Caffitaly CEO Giuseppe Casareto on untapped potential and why innovation is key to creating the best single-serve coffee in the world.
Giuseppe Casareto describes his introduction to Caffitaly Systems as a “roller coaster ride”. With an international career spanning almost 30 years working with high-profile consumer brands and companies including Duracell, Procter & Gamble, and the Bolton Group, Casareto took over the reigns as Caffitaly CEO in May 2020 and found himself facing more external challenges than he ever predicted.
“It’s been an exciting yet challenging transition. It’s exciting because the potential for Caffitaly and the opportunity for growth is hug,” Casareto tells Global Coffee Report. “The company is unique because what we try to do is make the best coffee in the single serve arena. It’s an environment where a good majority of players are focused on producing a good product at a low price, but we want to focus on making something that is much better than everybody else’s and bring a lot of innovation that drives value. The biggest challenge in this context, is convincing the customer.”
But that’s not all. Forced to stay grounded in Italy due to travel restrictions instead of introducing himself to customers and global suppliers, Casareto says the immediate challenge when COVID-19 struck was a loss of business for Caffitaly’s out-of-home customers. For some, like Caffitaly’s North-European customer, it meant closing stores and losing 40 per cent of revenue. For others that dabbled in at-home products, it meant their ecommerce and retail channels thrived.
“We had this mix of positive and negative effect for customers that had business in both markets,” Casareto says. “We had to be extraordinarily flexible to change production plans. Our business in professional machines basically went to zero while consumer machine sales doubled. It was a time when we needed to reset and restart some of the components of our business model, like innovation and the supply chain, and rebuild the relationships we have with our customers. At the same time, we needed to adjust ourselves to a market that was changing very rapidly, and not necessarily all the time in a positive direction.”
To add to the challenges in March 2021 the cost of raw materials such as coffee, polyethylene, and polypropylene started to rise as demand for the products surged. Even the cost of filters Caffitaly uses in its capsules increased by 40 per cent. But rather than putting the cost directly on customers at a time Casareto says the market was not ready for price increases, Caffitaly worked with customers on a one-on-one basis to find solutions to recover the extra costs.
Now, with the worst behind him, Casareto says Caffitaly is forging ahead with its plan for innovation and market growth.
“In 2020 we stabilised the business from a revenue standpoint after three years of decline, and [in 2021] we started growing in double digits,” he says.
The first half of 2021 saw Caffitaly experience 84 per cent growth in machine sales and more than 18 per cent growth in capsule volumes, with a turnover increase of more than 20 per cent equating to around €150 million on a yearly base (about US$169 million).
By the end of 2021, Caffitaly will have produced 1.7 billion capsules, and estimates a further 1.6 billion capsules will be produced by the end of 2022. Roasting about two tonnes of coffee per day at each of its Capriate and Gaggio Montano factories in Italy, Casareto uses his own calculator to estimate that Caffitaly roasted approximately 14.5 billion kilograms of coffee in 2021.
He says the revenue boom is a direct link to Caffitaly’s commitment to innovation.
“Innovation and technology is what keeps us alive. It’s the reason why we are in the business. Our business model is to provide our customers with a system that is unique on the market. It perfectly combines technology and the capability to deliver a superior tasting experience. But the market does not stand still. We need to constantly stay one step ahead of anything new that comes into the market, and so one blessing of the pandemic is that it forced us to innovate in order to lift our standards faster than I expected,” Casareto says.
Caffitaly now commits to an annual investment of approximately €2.5 million (about US$28 million) in research and development and is constantly working in this area to increase specific skills and fuel large-scale changes capable of revolutionising the market.
“What is interesting, is that the capability to innovate has always been within the company. We had the people, we had the knowledge, we were simply using the knowledge in the wrong way. When we started implementing proper innovation processes and new technologies, the impact was almost immediate,” Casareto says.
Offering a quality product is part of Caffitaly’s DNA. It was the mission of the group of entrepreneurs who founded the company in 2004 and remains its core objective. Up until the beginning of 2000 when Nespresso was the only single serve product on the market, Casareto says it was difficult for anyone else to play in the arena thanks to its capsule patent. When the patent expiry lifted around 2012, many businesses started developing compatible products, but not Caffitaly, it created a system of its own.
“Our founders started asking themselves ‘what more can we do?’ ‘How can we ensure the extraction of coffee is better than anyone else’s?’ Their know-how was machine knowledge, so they started there. Then they started thinking creatively about the capsule and reapplying logic from the world of coffee,” Casareto says.
They built a machine with a double infusion system equipped with two different pressures to help preserve the aromas and flavour characteristics of the coffee. Two filters inside the capsule – one at the top and another at the bottom – help compress the coffee and spread the water in a homogenised way for an even extraction.
Each Caffitaly capsule contains eight grams of ground coffee, which Casareto says is the right amount for a true Italian espresso with intense aroma and a thick crema.
“In some bars in Milan or London, a professional machine uses the same volume of coffee,” Casareto says. “As a result – and it’s something that stroke me immediately about Caffitaly – the company has never lost a customer. Once our customers physically exploit our system it’s very difficult for them to move to something else.”
Caffitaly machines also include optical readers that recognise the capsule and indicate to the user the correct dispensing button, such as espresso or filter coffee.
“There is no system comparable to ours. It produces a quality espresso, and has the flexibility to transfer that quality to other types of beverages such as filter coffee or teas. Other systems usually only specialise in one of the two. We are the only one providing a very high-quality spectrum of drinks because of the high level of technology in what we do,” Casareto says.
Caffitaly will expand its range of coffees over the next 18 months to incorporate functional ingredients that are focused on supporting consumers’ body and mind health. This includes Difesa, a coffee enriched with zinc, vitamin B6 and Beta-glucans to help raise immune defences.
“Customers see a massive opportunity in this area because you’re giving the market something more – not just another coffee with a different taste, but something that is good for them,” Casareto says.
After the success of Caffitaly’s range of coffees with aromas, such as rum, amaretto, nut, mint and espresso panettone for Christmas, Caffitaly will also launch seasonal Limited Edition coffees with aromas that meet the tastes and trends of the market. It is close to finalising a global deal that will see the brand expand its range of alternative soluble drinks to include matcha tea, ginseng, barley, and other natural offerings.
With around 71 per cent of Caffitaly’s capsule turnover coming from abroad, Caffitaly will keep leveraging international market opportunities. In particular, in 2022, it will focus on expanding its presence in the United Kingdom and United States, countries in which the brand is not yet present.
To help cater to its expansive growth and the development of new soluble products, Caffitaly is working with leading packaging company Cama Group, whom Casareto describes as a “fantastic partner and key supplier that helps Caffitaly bring to the market a superior capsule product with its range of feeding and packing lines”.
“In order to bring to the market a superior product we need superior technology to make it in the right way, and Cama plays a critical role in that. Cama has supplied us with many packing lines that enable us to deliver solutions for our customers and consumers. Cama is professional, ambitious, responsive, and very quick to help us. Their technology has a very high level of flexibility, ability, and quality which is applied to each of our packaging configurations,” Casareto says.
“We are also working with Cama on new improvements to invest in a new packing line that has a much higher flexibility than what there is on the market. It will allow us to shift from one pack to the other without stopping the feeding line. It’s extraordinarily efficient.”
Casareto is focused on building the best hot drink capsules on the market, but he also wants them to be the most sustainable. As such, Caffitaly has created a sustainability roadmap by customer and country with the objective to one day use 100 per cent recycled materials, largely from Caffitaly capsules, to create its single-serve products.
In the next 12 months, Caffitaly capsules will be fully recyclable, with all capsules made with 97 per cent polypropylene by the end of 2021. It will also launch its first fully compostable capsules in 2022.
“We have started designing and building a roadmap to drive sustainability across all our product brands, and all our customers are with us on this effort. We are 100 per cent focused on using materials coming from waste, which will progressively become recycled into the coffee capsules our customers use. That’s the full circular economy,” Casareto says.
He is also committed to improving the working conditions of Caffitaly’s 450 employees and creating opportunities for their future.
“Companies are made by people. Successful businesses are the result of the quality of the people that you have. Having the right level of talent, the right people to drive the business forward, to fix the issues we have, to turn the company around and to see the opportunities ahead has been a major satisfaction. The company is changing because the leaders are changing,” Casareto says.
Also changing is Caffitaly’s customer relationships, which Casareto says is “blossoming” after a period of transition.
“We’re starting to see revenue growing in the right direction. In a period of crisis, the capsule segment has grown fast. Single serve is still highly underdeveloped and is growing virtually unaware in double digits, and the expectation is that the market will keep growing,” Casareto says.
“We do expect it will become more complex, more innovative, and more competitive because there are many opportunities to employ premium technology to produce a better-quality product. The price of compatible [capsules] is going down and [so] is profitability, so the right way to leverage growth is to innovate and deliver a better product than what is currently available on the market. For us, the only way to survive is to innovate more than the other players and have flexibility that is difficult to match.”
This article was first published in the January/February 2022 edition of Global Coffee Report. Read more HERE.
For more information on Cama Group, visit www.camagroup.com