ISRAEL-ECONOMY/COFIX $1 coffee chain taps into Israeli anger over high cost of living

Record ID: 148803

  • Title: ISRAEL-ECONOMY/COFIX $1 coffee chain taps into Israeli anger over high cost of living
  • Date: 2nd July 2015
  • Summary: JERUSALEM (JULY 2, 2015) (REUTERS) MAN DRINKING COFFEE AT COFIX CAFE THAT SELLS COFFEE AND SNACKS FOR FIVE SHEKELS ($1.30) AN ITEM PEOPLE HOLDING COFFEE CUPS ON BAR PEOPLE IN CAFE WORKER PREPARING COFFEE COFFEE MACHINE IN ACTION (SOUNDBITE) (English) JERUSALEM RESIDENT, YAAKOV GOLDMAN, SAYING: "It is a significant saving because I can go to, I won't mention any names, to t
  • Embargoed: 17th July 2015 13:00
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  • Topics: General
  • Reuters ID: LVAEIKHX1O6SANZYH3W20P7BV6TK
  • Aspect Ratio: 16:9
  • Story Text: With a $1 cup of coffee, Avi Katz is starting to do something Israelis have been demanding for years and politicians have failed to achieve - lower the cost of living.
    In 2011, hundreds of thousands of Israelis took to the streets to protest against the high cost of essentials such as food and housing. That led to promises ahead of the 2013 election to cut prices, but progress has been slow, even if the government is now allowing more imports to spur competition.
    Israeli food prices rose 39 percent more than the consumer price index between 2003-2014, according to the central bank.
    In late 2013, Katz launched Cofix, an increasingly popular coffee and snack chain modelled on dollar stores in the United States that has grown to 80 outlets across Israel, mainly on busy streets in urban centres.
    The concept is simple: coffee and snacks such as sandwiches and quiche for five shekels ($1.30) each. Until Cofix came along, Israeli coffee shops routinely charged $3-$4 for a coffee and $5-$10 for a sandwich.
    Still, he wasn't sure the concept would work as it needed each store to sell at least 1,000 items a day to break even.
    Katz said Cofix stores, which only provide take-away goods, sell around 2,000 a day, with customers buying on average two items each. Such instant success led to copy-cat shops, while more established chains were forced to slash prices. Katz also said that the group would expand to 120 outlets this year.
    The clients seem satisfied.
    "It is a significant saving because I can go to, I won't mention any names, to these other fine coffee shops in Jerusalem but I can wind up spending four five times as much money for basically the same thing. And here I get quick service, I can sit down and relax, the coffee is just as good, very consistent and cheap," said Jerusalem resident Yaakov Goldman as he was sipping his coffee at the local Cofix branch.
    In recent months, Katz has expanded into the supermarket business with Super Cofix, a mini-market that sells items for no more than 5 shekels. He plans three more stores this year.
    "These people (referring to the target audience of Cofix supermarket) need a shop in the city where they can buy what they need. Not a shop in the city that takes advantage of the fact that they are in the city and have no time, no car and don't need to fill a cart at a large supermarket and therefore need to pay more. They want to buy in the city, buy what they need, in the right quantity and not pay more just because they want it. These people needed a solution. Super Cofix at the moment is the solution for these people," said Katz, who heads private investment fund Hagshama.
    "If I give you what you need, in less of a variety but in a quality that you're used to - You want a small package of yellow cheese, toilet paper, or wet wipes - If I give you this in the right size, for your actual consumption, you will love me," he added.
    In mid-June, Cofix went public by buying shell company Agri Invest and merging its operations into it. Revenue in 2015 is expected to near 200 million shekels. Katz said the company would have made a profit last year if it hadn't been for investment in a new low-cost supermarket concept.
    Still, its shares have shed 7 percent since going public, suggesting some investors remain to be convinced, though the stock has risen 15 percent in the past two sessions.
    Tel Aviv resident who shops at Cofix supermarket, Yaron, said it was "one of the best things that happened to Tel Aviv".
    "Well, I think this is one of the best things that happened to Tel Aviv. And it's only five Shekels and that's it. So, I get plenty of stuff for twenty shekels for example, unlike other places where I spend like twenty five (shekels) for just a coffee and sandwich. So, I'm pretty cool, pretty happy, that's all," he said.
    Katz hopes to expand his low-cost coffee shops to London and Moscow but nothing is imminent. A copycat coffee shop, Caffix, recently opened in London where items sell for 1 pound ($1.56).
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