Aroma cuts cappuccino price by NIS 3
One of Israel's biggest café chains quick to respond to arrival of Cofix, which sells cup of coffee for just NIS 5. Starting Sunday, Aroma to offer small takeaway cappuccino for NIS 8. 'We wanted our customers to feel they are getting a fair price,' owners explains
A large takeaway cappuccino will be sold at Aroma for NIS 12 ($3.40) instead of NIS 13 ($3.65). There will be no price reduction on the other items on the menu.
Following the price cut, Aroma's small cappuccino is still 1.6 times more expensive than the same product sold by Cofix.
Aroma Israel owner Yariv Shefa told Ynet on Tuesday, "We sent out an email today to all branches, issuing an order to all of the chain's cafés to reduce the price of a regular cappuccino starting Sunday.
"This is a quick response to the situation created. Later on, we will continue examining ourselves and see whether espresso prices can also be reduced. At the moment, apart from the coffee we are not making anything else cheaper, but we will later look into reducing the prices of other products too."
Did customers complain about the coffee prices after Cofix entered the market?
"We didn’t do it because we were approached by customers. We did it because of all the media buzz around the NIS 5 coffee. Our feeling was that our customers were uncomfortable. NIS 11 compared to NIS 5 is a very big difference. We always wanted and we still want people to feel they are getting a fair price from us, and that's why we fixed it."
Won’t it have a negative effect on your profit, on your franchisees' profits?
"The profitability will be reduced, but about 60% of the damage to the franchisees' profitability will be financed by lowering the price of coffee to franchisees and reducing the advertising budget by 35%."
'Cofix buys it fruits and vegetables from us'
Shefa says he is not reducing the price of a small cappuccino to Cofix's level of NIS 5 because he believes the other chain will be forced to raise prices at some point.
"Cofix's price is an entry price," he argues. "Cofix buys its packed fruits and vegetables from a factory owned by us. We sell each pack to Cofix for NIS 4 ($1.15), and they offer it for NIS 5 ($1.40), including VAT. In other words, you can understand their economic feasibility. There is no profit here.
"As far as I understand, their strategy is an entry strategy. They will raise prices later on. That still doesn't mean they can't sell items for cheap prices, but they won't be able to remain on this price level. There are differences in quality, as far as we understand."
Do you think other chains will cut prices now? Because you're a relatively cheap chain.
"We consider takeaway as part of our business. In the other chains it makes up a smaller share. So they may reduce prices or they may not."
Your sandwiches are still more expensive than Cofix's.
"We sell a small sandwich for NIS 12-19 ($3.40-5.35), but it's a product of different quality. We bake the bread on the premises, prepare the sandwich on the premises. And their NIS 5, as I said, is an entry price."
Aroma branches unaware of reduction
The chain's branches, by the way, are still unaware of the price reduction. "There is no change in prices at the moment," Ynet was told at the Ashdod café. Workers at Bat Yam's Rothschild Street branch were not informed of the new move either.
In addition, the price reduction will not apply to the Aroma Tel Aviv branches, as they belong to a different chain with a different ownership.
Aroma Israel raised prices earlier this year by comparing its takeaway prices to its regular menu prices, but the chain did reduce coffee prices. The price of a large cappuccino went down from NIS 14 ($3.95) to NIS 13 ($3.65) two months ago. Following the new chain's entry, it is forced to further reduce prices.
Yet there is still a significant difference between the two chains: While Cofix offers all items on its menu for NIS 5, Aroma Israel still sells a small sandwich for double the price in Cofix. Another difference is that Cofix, which is about to open its second chain in Tel Aviv next week, is a takeaway chain with no seats.
Other coffee chains in Israel have yet to respond to the Cofix revolution. Aroma is the biggest café chain in the country alongside Café Café. The other chains are Cup 'O' Joe, Greg Café, Aroma Tel Aviv, Arcaffé, Café Neto, Elite Café, Café Hillel and Ilan's.
