“We are unwavering in our pursuit of cost stability” – Cofix Global COO, Shaun Lewis
What was the idea behind Cofix and how has the brand evolved?
Cofix is a brand borne of necessity – to create a café concept with low fixed prices. Cofix opened its first stores in 2013 with all items priced at NIS 5 (approximately €1). The market response was strong and immediate, leading to rapid expansion throughout Israel. By 2015, we had launched our first franchise stores and a year later we entered our first international market – Russia. In 2023 – a full decade after our inception – a cappuccino at Cofix is priced at only NIS 8 ($2.14), and one is unlikely to find a lower price for a cup of coffee among any other chain in Israel.
Our growth momentum continued and today we operate over 400 stores across Israel, Russia, Belarus, Poland, Kazakhstan and Spain. In the last decade we have evolved considerably while remaining true to our founding mission: to provide high-quality coffee and delicious food at fair prices.
The majority of Cofix stores in the early years were company operated. Today, more than 90% of our total store footprint is franchised. We will never become a 100% franchised company, because owning a small number of our stores supports R&D and training programmes. We often deploy company-operated stores in new markets to validate the concept and unit economics for the benefit of franchisees.
Nevertheless, the future of Cofix is franchising and we are uniquely positioned to enable entrepreneurs to launch and successfully manage their own cafés.
How has Cofix performed amid tighter consumer spending?
Today’s tough economic climate reinforces the value proposition of our fixed-price model. Our concept has always enjoyed wide appeal among more price-sensitive populations and those who demand strong value for their money. During periods of economic uncertainty and high inflation, consumers tend to become more price sensitive. This dynamic persists in the post-pandemic period and we recognise a compelling opportunity to win and retain new guests.
“We understand that customers seek more value than can be achieved with price alone”
In pursuit of these new opportunities, we will continue to be aggressive in educating the public on our brand culture, incentivising them to trial our products, and reinforcing the loyalty of both new and existing guests. Our Cofix Club app, available across all markets, has been crucial in maintaining the engagement and incentive loops that keep our guests coming back.
However, even if our prices are consistently lower than most competitors, we understand that customers seek more value than can be achieved with price alone. The quality of our products is no doubt a critical element of our overall value proposition, but the way we curate overall guest experience is of equal importance.
How does the company balance a fixed price with high quality?
We are unwavering in our pursuit of cost stability and efficient management of our supply chain. We will never compromise on the quality of our core product offering – coffee. Therefore, this part of the cost and quality equation remains fixed. Coffee is subject to price fluctuations due to weather conditions, supply and demand, production costs and global economic trends. Our operational scale enables us to negotiate long-term supply contracts with favourable terms that support cost predictability and stabilisation in our supply chain.
We continuously conduct sourcing of new suppliers and price benchmarking, which provides insights and leverage in negotiations to ensure that we are receiving fair pricing on contracts. Cofix also operates a roastery to supply our stores within CIS regions. The additional margin associated with purchasing roasted versus green coffee can be excessive, and by operating our own roastery we are able to control this margin. This internal capability is particularly useful in times of crisis, as we can better insulate ourselves from supply shocks and moderate our production.
How has Cofix performed so far in 2023?
We concluded 2022 with positive year-on-year unit growth in each of our markets. Cofix is one of the top 10 largest coffee chains in every market we serve and we occupy a position in the top 20 largest coffee chains in Europe. In July 2023, we broadened our global footprint by opening our first store in Spain and will launch Cofix Armenia in September 2023.
“In many ways, the pandemic period assured us that global expansion is not only inevitable but crucial for long-term growth”
Have the last few years altered Cofix’s growth plans?
Our vision for Cofix remains ambitious, but sound management compels us to continuously monitor the global economic, social and political landscape. Our plan to reach 4,000 stores by the end of 2027 was conceived pre-pandemic and reflected a different conglomeration of circumstances. Our objective to be one of the top five largest coffee chains in the world has not changed, but we have adjusted our strategy.
We now find ourselves in a fundamentally different landscape. Consumer preferences have evolved, the retail landscape has undergone seismic shifts and market uncertainties have impacted the availability of capital.
In many ways, the pandemic period assured us that global expansion is not only inevitable but crucial for long-term growth. We view the geographic diversification of our business to be critical for supply chain and operational stabilisation. Those companies with more limited regional scope often found themselves to be fully risk-exposed to restrictive local governance, unpredictable supply chains and rapidly-changing purchasing patterns. The global nature of our company allowed us to thrive in challenging circumstances..
We are now charting a revised path forward. This year we finalised construction of our new Training Center at Cofix’s European Headquarters in Warsaw, Poland, and we continue to develop our operational and support competencies to aid expansion.
Our conversations with prospective master franchisees across different countries show a shared belief in our vision. As we take our next steps into markets like Germany, Serbia, India, Czech Republic, Hungary, and the UAE, we're excited about the opportunities that lie ahead.
Shaun Lewis is Global Chief Operating Officer at Cofix.
https://www.worldcoffeeportal.com/Latest/InsightAnalysis/2023/August/We-are-unwavering-in-our-pursui...