Analysis
Cristina Scocchia, the recently appointed Chief Executive Officer should be happy with the results delivered, although without taking anything away from her, they are a reflection of events that happened before her tenure. The revenue growth seems to have been driven by the opening of the economy post-covid. I’m not sure of the level of sales that the hospitality sector contributes toward overall revenues, but I imagine that it was significant.
Of course, revenue is only one side of the equation, and costs too have been soaring. However, the company noted EBITDA still saw growth, although they didn’t state how much. We may speculate from the lack of a specific number that it’s marginal, and this seems to be born out with the statement that the year ahead could be more challenging.
Going forward, the company’s focus is on growth in the US and China. Both these markets are so huge, you wonder why it’s even debated, yet in fact, they are challenging, require substantial investment and present a financial risk for getting it wrong. There is a saying in the market about the US being a graveyard for failed European ventures.
Yet, fortune favours the bold, and I think Illy is doing the right thing. In the end, it all comes down to execution, and so the next few years will be the true test for Ms Scocchia.
Press Release
Milan, July 29, 2022 – During the first half of 2022, illycaffè’s consolidated revenues grew by 21% compared to 2021.
In the Ho.Re.Ca. channel, revenues benefited from a gradual recovery in out-of-home consumption, and saw double-digit growth compared to 2021, narrowing the gap with pre-pandemic levels. This was especially true in Italy, where revenues grew by 30% compared to 2021 thanks to an acceleration in the rate of new client acquisition, particularly in the premium segment, and to an increase in average consumption.
Revenues grew compared to 2021 in the HOME channel as well. In particular, revenues from the online channel grew by 11% compared to 2021, with the United States and China driving growth.
In the United States, a priority market of the industrial plan, revenues grew by 34% compared to 2021 thanks to the positive performance of the modern trade, which was due, among other things, to strengthened collaboration with Amazon, and recovery in the food service channel.
The other markets in which the brand is present also saw significant growth in revenues compared to 2021. In particular, revenues in China grew by 16% compared to 2021, driven by the online channel.
In spite of constant pressure due to increases in the costs of raw materials and logistics costs, EBITDA grew compared to the previous year, as it benefited from increased revenues and improved operational efficiency, reflecting a strong strategic focus on long-term drivers of growth.
We are pleased with the results achieved in the first half of 2022. The positive performance of all markets underscores the effectiveness of the strategies laid out in the industrial plan, which revolve around international growth with a focus on the United States and China, which are the markets with the highest potential for us.
Revenue increase was supported by all distribution channels, with a good balance between home and out-of-home. Despite the exponential rise in the cost of raw materials and logistics, EBITDA saw an acceleration, fueled by a rise in revenue and a stronger operational efficiency, reflecting a strong strategic focus on long-term drivers of growth. Such results are a solid base to face a year that we expect to be complex and challenging, especially on the profitability front, due to the growing uncertainty and volatility related to the macroeconomic context and geopolitical tensions.
Cristina Scocchia, Chief Executive Officer, illycaffè
The press release was supplied by illycaffè.
