More mergers probable, says Illycafe boss

After informing attendees of the Global Coffee Forum in Milan that we could be heading towards a coffee catastrophe, Illycafe boss Andrea Illy has been suggesting that the next few years could be all about consolidation as business began to worry about tougher competition and decreasing margins.

Recently D.E. Master Blenders and Mondelez International, two of the world’s biggest coffee companies, joined forces to create Jacobs Douwe Egberts and this new conglomerated entity is expected to have a near 20% market share, second only in the industry to the Swiss giants Nestle.

Speaking to the website Agrimoney, Illy hinted that there may be other deals “cooking” that everybody bar those involved are in the dark about.

“We expect over the next two to three years to see more,” he said, although he did note any mergers probably won’t be on a scale of the one that created Jacobs Douwe Egberts.

And, in case you were wondering, Andrea Illy isn’t alone with his opinions – not that you thought he would be!

Giuseppe Lavazza, the vice-president of the fellow Italian firm Lavazza, has echoed Mr Illy’s sentiments. Speaking in Milan Lavazza is quoted as saying that “we are going to see more consolidation” and predicting that the entire industry is going to undergo a complete transformation in the next two decades.

But instead of nationalised deals, we would expect to see strategic cross-border partnerships to help boost revenues and maximise specific opportunities for growth.

“It [will be] about getting a bunch of brands,” he said.

Lavazza of course know something about this, acquiring Carte Noire for a rumoured $900m in the fallout of the Mondelez/D.E. Master Blenders merger.

Interestingly, Mr. Illy compared the situation in the global coffee industry to that of the brewing sector a couple of years ago when big players merged, creating space for smaller, micro-breweries to exploit.

But obviously, instead of micro-breweries we’re talking about independent roasters and so on, an area which is positively blossoming at this moment in time.

So from a business standpoint, it looks like it’s an interesting period of the world of coffee.