Coffee lovers in Israel don't have to use cash or credit to buy cappuccinos anymore.
Cups, a local startup founded in September 2012, is offering an alternative: unlimited, all-you-can-drink coffee at Tel Aviv coffee shops for approximately $45 a month. Customers pay with a proprietary smartphone app, which allows them to receive a drink of their choice at a participating shop every half hour. A second, cheaper, subscription tier offers users one coffee a day for approximately $27 a month. CEO Alon Ezer told Fast Company that 55 coffee shops are currently participating in the all-you-can-drink scheme.
The coffee shops, all located in Tel Aviv and neighboring Jaffa, are compensated by Cups for the cost of the coffee. According to an interview with the Times of Israel, the company currently makes money from occasional coffee shop patrons, since a customer who patronizes a cafe twice a week pays just as much as a true-blue caffeine junkie refilling their cup every half hour while using the cafe's free Wi-Fi. Subscribers can purchase any coffee or tea drink at participating shops; the price of a cappuccino or latte in Tel Aviv is approximately $4-$5.
Smartphone-driven loyalty card programs such as Belly have made inroads inside the United States, and international giants Tesco and Carrefour have both aggressively steered their card programs into the mobile sphere. Cups is one of many companies adopting the loyalty card template to local market conditions; it just happens that their variant is also a very effective caffeine delivery mechanism.
According to Cups' cofounder Gilad Rotem, the company was initially conceived as a discount service for heavy coffee drinkers. "We wondered why coffee--such a fundamental product consumed by hundreds of millions of people all over the world--is still purchased at relatively high prices," Rotem told Fast Company. Their long-term strategy, the company says, relies on retaining app users through discounts and retaining coffee shops by providing business owners data about customer behavior--as with other loyalty card apps, Cups' product collects detailed information about its users. Rotem says that subscribing coffee shops receive reports on patrons' buying habits, demographics, purchase times, and other information. The company claims user info is anonymized, and the app's permissions appear
to verify this.
The app, in a similar manner to American loyalty card systems like Belly, also attempts to steer foot traffic into participating coffee shops by offering a dynamic map of participating cafes to subscribers--food is not included in the all-you-can-purchase program. As Ezer told the Times of Israel, his hope is that participating stores “get additional sales from the cakes and sandwiches people order with their coffees, plus additional business from friends or guests who accompany the subscription holder."
The YouTube advertisement below provides a good example of the app's functionality:
Instead of relying on NFC or QR codes, the app generates a numeric code for purchasing coffee on the phone; patrons then show the barista the code--but the process isn't seamless, as the barista has to type the code into a separate app register-side.
For Cups, which is currently expanding to other Israeli cities, the big question is whether their all-you-can drink business model will translate to the international market. However, Cups is one of the first companies to offer unlimited purchases via a prepaid mobile subscription. Tel Aviv is a dense, coffee shop-filled urban center not too dissimilar to other large cities; if the concept works on the Mediterranean, it could well work elsewhere.
[Image: Wikimedia user Yug]
Update: This article was updated to include an English-language video.