♪ >> the story started in 1933 with a single café. within two years, the founder developed the blueprint for modern espresso machines, -- revolutionizing how copy was made. since then it has grown into a global enterprise, selling its projects in 100,000 bars and restaurants across the country, but some things haven't changed. he remains a family run operation. is andrea illy.

thank you so much for joining us. italian coffee has always been a thing. when did this coffee craze infect other parts of the world? andrea: as a matter of fact, espresso started to become global in the 80's and 90's. maybe with us, maybe, i don't know. we started exporting italian espresso to the u.s. in the mid-80's, and after that it has been a big boom. i don't pretend we have been the trigger, but for some reason we were there at that time. francine: do you know why? had the tastes of people changed? even in london 25 years ago, it was tough to find that decent cup of coffee. would say the overall experience beside the taste. time, it was not

possible to get decent copy out of the home. even in restaurants, they serve coffee for free. they did not even charge you. i cannot even imagine what the quality was. other than that you would get really lousy coffee that was sitting for hours. so the original idea was to kind of replicate italian bar, the italian coffee bar model and adapted to the united states, making coffee much more proximal for consumers. course italian bars were centered around italian espresso. then there has been a little bit of a push back from the american consumer to that, let's say hi body, concentrated italian espresso. so cappuccino and latte with the boom.

americans are great milk drinkers, so espresso-based drinks became a success. francine: who is your biggest competitor? is it starbucks, or do they have a different offering? andrea: our job is to avoid any direct competition. we try to walk away. we either have thousands of competitors or nine. starbucks as you mentioned, not necessarily because they are in a different business, they are retailers. the core business is really operating their own coffee shops, several thousand -- tens of thousands they have all over the world. francine: what is your business, high-end? is it for restaurants, bars, for consumption at home? andrea: the dream for which my grandfather founded the company

is to offer the greatest copy to the world. now covered in our mission, which is clearly to be the leader in quality. we seek the best possible quality, working hand-in-hand with our coffee growers, developing technology and experiences in order to enhance this coffee experience. this is what we do. we don't seek for volume, nothing else than quality. francine: does it also mean you can have higher margins, because you charge more? charge more,we deftly. but the goal is to have a sustainable supply chain, to really be a stakeholder company in which -- for which the a means, not an end. for sure, different model from the stove called -- so-called shareholder company. stakeholders are all parties

that are involved directly or indirectly in the business. the consumer customer, the talent working for us, without whom we would not have had this great coffee. pyramid isom of the the shareholders, which is our families supporting the business , not trying to pull out resources from it. francine: how tough is it working for a family run is miss? -- family run business? how does it work? andrea: it is of course a great responsibility but that's because there is a legacy, two generations already, and the next generation ready to start working in the business. because it is no longer a family business, it also has a family name. my job is to grow the company by maintaining it consistent with the legacy and with our tradition. a it is constantly

reinterpreted tradition that we are looking for and maintaining uncompromised quality and standards. you need to sacrifice from time to time, you need to sacrifice time, and alsos, freedom. but this is really worth doing. talk about not having real competitors, and yet having 1000 competitors. 1000 competitors on different sectors, are there too many different coffee producers? maybe the industry at some point needs to be consolidated. andrea: the industry is definitely under consolidation. there have been nearly 50 u.s. aliens invested in order to constantly adapt the industry. this is all started from the startedd family who

making so many acquisitions of so many brands, and of course the leading company was bored with acquisitions. so yes, there is a reconciliation ongoing and is kind of a scary one. happens verybut it often. at the same time he had the the otherion, you had side. so now we are in the so-called third wave where the so-called --cialty coffee is a kind of is kind of overcome by micro-roasters in little shops in town that are operated by -- they are very numerous. the fact that the number of fords and possibilities consumers is not growing, at the

end of the day, what's really going to make the industry's exciting and successful in creating volume is get the consumer engagement. , the moreiversity differentiation you can find in the market, the better the market. francine: still to come, what kind of leadership does it take to grow a global coffee business to sustainability? more with andrea illy, next. ♪

illy maybe quintessential brand, but it reaches across the globe.

advantage an initiative that work side-by-side with farmers are from them free training to implement best practices with a low environmental impact. is still with me. were you always a coffee geek because of your family? arrogance to the describe myself as a coffee scientist. this is only because of my background and how i spent my life. i'm a chemist by background, and i studied chemistry for the specific goal of knowing how to further improve quality, and this is why we work so much in economical processes and also in developing new technologies. so it's a little beyond the coffee cake. francine: sustainability, is

that the biggest risk for the coffee industry? andrea: sustainability is extremely important. coffee to remember that by rich and consumed countries. it used to be 80% of the -- they goodness god is rebalancing. still, there would not be a coffee industry without a developed consciousness -- developed countries. u.s. is number one. europe is number one with two thirds of coffee consumption, but 100% of the coffees grown in the south of the world, most of them are developing countries still struggling. this is not only -- not the only problem, the other big problem

is that agricultural commodities some reason, deflationary. prices never go up, they go down. on top of this, the coffee price is very volatile, predicted by different market factors. it's anchored to currency and the price of oil. that means we really have to do great efforts in order to make this coffee sustainable for growers. otherwise they will run out of business. first of all, we will not get any quality any longer, and second, we also might have a shortage of production with the consequence of price shot and so on. francine: but you need the help of your competitors to try to tackled this as a group. together you are stronger when it comes to sustainability. andrea: from that perspective i

would say the industry is cutting edge. there not some in the industry so cooperative at pre-competitive levels in order to strengthen the industry. so the collaboration with colleagues in the industry, this is one reason why a call them colleagues and not competitors, many areas.to i will give you an example. even before talking about sustainability and now talking about climate change, which is the current threat, we have been able to reach incredible, positive results because maybe 25 years ago, the belief was that coffee was maybe so-so for the human head. to 25,000w come up scientific studies all confirm that coffee is not bad for help. say is strictly correlated

with longevity. francine: but not everyone believes that. andrea: there are now scientific studies confirming that. they did reclassify coffee more positively two years ago. is that great, because this fromes confidence, countries like china and india, it now leads them to consume more coffee because it is good, and so on. francine: give me a concrete example is something you have worked on, either a specific country or project. this is not only about fair trade. >> we will talk later if you as i introduced before, the priority is pretty much it. yes, coffee is impacted by

climate change. quality first and productivity second. it is already happening since a while. they have been countries suffering big losses and also countries making a big investment. francine: so it's like natural disasters that hurt the crops? it's estimated that 50% of the currently suitable land for coffee agriculture will not be suitable any longer by 2050. so this is really significant. consumption is, growing, 2%. by 2050, we will need to produce twice as much as today with half the suitable land. that means we really have to invest in agriculture in order to make this culture resilient. francine: so this is different

ways of harvesting coffee beans. andrea: first, we need to improve economic practices. make them more technological in power. secondly, this is not necessarily an answer. new -- let'svent not sufficient, all that will require a big investment and we need to in thee more investments farms. francine: but this cannot only be a private practice, it has to be in partnership with the

public and the politicians. andrea: absolutely. this is why we are working together with a swiss copy trading association, the world's largest, over 50% of the coffee trade. in theth big growth international coffee organization, and were trying to develop an organization in order resources,ttract impact investments and allocate the resources to bankable projects in producing countries. the stampwhen i see fair trade, is it 100% true? does it mean that i as a consumer and doing a little less evil or the world? i believe it belongs a little bit to the past. it has been a very good first step toward sustainability. it's a commitment to pay premium

price to the coffee, which is the same that you would pay less on the marketplace. so if the kind of market distortion with which the consumer by seeing a label haseves that this coffee paid a fair price. unfortunately, these expectations have created huge consumption, because most of the consumers by their coffee not for the quality, but because it is fair trade. so they get to kind of limit their choice to sometimes, not always. you take your preferred coffee and sometimes your preferred wine. you mayther side, create an oversupply. the problem is that now there is too much certified coffee and the premium became very safe. this is why the system is a little bit broken, unfortunately.

intove to look ahead certification schemes that are more sophisticated, really certifying the sustainability of the supply chain. up next, representing italy in style. promoting luxury companies from fendi to ferrari, next. ♪

francine: as well as acting as

chairman of the company that also his name, andrea illy leads the foundation, its mission to increase the competitive this of high-end italian brands, from food to fashion. some of its members include , and they makei up 10% of total consumption of world.goods across the how do they preserve and grow that market share? thank you for staying with us. when you look at the italian magic, there are many high-end italian names. what is the secret sauce that italy has? andrea: italy has an enormous arrogance, such wealth in nature and whatever is intangible in culture. we are at the very center of the

cradle of civilization, the mediterranean, with a millinery culture. of let'sthese kinds say natural competitive advantages, there has been so countryitage in the that inspires genius in terms of technology and innovation of our best minds. with that, this luxury market is great, because it is over one trillion. italy is the coleader with our colleague, france, but we have the country with the highest amount of sector in luxury. electronics,umer other than that we have all out of market. you did mention ferrari.

food,e jewelry, sports, hospitality and so on. i don't want to mention them all. the other great competitive advantage we have is that we are the country where the product is made. francine: italian companies look at further expanding. have they gotten better at scaling up? the purpose of the foundation is how to strengthen competitiveness and growth. we have ideas how to develop that business, which contributes 5% to the italian economy. the brands you were mentioning before, among the other 100 of cultural the best ambassadors of the italian lifestyle. italy,fall in love with with the products, brands, point-of-sale, brought, and then

they are willing to visit our country and discover the beauty. tourism is gigantic. of world gdp. if you have a leadership position in that industry, you have a significant contribution to the gdp. there's another great opportunity which is now facing our country, which is the new alk road, which is involving trillion dollars investment in the decades ahead. aaly has always been for the silkarbor road, so this is another great opportunity. we do not lack opportunities. francine: with opportunity comes hard work. how many copies do you have a day, and what kind -- how many coffees do you have a day? andrea: i have several a day. the new and is a cold brew,

which i love, absolutely. to coffees per meal. francine: thank you so much. andrea: my pleasure. ♪

rishaad: asia-pacific markets despite lingering trade returns oil is rebounding. u.s. china it talked grinding to a halt with few signs of resumption per beijing saying washington's attitude is "cata strophic" for the world trade prayer and. it is hard to see a policy designed to harm america. in hong kong, i'm rishaad salamat. this is bloomberg markets. ♪ rishaad: just over an hour ago

the bank of korea came out and did a broadly expected, leaving unchanged. he interest rate unchanged, 1.5%. employment conditions remaining sluggish and they will carefully see whether they need to adjust policy any further. inflation and 2% target is the cpi read anyway. growth will be below that forecast back in april. nevertheless, that is korea. trading day getting underway. haidi: indonesian stocks looking to buck the regional trend. falling for the first day and four. the king at the broader market session, stocks recovering. the nikkei and the yen further spread.