While the cost of living in Israel continues rising alongside complaints from consumers, so does the standard of living. Consumers treat themselves more frequently to small and large indulgences, which also drives them to seek more unique foods and beverages. Accordingly, there is interest also in good-quality coffee, with Israelis becoming more knowledgeable about coffee types, coffee preparation methods and differences in flavor. The coffee market is therefore seeing fast premiumization, with consumers abandoning the previously popular instant coffee in favour of fresh coffee – which they can now easily prepare at home.
Coffee pod machines have been a significant factor in making quality coffee widely available. Before their entry into the market, only a small segment of the population owned home coffee machines, and these were espresso machines - an expensive affair that required much maintenance and expertise. With the introduction of coffee pods, achieving a great espresso at home became a much easier task, and increasingly affordable as pod machine prices dropped. Even Nespresso, which has established itself as a luxury and therefore high-priced brand, has targeted lower-income segments with simpler, cheaper pod machines.
The competition in coffee pods has also helped; several brands have launched coffee pod lines with prices that challenge those offered by market leader Nespresso, which currently controls almost 50% of the market in value terms. This is gradually changing the coffee pod retail landscape as well. Nespresso, offered in specialized boutiques and on its online store, faces competition from brands offered in grocery retailers. These have a significant advantage over Nespresso as they can easily be purchased alongside other groceries and do not have to be ordered or purchased separately. The increased presence of coffee pods in grocery retailers also has a positive impact on consumer awareness, of course, and will likely be a major growth driver in the next few years.
Interestingly, this has also boosted the performance of espresso coffee machines. As consumers gain expertise about coffee, they also prefer to experience it in a more traditional manner, choosing their own coffee bean mix in specialty coffee stores and preparing it with espresso machines. This market is dominated by expensive brands such as Delonghi and Saeco; however, 2017 saw the introduction of low-priced espresso machines into the market, allowing a wider audience to purchase such products.
With these recent developments, competition in the coffee market is picking up speed and it will be interesting to see companies' next steps. Regardless of this, however, we can be confident that coffee will remain the ultimate comfort and all-time favourite beverage.