Local Business

A sip for the discerning connoisseurs

Sanjiv Purushotham
Value Mining
Filed on September 3, 2018
A sip for the discerning connoisseurs
Sippy is a startup focused on specialty coffee experiences and it takes its inspiration from Middle Eastern culture.


Venture aims to support the specialty coffee movement in the UAE

This week, we highlight Sippy, a startup focused on speciality coffee experiences. What's unique about the venture is that it takes its inspiration from Middle Eastern culture, unlike others which appear to locally adapt successful models from Silicon Valley or Northern Europe. This company has presented an interesting data-rich revenue model supporting the proposition and appears feasible.

The knowledge of coffee - like countless other areas including theology, algebra, architecture and literature - went westward from the Arabian peninsula. To get a grasp of why this knowledge is so important for players like Sippy that are in the coffee business, the following paragraphs will provide an insight.

Coffee is traded in 60 kilogramme (kg) unit bags. The global consumption of coffee is in the region of 160 million units or about 9.6 billion kg. That's a lot of lost sleep! Information sourced from the International Coffee Organisation. More than half-a-trillion cups by the author's estimation. Add a money value to each cup and you can see why coffee is one of the most traded commodities in the world.

A sip for the discerning connoisseurs (KT1654893.PNG)

Unlike most commodities, coffee and tea are strongly associated with their origin. Within coffee beans, there are two major species - Arabica and Robusta. If you are anything of a coffee connoisseur, these are further sub-categorised into varieties and cultivars that are associated with cultural and personal preferences. To make it even more interesting are the subtleties - peaberry versus normal beans, gradations of roasting, how it's brewed and served - in paper cups from brand chains or poured from "dallahs", spiced with cardamoms. Plus the magical element of additives like chicory. Hence the place for speciality coffees!

There's a lot more to the complexity of the coffee business. The highest consumption is from industrialised nations that cannot replicate the manual intensity required for cultivation. A complex and highly specialised supply chain has developed. Hamburg is the world's largest trading hub for the commodity. Within this supply chain logistic are buried miles of details that only cognoscenti from the business are aware of.

The evolution of coffee drinking is seen through Western eyes, despite its origins here. The first wave was mass marketing of coffee which brought in hundreds of millions of consumers - primarily through commercial brands that still adorn the shelves of most stores. The second wave was the movement of speciality coffee chains that originated ostensibly in Pike Place, Seattle. The third wave has a lot to do with today's column. The phenomenal growth of speciality coffee outlets in global metropolitan locations. Technology, communication and the millennial consumer have played key roles in this wave. It's in the third wave that the UAE plays a key role.

Al Qahwa is the Arabic word from which coffee originated. A few years ago, the first speciality coffee store opened in a gardening store in Dubai. Green beans were roasted in-situ to produce the most flavoursome coffees available hitherto. The UAE's natural culture lifted that incident to a movement that has spread all across from Ras Al Khaimah to Abu Dhabi. The UAE even has its own coffee museum in Bastakiya.

Zouheir Fathallah and Rafi Dikranian saw a niche opportunity in the Dh3 billion UAE market. They co-founded Sippy to serve that niche. Working with the in5 incubator, they "niched-out" the mass market and chain stores, focusing instead on great coffee stores in amazing neighbourhoods. They brought the strengths that were usually only available to chains and store-brands to the small coffee shop - marketing, distribution, customer loyalty, procurement, skills training, knowledge-enhancement and consultancy - to these small merchants.

Fathallah and Dikranian aim to bring support to the specialty coffee movement through their venture by tapping this new regional cultural shift towards unique experiences. They are leveraging technology to build a "neighbourhood" of coffee drinkers through their enterprise. These "neighbours" can travel beyond their local coffee shop and begin the journey of trying some of the over 250 speciality coffee outlets in the UAE alone.

The twosome are attempting to create a newer and perhaps better version of the coffee experience. Their aim is to bring coffee outlets to consumers and vice-versa. By doing so, they intend to take the unknown out of the consumers' minds and demystify the pricing and accessibility of speciality coffee.

The manifestation of this is via the Sippy app which can be downloaded from both the iOS and Android stores. Upon registration, consumers get their first Qahwa on the house. Thereafter, they can choose to buy one-time subscriptions with enough credit for a single cup purchase or for bulk orders instead. At the store, there is no fidgeting around with cash or cards. The coffee outlet staff key in their code in the consumer's app and the coffee is made available.

The founders' methodology of working is to be fully transparent with each other and their team. Their intent is to build a great place to work that enhances the speciality coffee business. By understanding the unit economics in each market, they believe they can scale up quickly across multiple geographies.

Yet another interesting business model nurtured at in5.

The writer is founding partner at Bridge DFS, a bespoke financial advisory firm (www.bridgeto.us). Views expressed are his own and do not reflect the newspaper's policy. He can be contacted at sanjiv@bridgeto.us

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