The perfect business blend
As coffee consumption continues to rise in the UAE, with consumers spending 50 per cent more on the black stuff than in 2002, one company is hoping to capitalise on the trend.
Coffee Planet, which launched three years ago in Dubai as Coffee Planet Express, is rebranding and offering customers a unique selling point – cheaper drinks, which in today's economic climate is, they believe, what will make them stand out from established brands already operating in the UAE.
"We find our competition very expensive, but our coffee costs as little as Dh10 a cup," says Robert Jones, Coffee Planet's Business Development Manager, and one half of the sibling duo who run the Dubai-based company.
"Over the past two months, our sales have gone through the roof so we've been positively impacted by the alleged downturn. We do have a luxury product but it's not so luxury that people will forego buying it."
With a Starbucks, Costa or Caribou on every street corner, the gourmet beverage market might appear to be a difficult one to infiltrate, but Briton Jones, who runs the company with his brother Richard, believes their prices will draw customers in.
At Costa, a small latte costs about Dh14, the same as Starbucks and Caribou, thus over the course of a year Coffee Planet is Dh1,000 cheaper based on one cup five days a week.
Coffee Planet has been operating across the country in Enoc and Eppco petrol stations as well hotel groups such as Kempinski and The Westin, but now it is expanding to cafes and coffee carts, the first of which will be in API World Tower on Sheikh Zayed Road. Retail, however, is the ultimate goal, yet Jones realises it is no easy feat.
"We are trying to do something unique that customers' haven't experienced before as the market is quite stale now," says the 27-year-old.
"Starbucks started 30 years ago and said: 'This is how coffee should be,' and everyone else copied. Columbus Coffee, for example, is Starbucks in different colours as they use the same suppliers. This market has shown there is room for more than one brand of coffee, so I'm not worried about the bigger players. We are making 20 per cent of the menu bespoke and using different suppliers to set us apart from the competition."
Although Jones will not reveal company profits or turnover, except to say it has doubled every year, he does report they sell 50,000 cups a week at garages alone, which at an average cost of Dh10 to Dh12 a cup gives a weekly turnover somewhere in the region of Dh500,000 to Dh600,000, without factoring in the hotels, Ikea and corporate clients such as Abu Dhabi Commercial Bank.
Jones, and Richard who is the Managing Director, have also decided to do things differently to entice customers when their cafes, which are run on a franchise basis, opening in the second quarter of this year.
"We're going to use a lot of technology within the environment to change the mood throughout the day," adds Jones, who cites an espresso as his favourite.
The computer science graduate, who also has a Master's in business from the UK, moved to Dubai two years ago to help build on the foundations of Coffee Planet's co-founder Matthew Yorke-Smith. Richard flies in regularly from the UK to check on the progress, while their US-based father also has an interest due to him running its parent company.
Capturing the petrol station point of sale has been the key to Coffee Planet's business strategy but they have also cornered the coffee machine market creating something of a monopoly after becoming the sole distributors of Concordia Coffee Systems, which are used by many coffee shops in the country.
"We use them, as does Starbucks so they have to get their machines through us," says Jones.
In the UAE, consumers spent Dh158.3 million on the black stuff last year, an almost 50 per cent rise on 2002, which saw sales of Dh102.6m. It is also infinitely more popular than tea, which had sales of Dh101.7m in 2007, up from Dh68.7m in 2002, according to data from Euromonitor.
Meanwhile, figures from the National Coffee Association reveal that consumption in the US was up three per cent last year compared to 2007 with 17 per cent of the population drinking a gourmet cup on a daily basis. The biggest growth area, however, is young adults aged 18-24 who are now drinking 2.5 cups a day more than in 2005. Attracting the youth is great news for an industry that was worth $44.5 billion (Dh163.3bn) worldwide in 2007, with fresh coffee accounting for $26.9bn and instant $17.6bn, found Euromonitor – a huge rise on 2002 when overall sales were $29.8bn.
With the firm's relaunch plans steaming ahead, the company has another trick up its sleeve to ensure they offer customers quality coffee at affordable prices – its own roastery. The ideal time to consume the beans is between two and four weeks of roasting, therefore doing it in-house helps ensure consistency.
With four to six blends and eight tonnes of coffee beans processed a month, it offers Coffee Planet great potential for the brand. But its ambitions do not start and stop with the UAE; expansion into Oman is already under way.
"Last year we sold two franchises, the first of which will roll out 25 cafés and convenience stations," says Jones.
The major players
Although the Seattle-based chain is the biggest coffee house in the world, profits tumbled 97 per cent during Q4 last year to $5.4 million (Dh20m) compared to $158.5m for the same period in 2007. Yet, despite this, the total revenue rose three per cent to $2.52 billion. The company has in excess of 15,000 outlets in 44 countries.
Costa was started in the United Kingdom in 1971 by Italian brothers Sergio and Bruno Costa before being bought out by Whitbread in 1995. It is the largest and fastest growing coffee chain in the UK and opened its 1,000th store last year in Moscow. In the 2007/08 financial year, Costa's turnover was up 23.5 per cent to £216.3m (Dh1,157m), with profits rising 16.9 per cent to £20.8m on 2006/07.
The second largest coffee retailer in the United States, Caribou Coffee has almost 500 US outlets and 75 franchise locations around the world. Consolidated net sales fell 1.7 per cent year-on-year in the third quarter of 2008 to $60.9m with net loss at $8.8m.
Follow Emirates 24|7 on Google News.