Generation Start-up: Cofe uses tech to connect coffee lovers to specialty brews

Kuwait-born company is considering acquisitions to consolidate its regional presence even as it expands to the UK and Turkey

Cofe has grown between 200 and 300 per cent since its inception. Photo: Cofe

Ali Al Ebrahim’s enthusiasm when speaking about coffee is infectious. In fact, the idea for his business — a marketplace dedicated to coffee — stemmed from his love of the beverage.

“I am a big fan of coffee,” says the founder of Kuwait-born start-up Cofe.

“For us, coffee is part of our culture. If you go to any hotel or any house in the GCC, you always see the Arabic coffee there. Our attachment for coffee is big.”

The global coffee market was valued at $102 billion in 2020 and is projected to grow at a compound annual growth rate of 4.28 per cent between 2021 and 2026, a report by ResearchAndMarkets.com showed.

Meanwhile, the coffee market in the Mena region is set to grow at a compound annual growth rate of 7.5 per cent between 2020 and 2025, said a report by Mordor Intelligence. A 2019 report by Euromonitor predicted the region’s coffee market will reach a value of $4.4bn in 2021.

Cofe, which provides access to a wide range of international coffee franchises and artisanal coffee brands through its platform, aims to tap into this booming market.

The idea for Cofe came to Mr Al Ebrahim when he realised that his favourite beverage lacked an online marketplace similar to those that existed for food or laundry.

At that time, there were apps that delivered coffee but the entrepreneur believed that the Middle East had the potential for a more expansive solution for connoisseurs.

Mr Al Ebrahim, a business graduate from the University of Missouri, pursued the concept and launched Cofe in 2017 in Kuwait.

Cofe’s users can order their daily dose of caffeine from shops on its platform and either opt for a delivery at home or pick it up from the store. The app also offers capsules, beans, coffee machines and accessories for sale.

To entice users, the company provides “discovery points” worth Dh1,000 ($272) when they first sign up. Members can use to them to avail their beverages at a discounted rate. The points can only be used with a brand or a coffee shop once, encouraging people to try different vendors, the founder says.

The app also provides various loyalty points that build over time and offer additional benefits.

Cofe charges coffee shops on its platform a fixed annual fee for the number of customers they bring in.

“Instead of taking an average of 20 [per cent] to 30 per cent commission for every order like other apps, we take one fee [from the coffee shop] and if this person orders one time or 100 times, it's the coffee shop’s margin,” says Mr Al Ebrahim.

Cofe has grown between 200 per cent and 300 per cent since its inception, its chief executive says. It was downloaded at least two million times in the last six months alone.

On whether the on-demand apps ate into Cofe’s margins, Mr Al Ebrahim points out that they are not competitors.

“When they signed with us, they signed with 700 brands and three countries in one signature. This is very important because many people think [our main business is] delivery for coffee, but less than 10 per cent is our delivery orders.

“Most of our [revenue] comes through the customised rewards programme.”

Cofe is also expanding its offering with new premium products. For example, Cofe’s Saudi Coffee Box consists of beans sourced directly from farmers in the Saudi Arabian city of Jizan and roasted as premium coffee in one of the roasteries. The app also offers premium roasts from Uganda, Panama and Guatemala within the box..

“This is something we are going full-fledged [into] starting at the end of this month and building on it until the end of the year,” Mr Al Ebrahim says.

To help further expand the procurement of premium coffee straight from the farm, Cofe acquired UAE-based coffee market place Sippy Beans for an undisclosed sum this year.

The company plans more acquisitions similar to Sippy Beans but Mr Al Ebrahim declined to reveal more details.

While the founder did not mention how the deal was funded, Cofe is not without financial firepower. The company has raised $13 million so far from Kuwait-based investment company Al Imtiaz Investment Group and other investors.

Its series A funding round was led by KISP ventures, a fund established by Kuwait's KFH Capital, while other investors include Lebanon's Cedar Mundi, Oman's Towell Holding International, Bahrain's Takamul Capital and Dividend Gate Capital, Nizar AlNusif Sons Holding and Arab Investment Company.

Cofe also recently won the backing of Abu Dhabi Investment Office and became part of its $545m Innovation Programme this year. Following the investment, Cofe relocated its headquarters to Abu Dhabi.

“Being part of the UAE ecosystem is very important and Abu Dhabi is one of the leaders of that ecosystem. The network, the experience and the education … all of that are really essential for us to be successful,” Mr Al Ebrahim says.

For now, Cofe is not looking to raise any more funds, the founder adds.

“We are already very comfortable with the last round that we closed and now [with] Adio’s support, I think we're on track and don't need anything this year.”

Going forward, Mr Al Ebrahim and his team are planning an ambitious expansion of Cofe as coffee demand rises across cafes amid a relaxation of pandemic curbs.

“We are already soft-launching in a lot of markets, especially Egypt, Turkey and the UK. I think this, for us, is our major focus for the next 18 months,” he says.

Q&A with Ali Al Ebrahim, CEO of Cofe

Which other successful start-up do you wish you had started?

I'm very grateful and lucky to be part of this movement so I don’t wish otherwise. Again, the timing cannot be any better as the coffee and tea market is growing rapidly. I'm lucky enough to be part of this and actually to be the biggest online coffee marketplace in the region.

What skills have you learnt in the process of setting up your company?

Everything was new to me, including team management, dealing with different nationalities and dealing with investors. I think being agile is very important. Being adaptable and understanding what the customer needs and what the vendor needs are important. Finding the opportunities and celebrating small wins are also very important.

If you had a chance to start all over again, what would you do differently?

I would have worked in a start-up before starting out on my own. I would go to an early stage start-up and try to work there for a year or two years and then start my own venture. And I'm not talking about working in a start-up that is already in series D or series C, or a big star. I am talking about a pre-series or a series A start-up. This is very important to identify and understand how things work.

What advice would you like to give to entrepreneurs?

I would advise them to pick the right co-founders and the right partners, especially the ones that can add value strategically and not just cash value. Also, co-founders should have a balance. If one focuses on technology, the other should be able to handle the business side of things. Other than that, enjoy the journey.