Is This Hot New All-You-Can-Drink App a Threat to Quality Differentiation?

Cups app subscription packages include one category for coffees and another for espresso drinks

A new subscription-based app, Cups, is giving consumers nearly unlimited coffee and espresso drinks at coffee shops throughout New York for as little as $45 per month.

The Cups app was developed by entrepreneurs in Israel, and the New York rollout follows its debuts last year in the Tel Aviv and Jerusalem markets. The developers say the app is intended to give independent cafes a way to compete with loyalty card programs from the likes of Dunkin’ Donuts and Starbucks, although some analysts suggest that the flat-price model may undermine the work that some independent purveyors do to justify higher prices based on coffee quality.

(more: Coffee Consumers Leaving Millions of Dollars of Loyalty Card Rewards Unclaimed)

The app officially launched Friday for iOS and Android platforms. Users create an account, choose a participating cafe, select an available drink based on their subscription plan, a payment code appears, and the barista must then type in the code into their own POS system. There are currently 35 small chain and independent cafes participating in the New York launch. They are mostly in Manhattan, with a few spots in Brooklyn and Queens. (See the full list of participating cafes.)

Monthly subscription plans include a $45 unlimited “American Classic” package for batch brew or pour-over coffees and teas, and an $85 “Foreign Flair” package for espresso-based drinks and iced coffee. The only limitation is that drinks cannot be ordered more than once within a 30-minute period. Cheaper subscription plans also allow consumers five, 10 or 20 drinks per month, with coffees breaking down to between $1.20 to $1.40 per cup, and espresso drinks breaking down to between $2.40 to $2.80 per cup.

(more: Coffee Disloyalty Sweeping Southward Along East Coast Into Washington D.C.)

Assuming the app works as promised, this is clearly a win for more budget-conscious consumers, but it will be interesting to see how it affects retailers. When the app launched in Tel Aviv last Spring, Cups app co-founder Gilad Rotem told Fast Company it was conceived as a way to give consumers discounts on what the Cups team considered to be overly expensive drinks, saying: “We wondered why coffee — such a fundamental product consumed by hundreds of millions of people all over the world — is still purchased at relatively high prices.”

Rather than exploring that why — and thereby ignoring issues that quality-focused independents often face in trying to justify higher-than-Dunkin’ prices —  it seems the app is merely designed to drive down the retail cost-per-cup.

Speaking to the Wall Street Journal last week, longtime specialty coffee consultant Andrew Hetzel was skeptical on all fronts, saying: “My fear is that flat-rate pricing model will be a disincentive to the use of quality coffee and reduce overall consumption, making the app a poor value for consumers;” and, “What has allowed so many coffee shops to flourish in New York is ‘specialty coffee,’ a concept driven by quality differentiation and, not surprisingly better taste at a higher price.”