STARTUP

Will a Coffee Subscription Model Work in Southeast Asia?

Like Netflix, but for coffee

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BY Ezra Ferraz - 31 May 2017

PHOTO CREDIT: Getty Images

Subscriptions are one of the most common business models in tech, and now one start-up is bringing it to a staple of the founder’s daily diet: coffee.

According to Dennis Ng, he founded Coffee Break due to the difference in the coffee cultures between Australia, where he grew up as a teenager, and Singapore. In Australia, he says it was easy to find a coffee shop that sold inexpensive, specialty coffee.

“When I first came back to Singapore, the experience was slightly different. It was much more difficult to find specialty coffee, even if it was in my neighborhood. And when I do find it, it was also fairly expensive for a cuppa,” he says.

He thus wanted to improve the coffee ecosystem for both cafes and consumers, and saw Coffee Break as the ideal solution.

“For users, Coffee Break is a cafe-locator app that utilizes GPS to locate local cafes in the user’s proximity. Users purchase prepaid coffee plans and get to enjoy discounted coffee from any of the partner cafes in the Coffee Break network,” Ng says.

In terms of the user journey, member cafes are ranked by proximity, and once a customer visits the one of his choice, he specifies his order and presses the “checkout” button. “The cashier enters a code on your smartphone, and you’re all set,” he says.

Economics and exploration

Of course, one may question whether the value proposition of a subscription is worth it. Ng’s response can be summed up as economics and exploration.

“I drink about four cups of coffee a day and for a person like me, this app then becomes a compelling proposition to me. Coffee is something that many people drink everyday, yet it’s still sold a la carte, and these costs easily add up hundreds a month,” he says.

At the same time that patrons are saving money, they are also getting to enjoy different brews and environments to enjoy them in.  

“Coffee Break envisions to be like what Netflix did to TV. Creating a whole bunch of content into monthly subscriptions. But in this case, the content are the local cafes and coffee and the subscription comes in either fixed-number-of-cups prepaid plans or a special unlimited plan for heavy coffee drinkers,” Ng says.

For patrons considering Coffee Break, one common concern they express is that it may be difficult to pay with an app versus paying over the counter. In response, Ng’s team produced a three-step tutorial to walk users through the user journey.

“It requires a little education to this group of people but generally, once they use the app, they get comfortable and realize it super easy to use and will proceed to purchase coffee as it brings value to them,” Ng says of their efforts.

Banding together

For cafes, membership on Coffee Break confers similar benefits as you would get in a collective.

“The biggest advantage for coffee shops and cafes is that by grouping together, collectively they are able to compete against the big boys like Starbucks. As users are utilizing Coffee Break on a regular basis, we increase walk-ins and that gives them new customers whilst making their regulars more regular. Also, this provides an opportunity for the coffee shops and cafes to upsell their higher margin items,” Ng says.

While Coffee Break eyes expansion in other metropolitan cities across Asia, the company is currently focusing on brand building at events. In partnership with its member brands, the company is doing events at corporate offices, luxury car showrooms, and even flea markets.

For others who may want to get into the subscription business model in Southeast Asia, Ng has straightforward advice: “Do your market research and understand how your business will bring value to all parties.”