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R12 coffee? Yes! Here’s the story of SA’s uber successful Xpresso Café

Xpresso Café, now with 52 outlets, has grown rapidly since launching in 2016 and is adding a new brand to its offering. While other businesses have to justify why they are so expensive, Xpresso initially needed to prove that it could be so cheap….

Xpresso Café founders, Tomer and Nicolene Elhadad had, no experience in the food industry, but thought they could make freshly brewed coffee at an affordable price.

Nicolene admits to doubting the venture and getting the jitters before opening the business for the first time in 2016, “I remember saying to my husband the night before we opened, ‘I don’t think this is going to work.’ And he laughed at me.

“He’s like – ‘We buy coffee for like R35. Why would someone not buy it for R10?'”

Tomer & Nicolene Elhadad

With almost no marketing, hardly a mention of the opening to friends and family, and no idea what would happen, the Elhadads and GM Jolandi Erlank, launched Xpresso Café, selling every product on their menu for R10.

The launch was on 1 October 2016.

“Apparently, that is International Coffee Day, but we had no idea. We knew nothing about coffee and we knew nothing about food,” Nicolene explains.

The Elhadads were already successful entrepreneurs by then, having started businesses in the wholesale and distribution industries.

Nicolene says that they loved coffee as a couple, and decided to launch the Xpresso brand after becoming interested in how much it costs to make a cup. She said that she visited 20 to 30 coffee spots in Cape Town and then spoke to roasteries to get pricing.

“I realised that coffee is not that expensive,” she said, adding that she recognised that people are prepared to pay for the experience of being in a coffee shop.

“And that’s perfectly fine. But our target market was the people who love coffee but can’t actually buy it every day. And we wanted everybody to have that,” she said.

So the idea for Xpresso came about, and the couple initially settled on R10 as a flat fee for (now slightly upped to R12) all their products to keep pricing simple and easily understandable for customers. 

But providing food at that price would be a challenge, so they realised they would need to negotiate with suppliers.

She says that Tomer is a good negotiator:

“He would be like, ‘No, I’m sure you can give us a better price if we’re going to sell thousands’, and people looked at us going, ‘No, you’re not’, because all of their past clients would maybe buy, let’s say, 100, 200 for the month of an item. And we were like, ‘no, we’re going to sell thousands of this pastry in a month’.”

After explaining the pricing model to suppliers, they partnered with a few who were prepared to cut their prices, betting that the strategy would work.

The queues begin

By the end of the first day of operations, Nicolene said there was a line of people outside their Durbanville-based store who wanted to try the products.

“I think it was because people either were fascinated that it’s R10 and wanted to come and take a look, and then there was a big crowd that was [saying]: ‘No, this must be crap – so we’re actually going to go look just to see how crap it is’.”

She explained that Xpresso had the opposite problem to most businesses because they had to prove to customers how their product could be so cheap, not justify why the product was so expensive. 

Elhadad said she can remember many heart-warming moments when seeing people’s disbelief at the pricing….. Read the full article here; See more here