Launched as a joint venture between international coffee powerhouse illycaffe S.p.A. and Coca-Cola’s Venturing and Emerging Brands unit in early 2009, the beverage quickly gained distribution in the gourmet and natural foods channels, and in the two years since its debut, volume sales of the coffee have more than doubled (albeit off a very small base).
With distribution on the East and West Coast and nationally through Whole Foods, the coffee had been resonating well with its target consumers – urban, contemporary men and women – and according to Tom Larsen General Manager of illy issimo, “Drug stores were the optimum next step for illy issimo.”
Citing internal research by illy, Larsen stated that the drug store channel was comprised of consumers who are sophisticated coffee drinkers with a propensity for brand loyalty and better-for-you products. Additionally, the foray into CVS and Walgreens gives illy issimo a vast national presence and with it the ability to compete head-to-head with the category leader, Starbucks. However, Larsen stressed that the new distribution “had nothing to do with” the coffee giant.
“It’s all about brand illy and loyal coffee aficionados who have an appreciation for our coffee. We are focused on the consumer and channel and so for us, it’s all about CVS, Walgreens and… getting the product in the hands of target consumers,” Larsen said.
The coffee will be shipped direct to each chain’s internal warehouses, outside of the Coca-Cola network and Walgreens and CVS will initially carry two to three out of the five flavors of the coffee. Larsen stated that illy has defined and very clear metrics – based on in-store performance – to decide when to expand the number of SKUs in each chain. Though promotion for the product will not include sampling, illy will drive trial and brand awareness through each company’s coupon rewards program.
In terms of supply, production and distribution, illy issimo defines the term “global product.” While the coffee itself is Italian, the beverage is brewed in Denmark, packaged in Japan, and shipped for sale in the United States. When asked if such a complex supply chain could provide and, more importantly, sustain the necessary supply to so many retail locations, Larsen stated that large-scale capacity was built into the original plans for illy issimo.
“It’s really more about procurement than capacity,” Larsen noted, though he did follow by saying that the rising commodity prices for coffee beans were not yet an issue for the brand due in large part to the buying power of its joint venture partner.
As for the next distribution channel for illy, Larsen stated that the company was staying patient and particularly focusing consumers who were less sensitive to premium pricing.
“We’re not chasing low end value consumers. We’re descriptive and mindful of where we take the product, and so we’ll continue with further expansion in the natural channel, and also stay very focused on strong performance in drug stores,” Larsen said.