Illy is home by 9pm and often finishes the day reading newspapers, magazines or a business book.
VITAL STATISTICS
Born: September 2, 1964
Marital status: married, three daughters
School: Liceo Scientifico, Trieste
University: Trieste
First job: quality-control supervisor
Salary package: undisclosed
Homes: Trieste, Cortina
Car: black Audi A6
Favourite book: Mes Demons, by Edgar Morin
Favourite music: Simple Minds
Favourite film: Apocalypse Now
Favourite gadget: FrancisFrancis! espresso machine
Last holiday: Cortina
DOWNTIME
ANDREA ILLY likes to relax in his 55ft motorboat. "I don't sail so much any more because of the lack of time. Instead I take the motorboat down to the Croatian islands, south of Trieste, with my family. We spend most weekends there in summer.
My parents have a sailing boat which we can also use."
He also dives, skis, cycles and rides his BMW motorbike. He is not sure what he spends his money on. "I used to love cars -I had a Porsche -but not any more. I don't collect anything, just girls at home. I have four blondes, and they all collect dresses!"