Oct 15, 2013
Coffee Competition brings prices down
The benefits of competition are clear and obvious and should not need to be pointed out. Sometimes they are so immediate they are surprising.
Cofix is a new coffee shop in Israel. They are talking about opening 300 branches across the country, but they only just opened one so far, in Tel Aviv, this past week.
What's so special about Cofix that they deserve mention?
Cofix is selling everything in its store for 5 NIS. Everything - coffee, pastries, sandwiches. Everything for just 5 NIS.
Cofix claims that the chains in existence have been ripping us off, charging ridiculous amounts for coffee and burekas and sandwiches. The owners of Cofix want to show that they can charge a small amount and still make a profit. They have lines out the door. And in just one week they have the large chain coffee shops scared.
Just the other day a couple owners of some of the other chains spoke out about how the food at Cofix is low-quality and serving good quality costs more, with a whole bunch of other excuses for their high prices. Cofix is currently one shop - they could easily ignore it and see if they find a way to survive a month or two before relating to them. There is no way one coffee shop can possibly be making a dent yet in the sales of chain shops with tens and hundreds of locations, though in the future it could be a concern - if they actually survive and show they can make a profit at that price.
And now Aroma has announced that they are soon going to be cutting the price of coffee by a few shekels per cup. The Director of Aroma just said that they wont be able to drop the price to 5 NIS like Cofix, but the customers should not feel as if they are being taken advantage of.
One could make a study based on this situation. I find it startling how quickly a little bit of real competition can affect the market.
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Donate to the Schneider Hospital so I can run the Schneider benefit marathon..
Cofix is a new coffee shop in Israel. They are talking about opening 300 branches across the country, but they only just opened one so far, in Tel Aviv, this past week.
What's so special about Cofix that they deserve mention?
Cofix is selling everything in its store for 5 NIS. Everything - coffee, pastries, sandwiches. Everything for just 5 NIS.
Cofix claims that the chains in existence have been ripping us off, charging ridiculous amounts for coffee and burekas and sandwiches. The owners of Cofix want to show that they can charge a small amount and still make a profit. They have lines out the door. And in just one week they have the large chain coffee shops scared.
Just the other day a couple owners of some of the other chains spoke out about how the food at Cofix is low-quality and serving good quality costs more, with a whole bunch of other excuses for their high prices. Cofix is currently one shop - they could easily ignore it and see if they find a way to survive a month or two before relating to them. There is no way one coffee shop can possibly be making a dent yet in the sales of chain shops with tens and hundreds of locations, though in the future it could be a concern - if they actually survive and show they can make a profit at that price.
And now Aroma has announced that they are soon going to be cutting the price of coffee by a few shekels per cup. The Director of Aroma just said that they wont be able to drop the price to 5 NIS like Cofix, but the customers should not feel as if they are being taken advantage of.
One could make a study based on this situation. I find it startling how quickly a little bit of real competition can affect the market.
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Donate to the Schneider Hospital so I can run the Schneider benefit marathon..
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There is a major difference that should be pointed out but usually deprecated. Cofix is merely a food counter / kiosk and does not currently have 120 sqr metres with expensive decor and waiters to pay - the other coffee shops do, and tat is what people are paying for. Come, order a coffee for 18NIS, and sit around and talk for 45min with a friend or use the wifi. The coffee houses are operating in a very competitive environment, but have very high operating costs due to the necessity of renting expensive high traffic locations. Cofix is a gimmic the same way Pizza laDuda can afford to sell really cheap pizza.
ReplyDeleteIt is true that market competition reduces a considerable amount of cost of the various expensive coffee brands this is only done to attract consumers.
ReplyDeleteThanks
Finn Felton
Kopi Luwak