Israeli coffee startup proves bigger is not always better

Posted on April 29th, 2014
Tech

Israeli coffee startup proves bigger is not always better

 

An Israeli startup launched recently in New York City is quickly proving to be the David to Starbucks‘ Goliath.

The newcomer is called Cups and is a mobile app that connects coffee drinkers with small independent cafes in their vicinity.

The interactive map shows all the coffee shop locations and allows subscribers of the app to see where they can get great coffee with their subscription.

The success of the Cups business model is that it fills an obvious hole in the market. Local entrepreneurs would do well to follow Cups’ lead and take advantage of the gaps in the market, those that the industry top dogs are too big to explore.

Cups have 28-and-counting local coffee shop members and a subscription of just $45 a month, coffee-drinkers can get an unlimited plan for as much tea and basic hot coffee as they want; for $85 you can add lattes, iced coffee, and other espresso-based beverages into the mix.

“Our goal for Manhattan is 200 coffee shops, which is the same number as Starbucks locations,” Cups co-founder Gilad Rotem told Slate.

Rotem and his four co-founders, all high school friends and coffee lovers, launched Cups in Tel Aviv, Israel in late 2012. Soon after, Cups expanded its reach from eight member locations to more than 100 cafes in Tel Aviv and Jerusalem. They set their sights on New York, with its abundance of independent coffeehouses and caffeine-addicted residents.

Rooting for the underdogs

The genius of Cups is that it gives small independent cafes the increased presence enjoyed by big chains like Starbucks by allowing them to form chains of their own. “We see Cups as a new kind of coffee shop chain,” Rotem says.

“We’re uniting independent coffee shops together and giving them economics of scale and tools that they cannot get by themselves, but keeping their independent atmosphere. It’s a chain of independence.”

In addition to its monthly unlimited plans, Cups offers subscribers customised deals to cater for their particular coffee demands. Coffee shops don’t pay a fee to join the program, they are reimbursed at a discounted rate when customers purchase drinks through the Cups app.

Greg May, coffee shop owner and Cups member, told Slate that Cups essentially pays the shop half of its retail price on each drink. “It’s certainly brought in a lot of new business,” he says. “I think it’s a compelling value proposition for the consumer.”

While the May doesn’t register a loss on the discounted drinks, he says the hope is that customers who come in for cheap coffee will end up buying a pastry or sandwich too.

$45 a Month for Unlimited Coffee [Slate]

Photo source: Cups Blog