The illy coffee supply chain There are different integration levels in a coffee supply chain, some characterised by strong integration performed by multinational companies and others fragmented with many specialised network actors (growers, local traders, international traders, roasters and retailers). The large multinational companies in the food industry use vertical integration to raise profit margins, increase their control of part of the competitive environment and especially (in the particular case of specialities) maintain the quality level of the product as requested by the market. Illy bases its business strategy on product and service quality, obtaining an evident competitive advantage in the espresso market thanks to the careful management of its supply chain from the supply of green coffee and its direct relationships with the growers to distribution and its indirect relationships with consumers. However, it does this without implementing traditional vertical integration, which would be rendered less effective because of the small size of the firm. Thus, from this perspective, illys strategic and operational management of the coffee supply chain (as in Figure 12.3) has distinctive characteristics that are aligned with its business model. However, this strategic choice does not guarantee the quality of the espresso in the cup because the coffee beans can undergo variations in quality from the harvesting phase through the entire supply chain. For this reason, illy has implemented a set of technical, social and cultural practices at every level of the coffee supply chain 1.

What are the main possible integration levels of a coffee supply chain?