Supermarket king Rami Levy is buying 20 percent of the Cofix chain, Levy’s office announced Monday. The deal is worth NIS 105 million, and will give Levy an opportunity to open small markets inside large cities, a project that he has tried in the past but failed to accomplish, business daily Calcalist said.
Levy’s interest in Cofix is actually in its SuperCofix markets, which sell food and other grocery items, many of them in special sizes that the chain can sell for NIS 5 each, the signature price of the low-cost chain.
As part of the deal, Levy has the opportunity to acquire the entire SuperCofix chain, as well as an option to buy more stock in the company, which within two years could make Levy majority owner of Cofix. The completion of the deal is dependent on a number of factors, including the blessing of the Israel Antitrust Authority, which will determine if the deal gives Levy too great an advantage over his competitors.
The sale is part of Cofix’s efforts to return to profitability. Once the darling of Israeli bargain-hunting diners, Cofix has gone from a profitable enterprise to one that is losing money. Among other steps the company has taken was bringing back the NIS 5 cup of coffee that made it famous.
In February, company chairman Avi Katz announced that the price of a cup of coffee was rising from NIS 5 to NIS 6 – just a shekel, but apparently it was that shekel that was the root of the company’s problems.
Sales at Cofix’s 134 branches are down 26 percent this year, and a number of franchisees have cashed out — a stark change from the situation just a year ago, when there was a waiting list for franchises. Income was down 5.2 percent in the third quarter of 2017 compared to a year earlier, and it lost NIS 832,000 during that quarter — compared to the NIS 1.9 million it made in the third quarter of 2016.
Nearly all experts agree that the loss in sales at the coffee shops is at least in part attributable to the NIS 6 price. Customers have complained that what was an easy transaction — presenting an NIS 5 coin in return for a cup of coffee — became a complicated operation involving counting change, waiting extra time for transactions to be completed, and a lingering feeling that if the company could raise prices by a shekel, it could raise them by two next year.
Meanwhile, competitors arose and NIS 6 coffee is almost standard in many grocery stores and convenience stores – and at cafés where the prices are higher, the cup of coffee has increased in size to provide customers with value for money.
Cofix appeared on the Israeli scene nearly four years ago, after the protests in the summer of 2011 over the high cost of living in Israel.
One of the few lasting results of those protests, Cofix revolutionized fast food in Israel by offering coffee, snacks, and even whole à la carte meals where each item cost NIS 5 ($1.35), when competing cafés were charging three times and more for their products. The idea caught on, spawning imitators, and Cofix itself expanded into the supermarket business, selling household products, grocery items, frozen food, and much more for NIS 5 per item as well.