1 00:00:02,440 --> 00:00:13,880 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. Well, the cost of 2 00:00:13,880 --> 00:00:16,320 Speaker 1: a cup of coffee is on the rise as extreme 3 00:00:16,360 --> 00:00:20,159 Speaker 1: weather its global coffee supplies in Brazil and Vietnam. But 4 00:00:20,400 --> 00:00:22,680 Speaker 1: our next guest says that arrespite is on the way 5 00:00:22,720 --> 00:00:25,919 Speaker 1: for Java lovers. He expects prices actually fall this year. 6 00:00:25,960 --> 00:00:28,000 Speaker 1: And joining us now, I'm thrilled to say we have 7 00:00:28,080 --> 00:00:31,560 Speaker 1: Andrea Illy. He is Illy Cafe chairman. Illy Cafe, of 8 00:00:31,600 --> 00:00:36,200 Speaker 1: course is an Italian coffee company specializing in espresso. Great 9 00:00:36,240 --> 00:00:38,280 Speaker 1: to have you with me. So you said in late 10 00:00:38,400 --> 00:00:41,720 Speaker 1: March that you expect a decline in coffee prices coming 11 00:00:41,760 --> 00:00:45,000 Speaker 1: in the second half of twenty twenty four. In late May, 12 00:00:45,120 --> 00:00:46,120 Speaker 1: is that still your view? 13 00:00:46,880 --> 00:00:49,600 Speaker 2: I cannot say that the expects because the market is 14 00:00:49,640 --> 00:00:53,120 Speaker 2: becoming more and more in predictable. In the past the 15 00:00:53,200 --> 00:00:57,640 Speaker 2: trend was similar that in this season the prices were 16 00:00:57,680 --> 00:01:04,880 Speaker 2: coming down. But there are many reasons to sustain a 17 00:01:04,959 --> 00:01:10,720 Speaker 2: higher price because more and more financial markets rely upon 18 00:01:12,000 --> 00:01:18,160 Speaker 2: triggers for price search, and in this case, climate that 19 00:01:18,240 --> 00:01:23,480 Speaker 2: you mentioned is the main one, particularly excessive rains in 20 00:01:23,520 --> 00:01:27,440 Speaker 2: Brazil and route in Vietnam, which are the two most 21 00:01:27,480 --> 00:01:29,360 Speaker 2: important coffee producing countries. 22 00:01:30,240 --> 00:01:32,840 Speaker 1: It's interesting. I mean, when you think about sort of 23 00:01:32,920 --> 00:01:36,320 Speaker 1: volatility that we've seen, it's really been focused. My understanding 24 00:01:36,360 --> 00:01:40,720 Speaker 1: is on Robusta prices. I know that ELI uses Arabica beans, 25 00:01:40,800 --> 00:01:44,360 Speaker 1: but how is what we're seeing with Robusta translated over 26 00:01:44,440 --> 00:01:47,480 Speaker 1: into the type of beans that you actually use. 27 00:01:47,560 --> 00:01:52,680 Speaker 2: Usually there is a an arbitrash between Arabic and Robusta, 28 00:01:53,320 --> 00:01:58,040 Speaker 2: which makes the Arabica price at least twenty five percent 29 00:01:58,560 --> 00:02:03,440 Speaker 2: higher than robust which also reflects a higher quality in 30 00:02:03,480 --> 00:02:09,320 Speaker 2: the cup for some reason which are probably linked specifically 31 00:02:09,360 --> 00:02:15,079 Speaker 2: to the offer and demand. Robusta coffee is used for 32 00:02:15,120 --> 00:02:18,600 Speaker 2: a certain type of industry, like instant coffee and some 33 00:02:18,960 --> 00:02:22,880 Speaker 2: more let's say entry level coffee in the market, which 34 00:02:22,960 --> 00:02:30,679 Speaker 2: probably let's say, did not decide to replace a Robusta 35 00:02:30,720 --> 00:02:35,440 Speaker 2: coffee with Arabica, although there is a price advantage, have 36 00:02:35,520 --> 00:02:38,560 Speaker 2: we So yeah, it's quite unique as a dynamic in 37 00:02:38,639 --> 00:02:41,560 Speaker 2: the market. It didn't happen in the past. 38 00:02:42,080 --> 00:02:44,760 Speaker 1: Well you thought on what I've been wondering for those 39 00:02:44,840 --> 00:02:48,680 Speaker 1: who perhaps use the Robusta deans, I mean, how easy 40 00:02:48,760 --> 00:02:51,440 Speaker 1: is it to actually switch to using a different type 41 00:02:51,560 --> 00:02:54,639 Speaker 1: of less expensive dean, or is that sort of impossible 42 00:02:54,639 --> 00:02:55,440 Speaker 1: in this environment. 43 00:02:56,800 --> 00:03:00,520 Speaker 2: Well, what typically happens is the opposite. For dominant that 44 00:03:00,639 --> 00:03:05,160 Speaker 2: because Arabica coffee is the more premium. When the prices, 45 00:03:05,320 --> 00:03:10,320 Speaker 2: the market prices are lower, the percentage of Arabica coffee 46 00:03:10,360 --> 00:03:14,200 Speaker 2: using lenths increases so that you can, let's say, have 47 00:03:14,280 --> 00:03:19,840 Speaker 2: a better consumer let's say response, And when the cost 48 00:03:19,880 --> 00:03:23,160 Speaker 2: goes up, then you use more robust, which is cheaper 49 00:03:23,480 --> 00:03:28,160 Speaker 2: this time is not what is happening now, probably because 50 00:03:28,400 --> 00:03:32,799 Speaker 2: for certain kind of preparation, like I've already mentioned, instant coffee, 51 00:03:33,160 --> 00:03:35,600 Speaker 2: robust is more important. 52 00:03:36,480 --> 00:03:39,160 Speaker 1: And so I mean, looking into the future, like you said, 53 00:03:39,160 --> 00:03:43,160 Speaker 1: it's been difficult to predict with confidence belt whare prices 54 00:03:43,160 --> 00:03:45,560 Speaker 1: are going to actually go? But what does the actual 55 00:03:45,800 --> 00:03:48,640 Speaker 1: supply demand look like? It feels like a lot of 56 00:03:48,680 --> 00:03:51,440 Speaker 1: this is playing out on the supply side rather than 57 00:03:51,520 --> 00:03:52,440 Speaker 1: the demand side. 58 00:03:52,560 --> 00:03:59,800 Speaker 2: So to speak, Supply and demand is in balance, but 59 00:03:59,800 --> 00:04:03,040 Speaker 2: by means that one year might be a little deficit, 60 00:04:03,160 --> 00:04:05,760 Speaker 2: the year after is a little shupplus and if you 61 00:04:05,840 --> 00:04:08,920 Speaker 2: make the average you are more or less in balance. 62 00:04:09,200 --> 00:04:14,720 Speaker 2: Stocks levels as a consequence of these unstable dynamic are low, 63 00:04:15,120 --> 00:04:19,360 Speaker 2: and this is a significant let's say driver for a 64 00:04:20,160 --> 00:04:25,279 Speaker 2: price increases. But in the background there is climate change, 65 00:04:25,480 --> 00:04:29,480 Speaker 2: because there is the expectation not only for coffee, that yes, 66 00:04:30,360 --> 00:04:34,479 Speaker 2: climate change definitely impacts coffee agriculture and that there is 67 00:04:34,640 --> 00:04:40,240 Speaker 2: less reliability in the supply. And this, let's say commands 68 00:04:40,279 --> 00:04:45,120 Speaker 2: probably is a higher baseline. We will be able to 69 00:04:45,320 --> 00:04:49,000 Speaker 2: understand if the baseline, which used to be maybe one 70 00:04:49,040 --> 00:04:52,120 Speaker 2: dollar until fifteen years ago, then it moved up to 71 00:04:52,160 --> 00:04:55,560 Speaker 2: one twenty, then one fifteen. Now probably the baseline is 72 00:04:55,600 --> 00:04:59,960 Speaker 2: more around one eighty. But we will need the statistics 73 00:05:00,080 --> 00:05:03,240 Speaker 2: maybe a few months or years down the road to 74 00:05:03,279 --> 00:05:08,360 Speaker 2: really understand that if as a consequence of climate change expectation, 75 00:05:08,560 --> 00:05:16,239 Speaker 2: the baseline increases, which would completely revert the multi deflationary 76 00:05:16,279 --> 00:05:18,680 Speaker 2: trend of all agricultural commodities. 77 00:05:19,320 --> 00:05:21,599 Speaker 1: And of course, I mean it's not just coffee that 78 00:05:21,640 --> 00:05:24,040 Speaker 1: we're seeing this coffee beans, You're also seeing the effects 79 00:05:24,040 --> 00:05:27,000 Speaker 1: of climate change and just extreme weather in the likes 80 00:05:27,040 --> 00:05:29,599 Speaker 1: of cocoa, for example, has been a big, big story 81 00:05:29,920 --> 00:05:32,360 Speaker 1: this year. So that's sort of be the macro lock, 82 00:05:32,400 --> 00:05:34,480 Speaker 1: the broad roast strokes industry lock. I want to talk 83 00:05:34,480 --> 00:05:37,080 Speaker 1: a little bit about your business because you think about 84 00:05:37,120 --> 00:05:39,640 Speaker 1: your first ready to drink cold brew you introduced that 85 00:05:39,800 --> 00:05:43,119 Speaker 1: back in twenty twenty. You expanded that line in twenty 86 00:05:43,160 --> 00:05:46,599 Speaker 1: twenty two with more products. Really curious to hear how 87 00:05:46,680 --> 00:05:50,000 Speaker 1: that line is doing relative to hot coffee. 88 00:05:50,400 --> 00:05:54,360 Speaker 2: Well, really good. So cold brew is very fashionable. There 89 00:05:54,400 --> 00:05:59,200 Speaker 2: is a strong response, particularly from younger generations. Is also 90 00:05:59,360 --> 00:06:03,440 Speaker 2: a good way to drink more coffee summertime. Our effort 91 00:06:03,560 --> 00:06:08,080 Speaker 2: is extremely discipline because it is famous for the early blend, 92 00:06:08,240 --> 00:06:13,640 Speaker 2: because the best possible quality can be only only one. 93 00:06:13,800 --> 00:06:16,880 Speaker 2: So this is why Early offers only one blend, the 94 00:06:16,920 --> 00:06:19,760 Speaker 2: only roaster in the world with that strategy, and the 95 00:06:19,839 --> 00:06:22,960 Speaker 2: cold brew is based on the exact illly blended that 96 00:06:23,000 --> 00:06:28,680 Speaker 2: you can enjoy freshly brewed espresso or cappuccino in a 97 00:06:28,839 --> 00:06:34,720 Speaker 2: in a wherever, in a in the market, and matching 98 00:06:34,760 --> 00:06:37,400 Speaker 2: also the taste profile. This has been the bigger, the 99 00:06:37,400 --> 00:06:41,520 Speaker 2: bigger effort, and we are happy with the quality that we, 100 00:06:42,120 --> 00:06:49,039 Speaker 2: let's say reached in terms of taste consistency, and now 101 00:06:49,080 --> 00:06:51,800 Speaker 2: we expect for this market to grow. All Right. 102 00:06:51,839 --> 00:06:53,400 Speaker 1: I have to say, I drink a lot of coffee 103 00:06:53,480 --> 00:06:56,160 Speaker 1: and almost ninety percent of it is cold brew, So 104 00:06:56,279 --> 00:06:59,560 Speaker 1: there's some ANNEC data there. Andrea, I really enjoyed this conversation, 105 00:06:59,600 --> 00:07:02,320 Speaker 1: are sate you joining us, that, of course, is Andrea 106 00:07:02,320 --> 00:07:03,720 Speaker 1: Illy of Illy Cafe.