$1 coffee chain taps into Israeli anger over high cost of living

Thu Jul 2, 2015 8:16am EDT
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By Steven Scheer and Tova Cohen

PETACH TIKVA, Israel (Reuters) - 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.

"You brought new people into the Knesset (parliament) and people think they will change the country," said Katz. "But the new government was a disappointment and then came Cofix."

In late 2013, Katz launched Cofix, an increasingly popular coffee and snack chain modeled on dollar stores in the United States that has grown to 80 outlets across Israel, mainly on busy streets in urban centers.

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.

"Everyone knew you can buy coffee for five shekels. When you buy in large quantities, it's cheap," said Katz, who heads private investment fund Hagshama.

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.   Continued...

A shopper stands near a cashier at a Super Cofix mini-market in Tel Aviv, Israel June 22, 2015.  REUTERS/Nir Elias