Davos WEF
Davos WEF

Climate change grinding down coffee: Illy CEO

Anmar Frangoul | Special to CNBC.com
Coffee consumption is growing: Illy CEO

Climate change is a threat to coffee production in the medium and long term, Andrea Illy, chairman and CEO of Italian coffee company Illy, told CNBC at the World Economic Forum in Davos on Friday.

"Coffee is one of the crops which is severely affected by climate change, which is a threat both in terms of too high temperature in some regions when it is produced, (and) a threat in terms of water security – either droughts or excessive rains – in certain other regions," Illy said.

"(The) problem is that apparently, most of the land suitable for Arabica production which is the best and most, let's say, most cultivated, will be reduced by 50 percent from now to 2050 as a consequence of climate change," Illy went on to add.

Illy went on to explain that while climate change looks set to impact production, consumption was still growing.

"We predict that we will need twice as much as coffee at least – more probably three times as much – by the end of the century, with less than 50 percent of the land available. I think we have a problem we need to fix."

China's thirst:

Illy's coffee is currently available in 140 countries. In 2014 the company reported 391 million euros ($423.9 million) in gross revenue.

Turning to Asia's increasing appetite for coffee, Illy said he was confident that consumption in China would increase over the coming years as its economy shifted from exporting durable goods to one mostly driven by internal consumption.

"The disposable income is increasing in the country and coffee consumption will continue to grow double digit," he said.

Italy's recovery:

Illy said that the future looked good for his home market of Italy.

"Italy's coming back, we have some tailwind," he said. "The price of oil is stimulating consumption, very low interest rates stimulate investments, and the low euro stimulates the exports, so it's all good for the economy."

Government reforms and good political leadership were also starting to have an effect. "This is also impacting on the mood, on the trust of citizens," he said.

While the reforms would take time, and there was still an issue with non-performing loans in banks that needed to be urgently fixed, Illy said that, "all in all, Italy has really some good cards to play in the present and future."

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