The Israeli contender in Toronto’s coffee wars smells sweet success

TORONTO — When it comes to running a coffee shop, Anat Davidzon has done it all. As the co-founder of Aroma Canada, she’s been involved in every aspect of the business, helping open and operate numerous locations over the past decade while establishing the Israeli brand in Toronto.

On a recent Friday morning, Davidzon visits an Aroma close to the head office in midtown Toronto. True to form, she engages with employees and customers while attending to myriad details. To her satisfaction, the branch is full and animated, with a steady flow of people ordering coffee, pastry or an Israeli breakfast (known here as the “Power Breakfast.”)

Not so long ago, before Aroma’s arrival in the neighborhood, these customers likely drank their coffee down the street at major, long-established competitors — Starbucks, Second Cup or, a bit further afield, Tim Hortons. Today, the Aroma Espresso Bar sign is seen all over the city.

While Toronto may be far from Aroma’s Jerusalem origins and inspiration, it has embraced the franchise-based brand like no other place in the world. Since its Canadian launch in 2007, Aroma has opened 35 locations in Toronto, with more on the horizon. Such is the success of Aroma in Canada’s largest city, other Israeli companies are taking notice. In February, Landwer, another venerable Israeli café chain, will also try its luck there.

In a relatively short time, Aroma has carved out a significant niche in Toronto’s lucrative, fiercely competitive coffee market despite the decades-old dominance of major American and Canadian chains. In the process, it’s established the largest foothold in a Western city of any Israeli retail brand.

“The main reason Aroma is successful in Toronto is because it’s filling a void in the market,” says Davidzon, 36, who grew up in Eilat and Ra’anana until her army service. “From the outset, we’ve put a twist on almost every aspect of the common North American coffee shop experience.”

Aroma in Toronto is largely the same as in Israel, apart from the English signage, and allowances made for the Canadian palate to be more competitive with the local market. The menu is 80% identical to what’s served in Israel. The coffee, bread and most pastries come from Israel. Likewise the idea to include a dispenser of ice water with lemon in each location and the signature small piece of branded chocolate served with every drink.

To the casual observer who’s been to Israel, the decor, especially the black/red/white color scheme, evokes the original Aroma — a result of working with its Israeli designers.

Despite the similar look, Davidzon says perception of the brand is different in Canada.

“In Israel, Aroma is considered more common and more affordable than Aroma in Canada,” says Davidzon, who’s married to an Israeli with whom she has a two-year-old son. “Here, our position is different. We’re more of a higher-end chain. In terms of pricing, we’re compared more to Starbucks than Tim Hortons.”

When asked about the difference in service, she’s circumspect: “I don’t want to offend anyone in Israel and that’s why I’m cautious in what I say. Aroma here reflects the North American approach to customers.”

Most people in Toronto would be hard-pressed to identify Aroma as Israeli. Nothing on the surface denotes the brand’s heritage, although it’s mentioned on the company’s website.

“I don’t think Aroma’s Israeli origin is something that should appear on our business cards,” says Davidzon. “It’s not relevant to the day-to-day activity of our business. We’re not involved in anything political. Aroma is about coffee, food, experiences and being connected to the local community. If you walked into an Aroma in Israel unaware you were in Israel, you wouldn’t know it’s an Israeli company. There’s no Jerusalem stone or Israeli flags. It’s not part of the branding strategy there so I don’t think it should be part of the branding strategy outside Israel.”

The lack of any outward sign of Israeli identity hasn’t stopped pro-Palestinian activists from targeting Aroma. On several occasions, demonstrators — many from the Independent Jewish Voices organization — have assembled outside certain Toronto locations, calling on passersby to boycott the brand. The most recent protest occurred a few years ago, along with articles on a local BDS website denouncing Aroma for being supposedly complicit in Israel’s alleged transgressions against Palestinians.

“I’m sure there are some radical people who won’t come to Aroma because of its Israeli background but I don’t think it’s substantial,” says Davidzon. “Canada is such a diverse country, especially in Toronto, that I don’t think most people pay attention to the protests.”

Toronto businessman Earl Gorman, 66, is the majority owner of Aroma Canada, having provided most of the initial $2 million (CAD) investment. He responds more philosophically to the controversy.

“I don’t really mind it,” says Gorman. “I find that as long as they spell your name right, most of these things actually help business. The BDS activists are so stupid not to understand that many people are going to rally to support those that BDS targets. For every person who decides to avoid Aroma, there’s at least another one who says, ‘let’s go there and check it out.’”

‘I find that as long as they spell your name right, most of these things actually help business’

For Davidzon, the issue has another dimension.

“I get more upset than Earl,” she says. “As our first few franchisees were either Jewish or Israeli, they understood what the protests were all about. But as we grew and more of our franchisees and employees weren’t part of this circle, you feel a responsibility to explain to them why there are people outside their store demonstrating and calling for a boycott of Aroma.”

The annoyance hasn’t blocked Aroma’s impressive growth in Toronto and beyond, having also opened in Ottawa, Niagara-on-the-Lake, Oakville and London, Ontario, bringing to 39 the number of Canadian locations. In 2017, it’s planning to open 10 more branches, including in Vancouver.

As the country’s business and cultural powerhouse, Toronto was a natural choice for Aroma’s first foray into Canada. Home to a booming economy and a multicultural population, the city attracts 100,000 immigrants every year.

Ironically, Aroma Canada’s head office in Toronto is just above a Starbucks.

“Before being involved in Aroma, I was a Starbucks customer and still am,” says Davidzon, whose parents moved to Israel from the former Soviet Union in the early 1970s. “I’m a big fan of the brand. They do amazing work and they make us better. The most obvious difference between us and them is we have a full kitchen in which we prepare fresh food and they don’t.”

‘I was a Starbucks customer and still am… They do amazing work and they make us better’

Gorman is also quick to praise Starbucks, which famously failed in Israel in 2003.

“It’s important to respect the competition and how they created the market,” says Gorman, who has invested in many businesses in Canada and Israel. “Aroma is a more hands-on operation. Starbucks is corporate with many layers and not a franchise business. Service is different when owners are present at their own locations with an investment in the business. Their connection to the community around them is stronger.”

In 2005, Gorman was looking for businesses in Israel to invest in. He knew Aroma well from his many visits there and felt it had potential in Toronto. At the time, it was planning its first international location in New York [today, that city has three].

Gorman soon secured the rights for Canada. For a managing partner, Aroma gave him the names of people who had approached them previously to open in Canada but didn’t have the money to do it. One of those was Davidzon, who had contacted Aroma in 2005.

Four years earlier, she had left Israel to study computer science in Toronto, joining her parents who had moved there in 2000. A big fan of Aroma while living in Israel and having observed its growth, she felt it could succeed in Toronto, where she was then working for El Al and thinking of returning to Israel to get her MBA.

Gorman and Davidzon met in Toronto in early 2006 and he eventually chose her to be the main person on the ground and one of his two partners in the venture. The other is Aroma Israel. She soon went to Israel for training at Aroma, returning to Toronto to help prepare the launch in May 2007.

‘The process would have gone even slower if we had known what we were doing’

“The process would have gone even slower if we had known what we were doing,” says Gorman, who’s worked extensively in high-end construction and development. “Ignorance can be blissful. I never imagined the project would turn into what it has become.”

It’s become a local fixture attracting loyal customers and people seeking a franchise. Today, every Aroma — except for one used for training and testing new products — is owned and operated by franchisees. They pay $50,000 (CDA) per location and commit another $600,000 – $900,000 for construction, equipment and furniture. In exchange for the fee and monthly sales royalties, Davidzon and her team provide training and support to help franchisees succeed while ensuring they adhere to the brand’s standards.

With little local brand awareness of Aroma when it started in Toronto, the owners counted on the city’s large expatriate Israeli community to put it on the map. In the early months, Israelis and members of the Jewish community helped it take root. Today, five locations have a large Jewish and/or Israeli customer base to whom Aroma shows its gratitude by supporting causes and events, such as the Walk With Israel and the Jewish Film Festival. Last year, in response to demand, it opened a kosher location in a Jewish area.

In 2017, in addition to opening new branches, Gorman and Davidzon will expand Aroma’s catering side and initiate online ordering. In recent years, they’ve also added wine and beer to nine locations and introduced live jazz to two branches.

Aroma’s growth in Canada is of much satisfaction — and financial gain — for the brand’s owners in Israel. Senior executives have visited on several occasions.

‘I loved seeing how the look and feel of Aroma nearly mirrors that of our stores in Israel’

“When I was in Toronto, I loved seeing how the look and feel of Aroma, including the menu, nearly mirrors that of our stores in Israel,” says Dany Michel, CEO of Aroma Israel. “The brand’s success in Canada doesn’t surprise me. Our concept of fresh food made-to-order, an in-house bakery, specialty coffee and a unique fast-casual dining experience are in global demand among diners.”

Brothers Sahar and Yariv Shefa founded Aroma in Jerusalem in 1994. Following a dispute, they split the business in two: Aroma Tel Aviv is run by Sahar and Aroma Israel is controlled by Yariv. The latter operates Aroma everywhere outside Tel Aviv.

All combined, there are 171 locations in Israel, with another 49 abroad [39 in Canada, eight in the US and two in Ukraine].

As Aroma Canada prepares to celebrate its 10th anniversary in a few months, there’s a new Israeli kid on the block. If Haifa-born Eran Shram has his way, Café Landwer will enjoy a similar trajectory as Aroma. He’s the main investor and driving force behind the $1 million-plus (CAD) venture to introduce Landwer to Canada.

Construction is now underway on the first location in a Toronto suburb where many of the city’s 65,000 former Israelis live. More locations are planned.

“Long before Aroma came here, I’ve wanted to bring an Israeli brand to Toronto,” says Shram, 43, a luxury home builder, who moved from Israel to Canada with his family when he was 15. “I had discussions with several chains in Israel including Aroma, Arcaffe and Landwer. I was most impressed by Landwer and I had an excellent connection with the owners. They impressed me by how they’ve taken coffee, food and design to such a sophisticated level.”

This will be Landwer’s first location outside Israel, although they’re now exploring Boston for their entry into the US.

Landwer Israel is a partner with Shram in the Canadian venture, along with minority partner Niv Feldman, 32. An accountant by profession, the Holon-born Feldman who moved to Toronto in 1998, just spent six months in Israel training at Landwer ahead of the mid-winter opening in Toronto where the menu will be 90% identical to its Israeli counterpart.

Should Landwer prove successful in Toronto, will Max Brenner, the Israeli chocolate restaurant chain already popular in other countries, be far behind?