Illycaffe looks beyond Italy with Jacobs Douwe Egberts coffee pods deal

Illycaffe has joined the global coffee market’s dealmaking frenzy, looking to extend its European reach by teaming up with JAB-owned Jacobs Douwe Egberts (JDE) to produce and distribute illy-branded coffee pods.

The licensing agreement is the latest move in the battle for consumers ready to pay more for higher-quality coffee, with illycaffe’s new pods to be designed to work in rival Nestle’s Nespresso coffee machines.

Illycaffe's existing pods work only with the Italian brand's own coffee machines, but Nespresso compatibility would open up the wider European market, where the Nestle machine holds a very strong market position.

The deal follows Nestle's own $7 billion licensing deal with Starbucks, announced in May, and Coca-Cola's August acquisition of coffee chain Costa to expand in the fast-growing sector.

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One blend

Illycaffe, a premium brand that produces only one blend made from nine varieties of Arabica beans, is the third-biggest coffee maker in Italy with sales of nearly €500 million last year.

The JDE tie-up was announced in Milan on Monday, though illycaffe declined to provide financial details.

"Illycaffe has struck a licensing deal with JAB's JDE under which JDE will sell aluminium capsules containing coffee produced by illycaffe." said CEO Massimiliano Pogliani. The agreement will see Trieste-based illycaffe produce its blend for capsules that JDE will sell outside Italy. – Reuters