andrea: the illy story started in 1993 with a single cafe. founder o years the developed the blue print for modern espresso machines, how coffee was made. since then the business has enterprise, global selling its products in 100,000 bars and restaurants in 140 countries. but some things haven't changed, t remains a family run operation. today on "leaders with lacqua"

illy, the rea chairman of illy. thank you very much for joining us. italian coffee has always been a thing. hen did this coffee phrase infect other parts of the world? > as a matter of fact espresso started to become global in the '80's and '90's. it started maybe with us, maybe, startedknow, because we exporting italian espresso to mid-'80's and e after that, there has been a big bowl. we were premier but for some within we were at that time. >> do you know why, has the taste of people's changed? london a few years ago it was difficult to find a good cup f coffee and now every street corner has something good to offer. >> i would say the overall experience besides the taste. that time in the u.s. it was not possible to get decent

coffee out of home. restaurants, coffee was served, drip coffee for free. you.didn't charge you can imagine the quality that it was. other than that, you could go to to get some really lousy boiled coffee sitting for hours. cafes, the original idea was to kind of replicate the bar an bar, italian coffee model and then adapt it to the making coffee for more proximal consumers. and because these italian bars around italian esprosio, the proposal was the authentic one initially but then had been kind of a pushback from the american say, er to that, let's high body concentrated italian was the so cappuccino boom. cappuccino, latte.

a great, say, milk drinkers. espresso-based drinks became the success. >> who is your biggest competitor? starbucks a competitor or do they have just a different offering? want to avoid any direct competition. so if we see somebody's coming on our turf, we try to move away. we have thousands of competitors or none. and starbucks that you not necessarily because they are really in a different business. retailers. their core business is really perating their own coffee shops. the several thousands they have, tens of thousands they have all over the world. we are not in the same business. >> so what is your business, high end? is it for restaurants? for bars? home?for consumption at >> the dream upon which my

grandfather founded the company coffeeoffer the greatest to the world. and this dream is now let's say converted in our mission, which clearly to be leader in quality. possible e best quality working hand in hand ith our coffee growers, developing technology, and experiences in order to enhance cough scombrirns. this is what we do. volume.on't seek for else than ek nothing quality leadership. >> does it mean you can have because you s charge more? >> yes, we charge more definitely but the goal is to sustainable, let's say, upply chain to really be a stakeholder company in which the profit is a mean, and not an end. model sure a different from the so-called share

they are the parties directly or indirectly involved in the business and we have customers, talent working for us, suppliers without we wouldn't have this coffee, the communities and at the bottom of the pyramid our hareholder, which is family supporting the business. ot trying to pull out the resources from that. >> how tough is it working for a family run business? do you always have to get along or do you have to get independent advice? does it work? >> well, it is, of course, a because ponsibility there is a legacy two generational already and the to start ation ready working in the business. o it's not only a family business, it also has the family name so this is a double responsibility. is to grow the company by maintaining its consistent the legacy in which our traditions.

interpreted antly tradition we are looking for in uncompromised quality and ethical, let's say, standards. sacrifice from time to time. you need to sacrifice volumes. need to sacrifice profits, you need to sacrifice time and freedom, you know. really really worth doing. >> you talks about having competitors or no competitors. >> we try not to. > so are there too many coffee producers? do you feel that maybe the industry at some point needs to be consolidated? the industry is definitely under consolidation. there have been in the last five billions ly 50 u.s. invested in order to constantly date that industry. started by a german

reinhart ice from the by making their job so many acquisitions of so many brands around the world. course, the leading company ed with very brave acquisitions. yes, there's a consolidation ongoing. must say it's kind of a scary one on one side. but it happens very of on. t the same time you have the consolidation you have the fragmentation on the opposite side. so now we're in the so-called third wave where the so-called coffee is kind of now micro-roastersese in little shops in towns that of coffee d by kind geeks and they are very numerous. so in the fact that the number of brands and possibilities for

isn't growing is oishl official because at the end of can really make this industry exciting and successful and also creating consumer et the engagement and the more iversity, the more differentiation you can find in the market, the better the market. >> still to come -- what kind of leadership does it take to grow coffee business sustainable?

quintessential italian brand but its supply chain reaches across the globe. it's arabica beans are grown in regions across four

continents. ith an aim of sustainability, they found the illycaffe, an nitiative that works side intied with farmers offering them free training to implement best practices with a low environmental impact. still with me. were you always a coffee geek family? of your or did you sometimes think let's coffee into the business? > i have the arrogance to describe myself as a coffee scientist but this is only because of my background and how life.d my i'm a chemist by background and started chemistry for the specific goal of knowing how to quality and this s why we work so much in the economic process and industrial rocesses and technologies but it's a little bit beyond the coffee geek.

francine: is that why you're worried about sustainability? is reallystainability relevant, both the one but you have to remember that coffee is loved and consumed by rich countries. they're rebalancing with coffee counters and producer counters. not be the uld number one, with two-thirds of the coffee consumption but with 100% of the coffees grown in the south of the world. are developing countries still struggling. and this is not the only problem under development.

he other big problem is the agriculture qualities go up and never down. the coffee price s very volatile, different factors, let's say market coffee other than the themselves. for instance this is very much nchored to currency and the price of oil. to do ans we really have great efforts in order to make this coffee sustainable for growers. >> and together you're stronger and that is sustainable? i would say the industry

is cutling edge? knowledge there's not so many industry cooperative at precompetitive level in order strengthen the industry. so the collaboration with the industry, thishe is one of the reasons why i call hem colleagues and not competitors is quite, let's say, areas.ed to many, many i will give you an example. talking about sustainability and climate change, which is now the current threat. have been able to reach withdible positive results coffee and health. the than 25 years ago, belief was coffee was maybe so, humans. but now after 25,000 scientific confirming coffee is even d for health, but

let's say directly correlated with longevity, we can now say better ands you live longer, which is great -- francine: not everyone believes that. but there are now scientific studies confirming that. scientific studies from for nternational agency research on cancer which reclassified coffee more and ively two years ago it's all great because, of course, this creates confidence emerging coffee consumers like china and india consume morest who coffee because it's good. francine: when you come to me ainability, can you give a concrete example of something you worked on either in a country or specific project? this isn't only about fair trade, right? trade, we will talk later if you like. what i introduce before the real is climate change. because yes coffee is impacted by climate change.

two-fold, quality first and productivity second. countries making big losses. rancine: because of natural disasters? andrea: could be natural disasters. fact, they of estimate 50% of the currently suitable land for coffee agriculture will not be suitable by 2050.r but this is really significant because in the meantime thanks coffee ositiveness of that i just described, consumption is growing 2%. produce 0 we need to today.s much we do so that means we have to invest n agriculture in order to make

coffee resilient. francine: but this is different ways to harvest coffee beans? yes, first what we need to do is improve the economic practices. make them more sophisticated, science based, technologically empowered. have ly, we will need to new ways for climate change. if these are not sufficient, we have new areas like higher latitudes and altitudes. require more ll investment and we need require investment in the farms. francine: this cannot only be a private practice, right? partnership with the public

and politician. >> absolutely. we are working together with a coffee trading association, the world's largest over 50% of the coffee trade in order to have a mass and i.c.o., international coffee organization and all of we relevant associations, are trying to develop an organization in order to broker, in order to really attract institutions, fill tlop cal in other countries. francine: when i say fair trade, a consumer rue i as is doing a little bit less eefl for the world? has been, i trade believe it belongs a little to the past. it's been a very good first step towards sustainability.

but not sustainability, it's the commitment to pay premium price coffee that you would pay less on the marketplace. o it's kind of a market distortion which the consumer by seeing a label believes that the coffee has paid a fair price, unfortunately, these expectati neither create a huge consumption because most of the consumers by the coffee the quality but because it's fair trade. so they tend to kind of limit choice to sometimes, not always, you know. ou take your preferred coffee and sometimes you take fair trade one. nd on the other side, the expectation that created with an overspli.reate the problem is now there's too and the ified coffee premium became very, very thin. so this is why the system is a

unfortunately.en and we have to look ahead into schemes which are ore sophisticated, really certifying the sustainability of the supply chain. not only solidarity. next -- up representing italy in style. talk andrea's mission of fendi ng companies from to ferrari next. next.

francine: as well as acting as

chairman of the company that andrea illy also leaves a foundation whose ission is to increase the competitiveness of high-end talian brands from food to fashion. ome of its members include fendi enfromary. today italian brands make up 10% consumption of luxury goods across the world. grow n they preserve and that market share? mr. illy, thank you so much for still being with us. at the italian magic, there are very many thisan high end names, and is despite the political turmoil 40, 50 years.n what is the secret illy has? andrea: italy has an enormous a wealth in uch nature and whatever is intangible in culture. country of beauty

hough and we are at the very center of the cradle of ivilization with the mediterranean, with all of this natural competitive advantage, there has been so beauty and heritage sedimenting in the country that creativity and ingenious in terms of technology and innovation of our best minds. this luxury market is great because it's over 1 trillion. italy is a co-leader with we colleagues in france but have two great, strong points. the e the countries with highest amount of luxury -- we miss only one, consumer electronics. other than that, we have all. utomotive, you mentioned errari, lamborghini, we have

jewelry, sport, food, hospitality and so on. i don't want to mention them all. and the other great competitive have is we're the province where the product is made. italian companies look at further expanding. scaling up?oked at andrea: the purpose of the foundation is how to strengthen competitiveness and grow. have ideas how to double that usiness, which is already a ontribution to the italian g.d.p. of 5%. that industry, the brands you before among the other 100 of them, are the best ulture ambassadors of the italian lifestyle. do people fall in love with an products, brands, point of

sale abroad? willing to y are visit our country and describe beauty. and it is gigantic because of 10% world g.d.p. have a leadership position in that industry, you have a significant contribution to the g.d.p. there is another great pportunity, which is now let's country,ng upper to our road involving 8-k investment in italy ahead. italy has always been let's say a harbor for other great opportunities. we don't welcome opportunities. francine: no, certainly don't lack opportunities. also come unities hard work. how many coffees do you have a coffees?hat kind of andrea: i have an average of four. four, five.ree, francine: espresso, cappuccinos?

andrea: a new one i love called brue. coffee, not milk. illy, thank you very much. andrea: my pleasure. asure.

>> coming up on "bloomberg best ," stories that shaped the week around the world. brexit plans move forward despite chaos in the cabinet. >> she is facing a life or death moment within the conservative party. astrade tensions ratchet up u.s. and u.k. tussle over tariffs. earnings season rolls in with some of the big banks reporting results. jpmorgan came out with strong results, nothing missed. opec issues and a output outlook. canada's central bank this --