The coffee war is fierce


The agreement between Illy and JAB is the latest sign in the fierce battle of the coffee market in the world.

In 1934, in the Italian city of Trieste, Francesco Illy came up with a way to pack coffee in pressure vessels to keep it in a special aroma. In 1935, he invented the first automatic coffee machine. In 1974, Illy, the company he founded, became the first company to sell a quick drink of ground coffee.

Automatic coffee machines have opened a fierce war for the largest coffee companies in the world. Especially Nestlé, a Swiss food and beverage company and JAB Holdings.

According to The Economist, on November 8, when the coffee industry war was breaking out, Illy signed an agreement with JAB to provide coffee machines.

Jeffrey Young of Allegra World Coffee Portal, a consulting firm, said that two decades ago, up to 20 large companies were involved in the coffee retail trade. Over the past few years the market has grown at a faster pace than in the past year.

In 2015, JAB bought Keurig, the largest US shell coffee system, for $ 13.9 billion. It also “swallowed” Jacobs Douwe Egberts, Espresso House and Peet’s Coffee. Nestlé signed a $ 7 billion deal in May with Starbucks to distribute products of the popular product chain.

Currently, JAB and Nestlé together control 1/3 of the fresh coffee market. The deal is estimated by Euromonitor International, a research company, worth 83 billion USD a year.

Nestlé announced it would distribute Starbucks coffee worldwide, including in Italy. And over the past few years, the popularity of Nestlé’s Nespresso coffee machine has posed a growing threat in the land of espresso.

Automatic coffee machines, an expensive but convenient way of making coffee, have become the fastest growing product of the market in recent years. The pace has slowed lately, especially in the US, where markets have matured, but Europe is still boiling. Nespresso, owned by Nestlé, led in Europe but failed to penetrate the United States.

Until recently, Nespresso only sold products in its own stores and through the website. The acquisition of Nestlé in 2017 by a major stake in Blue Bottle Coffee, a California brand in California, is a sign of its eagerness to strengthen its U.S. presence.

Despite the growth of JAB and Nestlé, others want to compete. Coca-Cola bought Costa, a British chain, in September for £ 3.9 billion ($ 5 billion). This month Lavazza, another Italian coffee maker, purchased Mars’s coffee business, including the Flavia and Klix sales systems.

Currently, Amazon is a big unknown. Hot beverage sales have been slow in the online market. Matthew Barry of Euromonitor said that the popularity of coffee machines could change. Amazon bought Whole Foods, a trendy grocery store, in 2017 carrying Allegro, another fancy coffee brand.

Thai Binh / The Economist
* Source: Investment bridge

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