How much will we pay for our cup of coffee in the cafe or on the road 

Coffee is one of the most common commodities among adult consumers in Israel and the world in general. About 78% of all adult consumers consume coffee regularly, between one and eight cups a day. Coffee drinking is divided into two main patterns that do not contradict each other: consumption at home and consumption outside the home. Coffee is both a basic commodity and a product of leisure and entertainment, and around it there is a huge industry with a rich culture and many years of Torah. Coffee has tradition and rules, and it is not just a drink to quench the thirst, but a drink that includes types, varieties, methods of preparation and high loyalty to the consumer.

The types of coffee and their consumption patterns in Israel

The most common types of coffee in Israel include black coffee, instant coffee and espresso. Each of these segments has sub-varieties and groups that affect the taste, aroma and method of preparation. Consumer loyalty to coffee brands is among the highest in the consumer goods market. For many years they tried to replace dominant coffee brands in Israel, but the results showed time and time again failure and business infeasibility.

Black coffee and instant coffee

Elite's black (formerly Turkish) coffee leads the black coffee market in Israel, with extremely high consumer loyalty. In recent years, private brands of the marketing chains have begun to present and highlight their products in packages that resemble the well-known brand, which has caused a certain bite in Elite's market share, but there is still a high loyalty to the brand. Elite's legendary instant coffee (powdered) also has high and significant brand loyalty, although in recent years there has been a retreat towards granulated instant coffee. In this segment, the leading brand in the market is Taster's Choice by Osem-Nestle.

The espresso capsule market

In the espresso capsule market there is flexibility on the part of consumers, who try new brands and varieties. The espresso market developed after the launch of Nestlé's Nespresso brand, which turned the coffee culture into a unique shopping experience, where customers did not understand whether they came to purchase coffee or expensive jewelry. With the launch of coffee machines for consumers' homes, the market developed and many companies began to produce parallel products suitable for use with the popular machines.

The capsule market is in constant growth with hundreds of brands in the world, and even the private label market is showing growth in this segment. Each espresso brand has several types of capsules, according to varieties, strengths and trends. The world's leading brand in the capsule market is Nespresso. In the consumer market in food chains in Israel, the "Elite Capsules" brand leads the sales. Next to it is the consumer brand of Nestlé, which carries the brand of the global coffee chain Starbucks, Cafe Landover, Cafe Joe, Jacobs, L'Or, Lavazza, and even the international brand of Carrefour presents a wide variety of capsules and changed the average price in the market following the prices The discounts he presented on the chain's grocery shelves.

The coffee market in Israel: size, sales and consumption patterns

The coffee market in Israel generates about NIS 1.5 billion a year. In the past, black coffee was the main product in the market, but today it accounts for less than 30% of the market share. At the same time, the capsule segment is growing impressively and reaches about 40% of the financial market share.

According to Stornext data, coffee sales in the Hamburged consumer market amount to approximately NIS one billion per year. Instant coffee leads the volume of sales with approximately NIS 460 million per year, black coffee accounts for approximately NIS 310 million per year, while espresso coffee accounts for more than NIS 200 million per year.

The differentiation between domestic consumption and leisure consumption

There is a clear differentiation between home consumption and leisure consumption and spending time in coffee shops. When it comes to home consumption, the consumer controls the brand, strain, strength and preparation method. On the other hand, in coffee shops, the control is lower, and the consumer can mainly choose the degree of heat, the amount of milk and water, but not the varieties of coffee beans or the exact preparation method. Previous surveys conducted show that many of the consumers who drink black coffee at home order espresso coffee in coffee shops, and those who are used to drinking instant coffee tend to order cappuccino.

Consumption habits and places of purchase

In the last two years, there have been significant changes in coffee consumption habits in Israel. Most home consumption is still done through grocery stores, but there is also an impressive growth in orders directly from online sites specializing in coffee. This phenomenon is mainly expressed in the market of coffee capsules and coffee beans, where about 30% of all coffee consumers currently own a home coffee machine.

Growth in coffee orders from online sites: this shows that there is a change in consumption habits, when more people tend to order quality coffee directly from the Internet, probably due to the convenience and ability to choose from a wide variety of products.

Growth in the market for coffee capsules and coffee beans: This indicates that more people are looking for quality coffee experiences at home, and prefer to control the preparation process of their coffee.

The spread of home coffee machines: about 30% of coffee consumers already own a home coffee machine, which indicates high popularity and a change in lifestyle and consumerism.

The effect of the Corona period on the coffee shops: The Corona period probably created many difficulties for the cafes, but a return to the data of the face of the epidemic suggests a recovery and a return to normality.

The development of coffee culture: the spread of advanced coffee machines in offices, the culture of coffee carts and food trucks shows a time when coffee became a more important and central part of everyday life and leisure culture.

Each of these trends can serve as a starting point for more effective marketing and sales in the coffee field, and perhaps even consider including new developments or collaborations in the online field or the home machine market.

Cultural change in coffee shops in Israel

Thirty years ago, the Aroma chain brought to Israel a new spirit in the culture of coffee consumption, thus changing local consumption patterns. In the past, the options were limited to buying coffee "to take and go" or sitting in a cafe that offers waiter service, with a varied menu that was hard to ignore. The traditional cafe did not allow staying for a long time on one cup of coffee, and it was always necessary to consider the cost of the service.

Then Aroma came with an innovative model, based on ordering independence similar to fast food chains like McDonald's, where everyone can order what they want and stay as long as they want without any time limit. However, as Yakir Zada, an entrepreneur in the field of coffee shops, explains, this model led to situations where many turned coffee shops into personal offices. Tables became the center of meetings and long business conversations, which created a feeling of discomfort for other customers who only wanted to drink coffee in silence.

The need to control the nature and timing of the use of the public space resulted in many cafes, especially in the center of Gush Dan, being forced to close their doors due to financial incapacity. The economic crisis intensified especially after the corona epidemic, which also led to changes in business conduct. In recent years, there has been a return to the format of service cafes, where the business owners strive to maintain control over management and prevent being dragged into situations of financial impossibility.

The influence of convenience stores and coffee prices in the Israeli market

In recent years, convenience stores have become a significant factor in the sale of ready-to-drink coffee. Chains such as Yellow, Menta and Su Good report that coffee drinks, cold drinks and cigarettes constitute a significant part of their activity. The growth in coffee sales in these stores is happening despite the competition with the popular coffee shops and coffee carts.

Over the past decade, coffee prices in coffee shops have jumped up to 50%. With the introduction of the Cofix chain, which offered a variety of products at a uniform price of NIS 5, there was a slowdown in the sales of competitors. The market reaction was not long in coming, and chains such as Aroma and others began to lower coffee prices, with the price of an upside-down coffee dropping to NIS 8 and espresso to NIS 7.

Today, in 2024, it seems that the Cofix chain has not survived its economic model, and cappuccino prices reach NIS 12 to NIS 14 per cup, and up to NIS 18 for a large cup. The prices of prepared coffee have jumped significantly, also compared to the prices of the raw materials and the prices in the main marketing chains.

The prices of the capsules range from NIS 0.69 to NIS 1.80 on average, although we can find capsules on the supermarket shelves at prices of NIS 3.50 per capsule from well-known but less common brands. The original Nespresso capsules are only available in the dedicated chain stores and the price ranges from NIS 2.3 to NIS 2.7 per capsule.

The prices of black, instant and granulated coffee maintain their price for the consumer and their rates of increase do not correspond to the general ratio. The reason for this is the loyalty of the consumer and the knowledge of the price, which is a marker for the price level of the network. We checked how much we would pay on average for 100 grams of elite black coffee.

The price of Elite's powdered instant coffee has remained at an average price almost the same in the last year, in the last month we can see exceptional promotions that have led to regional competition.

The Yesh network, Shufersal's ultra-Orthodox format, presents the product at a price of NIS 14.90 per consumer - the cheapest price on the market. The average price in the market is about NIS 20.

We also see a similar behavior in the Testerchoice product - its price remains the same and ranges from NIS 34.90-29.90 per consumer.

The difference in prices refers to discount stores and urban stores.