Illycaffe Braces for U.S. Tariffs with Price Hikes and Considers U.S. Production Expansion
April 13 - 2025
Coffee Geography Magazine
Italian coffee giant Illycaffe has expressed its plan to raise prices in response to potential tariffs under U.S. President Donald Trump’s proposed "Liberation Day" trade measures, CEO Cristina Scocchia announced. The tariffs, aimed at countries perceived to disadvantage American goods and workers, could disrupt Illy’s U.S. operations, its second-largest market, accounting for 20% of global revenue.
Scocchia emphasized that tariffs would inevitably inflate consumer prices, though the exact percentage remains under evaluation. This decision follows a challenging period for the industry, with green coffee bean costs surging 40% in recent years. Despite absorbing these pressures in 2023 by keeping prices steady, Illy implemented a 4% global price increase in 2025 to safeguard margins. “The entire sector faces squeezed profitability,” Scocchia noted, highlighting the compounding pressures of volatile bean prices and geopolitical uncertainties.
Cristina Scocchia CEO of illycaffè
To mitigate future trade risks, Illy is exploring the construction of a U.S.-based roasting plant and assembly line. While some products could shift to localized production, the majority of manufacturing will remain in Trieste, Italy, where the company is investing €120 million to double production capacity. “A U.S. plant is a strategic consideration, but feasibility studies and construction timelines mean this is a multiyear plan,” Scocchia explained. The move aligns with broader industry trends, as companies increasingly localize supply chains to navigate trade tensions.
Despite macroeconomic turbulence, Illy reported a 6% revenue rise to €630 million in 2023, with core profit (EBITDA) jumping 19% to €110 million. This growth underscores the brand’s premium positioning and operational efficiency. However, Scocchia cautioned that the “perfect storm” of rising costs, tariff threats, and geopolitical instability has delayed potential plans for a stock market listing. Shareholders, including the Illy family—which retains majority control after selling a 20% stake to U.S. private equity firm Rhone Capital in 2021—deem current conditions unfavorable for an IPO.
Founded in 1933, Illycaffe’s response mirrors broader sector challenges. Competitors like Lavazza and Nestlé also face pressures from commodity fluctuations and trade policies, with some accelerating regional production hubs. Trump’s tariff strategy, reminiscent of his 2018-2019 trade wars, could reignite global supply chain disruptions, particularly for European luxury and agro-food exporters.
Illy’s dual approach—short-term price adjustments and long-term U.S. investment—reflects a balancing act between immediate survival and strategic growth. As Scocchia concluded, “Our heritage is rooted in adaptability. We aim to protect our legacy while innovating for tomorrow’s markets.” With the U.S. contributing €126 million annually, Illy’s moves will be pivotal in shaping its trajectory amid an uncertain trade landscape.