From coffee, tea, chocolate and jam to wine. The Italian company illycaffé was founded as a coffee roaster in 1933 as a joint venture between two families, Housebrandt and Illy. It produced jams from fruit grown on its own plantations in Istria, Croatia, before branching out into chocolate. But it wasn’t until a decade ago that illycaffé invested in one of the world’s most famous wine regions: Montalcino. So how has it found working in wine?
In 1982, when Bordeaux was having an exceptional vintage that, with help of Robert J. Parker, was to change the wine world’s landscape forever, Francesco Illy was busy rethinking coffee. The result was the 100% Arabica Espresso Blend, a step up from the traditional mix of Robusta and Arabica his father favoured. According to Francesco Illy, Robusta coffee contains molecules that “smell dreadfully of mould”.
The Illy family has always embraced technological innovation and marketing savvy. From the time of founder Francesco Illy onwards, they have created sophisticated coffee machines, mochas, coffee blends and even teabags, paving the way for today’s premiumisation of these products; throughout their history, they have declined to go down the road of sourcing cheaper raw materials. Given the many similarities in the sensory evaluation of coffee and wine, it’s no wonder the Illys embraced wine as readily as they did coffee.
Today, Riccardo Illy, Gruppo Illy’s president, is just as likely to be seen pouring wines for a trade tasting in New York, or at the annual Benvenuto Brunello in Montalcino, as sipping espresso. “Like our mother, I’m an avid tea drinker,” he says. But to people who know the Illys’ story the company’s move into wine doesn’t come as a surprise, since another family member, Francesco Illy, had been running the Podere Le Ripi winery in Montalcino for years by the time the Mastrojanni estate came on the market in 2008.
For Francesco, one of four siblings of the third generation of Illy family, the wine adventure started in the late 1980s, when he started looking to buy some land for a house to get away from his home in Switzerland, where he was developing coffee distribution and the Amici brand. “I came, looked at the place and thought it was a little big for a house in Tuscany,” he recalls. “So I decided to plant a vineyard in a place that used to belong to a shepherd. At that point I was a wine consumer, but I knew zero about wine production.” By chance, the estate he acquired in 1998 was next to the Mastrojanni vineyard, the wines of which Francesco already knew and appreciated.
While Francesco’s love of Montalcino had led him into wine production, Riccardo Illy’s love of wine led him to become friends with the late wine critic Luigi Veronelli. Riccardo took wine courses at Veronelli’s home, and his wife Rossana later became a wine educator. So in 2004, when Francesco, Andrea, Riccardo and Anna Illy were handed the keys to the company’s management and began to rethink its future, the ground had been prepared for a new venture.
“Our blend, Arabica, costs more than most competitors’ products – almost double, to give you an idea,” says Riccardo. “The first strategy was to go down in quality, the second, to start the company’s diversification. We decided to go back to where we started, to chocolate, tea, jams and agriculture.” Thus, the Illy Group was founded and soon incorporated the Domori chocolate factory near Turin, the French tea producer Dammann Frères, and the Piedmont jam and canned fruit producer Agrimontana, while illycaffé was able to keep its high quality and continue selling at higher prices.
Moving into wine
In 2008, after the death of lawyer Gabriele Mastrojanni, his children couldn’t agree on how to run the Montalcino estate he left behind. They decided to sell and Francesco Illy proposed the family take part in the bidding. According to Francesco, there wasn’t much debate. “They were all very positive to do something with wine. Riccardo was also a wine lover at that time, so we said, “Let’s do it’,” he recalls.
The family bought the winery for a reported $23.2m and Andrea Machetti, the winemaker since 1992, was appointed CEO, while Francesco Illy became president. Wine consultant Maurizio Castelli, who had worked at Mastrojanni since the earliest days, remained with company, and the first vintage under the new management was 2008.
The Illys invested in the winery. In 2011, they added to the ageing cellar. Francesco’s son Ernesto decided on bio-architecture, using stone, terracotta brick and chestnut in the building and omitting concrete. The vinification area was also expanded. Last, but not least, Illy decided to turn the former owner’s houses into a Relais boutique hotel, to host the group’s clients.
The Mastrojanni winery is not simply a hobby. The Illys became attracted to wine after Riccardo realised that its worldwide sales are greater than those of coffee, tea and chocolate combined. “The first moment, I couldn’t believe it when I read it. How could that be?” Riccardo lays out a hypothetical dinner, where the guests are served beverages: about 2gm of tea, 7gm of coffee and 750ml of wine – which is sold at a much higher price.
He believes wine is a long-term project for the company. It needs to be: the Mastrojanni winery returned just €2.2m ($2.49m) in sales in 2017, compared to €34m from Dammann Frères, €18m from Domori, and about €20m from Agrimontana. The investment costs are not small. “You need to own your vineyards and land costs a lot in valuable areas like Barolo and Montalcino,” he says. “We think we have to push the goals of our tea and chocolate companies and invest the cash flow into the wine sector.”
The striking similarities between wine and coffee sensory analysis, and the development of the terroir approach to coffee growing, are raising some interesting questions about the synergies of the two businesses. Riccardo Illy doesn’t see a lot of similarities in research and development of coffee and wine but he does see similarities between the two in the quest to preserve aromas. “In chocolate, we roast cocoa at lower temperatures of 120oC compared to 150 oC normally used,” he says, explaining that their refining process (called conching) now takes place over eight hours at 45 oC, compared to the traditional 72 hours at 80-85 oC. “Everything is done to preserve the flavours. Otherwise, in 72 hours they will completely evaporate and disappear.”
Francesco Illy believes there are definite similarities between the wine and coffee worlds, which should benefit the Illys’ wine business. “This could also be one of the answers to ‘Why invest in such a relatively small business for the group?’. The learning curves are very similar and you must know your product extremely well with research and study. The cross-contamination of these schools helped a lot.”
Since wine is heavily regulated in most countries, the Illys cannot fully exploit the potential distribution synergies between the two products, as wine is sold through separate distributors in most countries. “We have to store wine at special temperatures and in special warehouses. Only in eight countries we have distributors that deal with both wine and coffee, and we serve 140 countries of the world,” says Riccardo.
Mastrojanni, set in a privileged location close to both the Sant’Antimo Abbey, near Val d’Orcia, and the long-dead volcano Amiata, shares its terroir with famous wineries. One of these is the nearby Poggio di Sotto, just a couple of kilometres away, sitting on the same hills and experiencing the same strong winds from the valley.
Mastrojanni now produces some 100,000 bottles of wines including Rosso di Montalcino, a Brunello and two Brunello crus (Vigna Schiena d’Asino and Vigna Loreto), along with the sweet Moscadello. The Relais boutique hotel is now open for business, as is the spa, and the Illys are already looking ahead for new opportunities. “We think we will invest long term in the wine business,” says Riccardo. “Only in family companies you can think in generations like we do.”
Riccardo has developed an idea that he calls “universal wines”; classic wines and regions that have been on the wine map for centuries, and gained strong positions.
“There are many excellent wines in the world, but only a few, like Burgundy, Barolo, Montalcino, Bordeaux and Champagne, have gone global. They’ve become universal and we would like to stay in that category.”
Francesco Illy says that the gross profits from wine are also “much more interesting than those of other things. There’s also the land, increasing in value,” he adds. “Now the family is 11 years into running Mastrojanni.” They have more than doubled their vineyard and are thinking about buying in other areas. “If you want to understand the point of running such an operation within the core business – with a €480m turnover plus other businesses that we have – I’d say, let’s look at it in 50 years,” says Francesco.
This article first appeared in Issue 2, 2019 of Meininger's Wine Business International