Cappuccino, Latte, Macchiato, Americano, and Espresso have become increasingly popular in various coffee shops during the coronavirus pandemic. Even though the challenging weeks of the coronavirus lockdowns, Israelis never ditched their beloved coffee, resulting in a massive uptick in the sales of coffeemakers.
Follow Israel Hayom on Facebook and Twitter
Another trend is that more and more consumers have discovered the virtues of automatic coffee machines, which grind whole coffee beans on the spot. Some 10% of the household machines fall into that category, showing just far Israelis are willing to go to get their perfect cuppa joe. It turns out Israel is a country of coffee aficionados and dairy lovers. According to various estimates, about a quarter of those with coffee machines at home have a frother either integrated into the machine or as a separate device.
According to Elad Komissar, who is the vice president for business development at Strauss Coffee Israel, "nowadays coffee is considered a sophisticated product. It's more than just a stimulant, it is part of your lifestyle."
He adds that "the big break was when espresso became a household product. In that regard, Israel is no different than the rest of the developed world. It began with the use of capsules, and after Nespresso made them part of our lives, we also adopted capsules. Today capsules comprise a very big chunk of household coffee consumption. The capsule market is worth hundreds of millions of shekels and amounts to hundreds of millions of units."
Komissar has analyzed the trends in the Israeli market, telling Israel Hayom that "there are many people today who understand coffee like they would in any culinary field. We run the biggest coffee community on Facebook and you can see there that the level of discourse there is very high. Coronavirus accelerated this trend because people had a craving for coffee like that outside their homes."
Q: So the world of coffee is growing at a double-digit rate?
"Correct, there are coffee makers that work with capsules or whole beans, with the latter being the most dominant, but the market share is rapidly growing.
We believe the market value of non-Nespresso capsules will reach 160 million shekels ($51 million) by the end of 2021. That means more than 100 million capsules will have been sold in 2021, and this is without taking into account Nespresso capsules. The world of Nespresso-compatible capsules is growing and rapidly taking more market share. It is on track to grow by about 27% in 2021 compared to the previous year, which also saw rapid growth in the capsule business because of the pandemic."
"We have a 50% market share in the Nespresso-compatible capsule business, and after that there is Starbucks. Six years ago Nespresso-compatible capsules could not match the original capsules, but today we and some of our competitors can deliver on high-quality capsules. We are talking about 100% aluminum fully-sealed capsules. It's no longer a niche product. Moreover, we have set up an entire array for recycling the capsules."
From the farm in India to your cup
Komissar noted that "the most interesting part is the whole beans," saying this experience of having the granular coffee being prepared on the spot ultimately wins over true coffee lovers.
"At the end, nothing beats the feeling of drinking coffee that has just been grounded. In the past, the complexity of coffee makers, their size, and their price meant that only diehard coffee lovers would get them, or various experts. Today the technology has advanced to the point that you can get bean-to-cup coffee makers at very affordable prices. So nowadays there are quite a lot of coffee drinkers who take that leap and get those machines.
"As the biggest and leading coffee company in Israel, we have covered all realms: Turkish coffee, instant coffee, capsules, and whole beans. We have recently launched a brand of cold coffee drinks. In this line of business, there is no such thing as one-size-fits-all. There are those who pack instant coffee when they go traveling, and there are those who have been born to a reality of espresso and then move on to whole beans and capsules. Most consumers diversify their choices so that they juggle between instant coffee, capsules, and Turkish coffee."
Q: Can we expect the trend toward premium coffee products to continue?
"Generally speaking, yes. The capsule-based machines and the bean-to-cup machines will make more inroads into Israeli households. What used to be only in the homes of experts can now be found in homes all over Israel. Ten years ago only a minority would have had access to capsules, but today our capsule business is growing at a double-digit rate. The same thing can be said about the whole beans: This line of business has picked up pace, in part because of various programs in which you get a machine on a temporary basis and just pay for the beans."
Nespresso has been the dominant player when it comes to capsule-based coffee machines in Israel. As an international company, it has a lot of insight into the Israeli market. According to Nespresso Israel's Vice President of the Commercial Division Tomer Horovitz, "both in Israel and around the world people want to dedicate more of themselves and their time in the process of making coffee. People put a lot into their coffee and the machine. It is as if everyone now is a barista. We have noticed there is great interest in where the raw material comes from and where the coffee is cultivated. Being environmentally friendly is crucial. We also have a machine called Vertuo Next that is 50% more ecological because it is 50% recycled material. In fact, 99.5% of its packaging is recycled."
Q: How important is sustainability?
"It is extremely important. Its basis is the ongoing work with farmers all over the world, as part of Nespresso's AAA program. The goal is to help the farmers' livelihood and the quality of their crop so that we can provide the best agricultural product. We have noticed that organic coffee is an emerging trend so we have an organic blend for Vertuo. Our customers want to upgrade the coffee experience, they want to combine coffee, food, and alcohol, and they want to know what kind of processes their coffee had gone through. We have launched the Ambassador program that provides access to workshops and content that are exclusive."
Horovitz believes that coffee consumption around the world is in flux, and people are eager to put a lot of thought before they buy the machine."Israelis love milk; people love to hold a large cup of coffee in the morning and in the evening."
Q: How do you deal with the competition?
"Competition is a good thing. We want to create a real relationship with the clients, with a lot of interest and content."
According to Mor Moskowitz, who is the small product manager at the home and kitchen appliance company Brimag, "this trend is increasing, people want to replicate the flavor they get in coffee shops. That's why they want bean-to-cup machines."
For Moskowitz, this means companies have to tailor their products accordingly.
"It's hard to do this with capsules because such coffee is designed to meet the widest common denominator and is created in a lab. People who use machines with whole beans want to get maximal freshness and they want to achieve the closes taste to a coffee shop in their homes. What's most important is that with a bean-to-cup machine you are not tied to any single company, you can make your own blend and tailor it to your palate."
Q: Have you noticed a drop in the price of bean-to-cup coffee makers?
"Yes. They may not be cheap but they are much more affordable than before. In the past, automatic coffee makers could cost you thousands of shekels, but today the average person can get them. The more you use them, the more you get a return on your investment."
Moskowitz said that the recent advances in such machines mean that the variety of pre-programmed options has grown massively.
"Some of the machines also allow you to interact with the smartphone, and in many cases, they have been scaled down so that they would not take too much room on the countertop," he said.
Uri Federman, CEO of Landwer Cafe, says that this trend is clearly noticeable across the board. "Over the past six and seven years, capsules have allowed people to introduce coffee machines into their homes, and as a result, this product has become more affordable. Because such machines only cost hundreds of shekels means, this has resulted in an influx of capsule-based coffee machines in households, resulting in a massive uptick. During the pandemic, the consumption of capsules grew by 55%. Over that period there has been a growing number of people who have moved on to bean-to-cup coffee makers."
According to Federman, "capsule coffee machines make the bulk of the machines in Israel, but there are those who have gone a step further and bought a machine that costs more than 10,000 shekels ($3,215) and there are those who buy coffee makers for 1,500-2,000 shekels ($480-$640), which work with pre-ground coffee. So these machines are on the rise but have yet to reach the popularity of capsule coffee makers. With automatic coffee makers, people like to hear the sound of the coffee beans being ground as if they are in a coffee shop, they like the ceremonial aspects and the feeling of being a professional barista."
Federman noted that this trend has proved resilient to other economic trends. "Although shipping costs are on the rise, these products are affordable. There are also coffee makers you can take with you on various road trips so that you get your shot of espresso while you are on the trail," he said.
But there is also bad news. According to Federman, "since the start of the year the cost of raw goods, not just coffee, has seen an uptick," and in some coffee exchanges, the price has all but doubled.
Subscribe to Israel Hayom's daily newsletter and never miss our top stories!
