Italy must adapt to survive, Illy boss warns

A passion for perfect coffee
A passion for perfect coffee

    JUST WATCHED

    A passion for perfect coffee

MUST WATCH

A passion for perfect coffee 04:21

Story highlights

  • The head of Illycaffe says Italian business has failed to compete internationally
  • He says Italian industries have shrunk as they have struggled to adapt to a global marketplace
  • Reforms currently being implemented were needed to restore its economic might

Italy -- an economic giant of the eurozone -- is failing on the global stage and must adapt if it is to survive, the head of coffee giant Illycaffe has warned.

Andrea Illy, CEO of Trieste-headquartered Illycaffe, told CNN his country's woes would be "just the beginning of our problems" unless its businesses learned to compete in the international marketplace -- something they had largely failed to do.

"The Italian economy is wrong in the sense that it is not conscious enough about how important it is to become competitive in the global arena," he said. "Let's say we don't really step up: what we have suffered until now... is just the beginning of our problems."

Italy's economy makes up 17% of the eurozone -- almost three times that of bailed-out Greece, Portugal and Ireland combined -- and, as the third-largest economy in the bloc, is regarded as "too big to fail."

Illy's comments come as the borrowing costs of Spain, another pillar of the bloc, push toward 6%, feeding fears the debt crisis is spreading to larger economies. Italy's borrowing costs passed the psychological 7% level -- beyond which countries are considered unable to fund themselves -- last November, before dropping back.

According to Illy, Italian businesses have been slow to adapt to the demands of a globalized economy -- unlike many German businesses, for example, which had aggressively pursued a path of international expansion through creating foreign partnerships.

"Some entrepreneurs did it: few, not enough," he said. "In the meantime, the relative size of the Italian industries in most of the sectors has been declining."

He said the far-reaching reforms being implemented by new Prime Minister Mario Monti were "absolutely" necessary for Italy to regain its economic vitality.

"This country needs a break in Italian politics in order to reform," he said. "Otherwise there will be no growth."

Illy is the grandson of Francesco Illy, who developed the modern espresso machine and founded the company in Trieste in 1933. Today, Illycaffe sells its products in more than 130 countries around the world.

The company faced a significant challenge in competing "in a more crowded, competitive market arena," he said. But, conversely, "opportunities are becoming much larger," he added.

He saw a strong future for the company in the premium sector of the coffee market, which had undergone significant changes in the past decade or so.

Previously, he said, the market had been "the shape of an anvil... with a big mainstream part and a very small narrow premium coffee segment." Today, he said, it was more like an hourglass, with a substantial market for premium, specialty coffees.

"This is the future," he said. "It will be more and more high quality, like wine."

Being an internationally competitive coffee brand did not mean aiming to have as many outlets as Starbucks, he said. "I would like to have 1% of what they have, but to reach the same awareness."

      Marketplace Europe

    • spc marketplace europe latvia valdis dombrovskis_00021207.jpg

      Latvia's economic prospects

      CNN's Nina Dos Santos visits Latvia to speak to the country's outgoing Prime Minister and the prospects for the eurozone's 18th member.
    • spc marketplace europe malta immigration africa_00002118.jpg

      Asylum seekers in Malta

      Malta is the gateway to Europe and on the frontline of the immigration flows. Isa Soares reports from a detention center on the Mediterranean island.
    • spc marketplace europe malta immigration vox pops_00001419.jpg

      Maltese concerned over migrants

      CNN's Isa Soares speaks with people on the streets of Valletta who say their country can't cope with more migrants from Africa and the Middle East.
    • spc marketplace europe malta george vella_00032005.jpg

      Malta's migrant struggle

      Malta cannot afford to continue supporting migrants from war-torn countries in its over-crowded detention camps, the country's foreign minister has told CNN.
    • spc marketplace europe 2013 what went wrong_00020426.jpg

      What went wrong in 2013?

      Slow recoveries, bailouts, and youth unemployment. Richard Quest speaks to Europe's top CEOs about the issues of 2013.
    • spc marketplace europe 2013 defining moments bob parker intv_00010826.jpg

      2013: The year of tapering

      CNN's Richard Quest speaks to economist Bob Parker about defining moments of 2013 and about what to expect in 2014.
    • spc marketplace europe estonia energy_00000923.jpg

      Estonia's dirty energy drive

      The Baltic nation of Estonia is developing its oil shale energy reserves in a bid to become energy self-sufficient.
    • spc marketplace europe nani beccalli falco_00041005.jpg

      GE Europe exec's jobs warning

      Europe must stop being nationalistic if it wants to help a lost generation of workers, the regional boss of U.S. conglomerate General Electric says.
    • spc marketplace europe greece petros christodoulou_00002025.jpg

      Is Greece on the mend?

      Greece is on the way to economic recovery as investor faith returns to the recession-ridden eurozone nation, an executive at Greece's largest bank has told CNN.
    • spc marketplace europe euro jim cloos_00012617.jpg

      Don't blame euro, says pioneer

      One of the masterminds behind the euro says Europe would have suffered a far worse fate if the single currency had never been created.
    • spc marketplace europe maastricht eu_00002401.jpg

      The birthplace of the euro

      Nina Dos Santos visits the Dutch city where the European treaty carrying the city's name came into force 20 years ago.
    • spc marketplace europe spain working hours_00010525.jpg

      Spain may turn clocks back

      As Spain continues its drive to slash budgets and cut spending, one of the nation's favorite pastimes is under threat as ministers look for ways to boost productivity.