Why is a cup of coffee so expensive?
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- čas přidán 24. 06. 2019
- I thought it would be interesting to talk a little about the economics behind a cup of coffee, and why the price of your daily cup of coffee in a cafe is rising.
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As a consumer and not someone who works in the industry, this was really helpful
I totally agree. This does clear some things up.
Is it really expensive?
Maybe in a cafe.
But at home it’s dirt cheap considering it comes from across the world.
Coffee is probably the most underpriced luxury good. Coffee farmers are doing hard work with long hours, high risk season to season and enormous exposure to climate changes. Many of the migrants who walked from Honduras to the US-Mecixo border are former coffee farmers who were unable to make a living due to the dysfunctional market and reduced yields. Meanwhile I'm sitting in my office doing something I love for 8 hours a day. They deserve our wages and we deserve theirs.
Yeah.. and good beans takes lots of ''effort'' into it.. good plant varieties, good soil and plant care, manual harvesting, post harvesting processing....
But it means nothin to pay more, if that more aint going into the main ppl on the chain.. wich for me are the rural producers.
@@tykjpelk So Simen when are you moving to Honduras to start growing coffee?
this
As a manager of a café and restaurant, this is validation that it is really hard to make money, even the smallest slip up in terms of staff costs or overheads, any wastage, and that 10% profit is down the drain! I totally agree with your point about landlords. In my head, there would surely be a thriving local business scene if rent was cheaper in our cities. Maybe that’s too simplistic, but it seems possible!
How the government can control the amount of cups being sold Joshua?
Really? The landlord is the problem here? The one who has to pay sky high property taxes and provides you a building and location at risk of losing their shirt when property prices plummet? When you include the taxes on the property, income taxes on profit, business licenses and taxes etc. the government is easily taking 35-40% with zero risk or effort but go on blame the greedy landlord instead
@@topcat2001 Yes, the landlord is the issue. I know this first hand in my city - where the centre is predominantly 4 or 5 families/entities. They ask unsustainable rents, instead of seeking to work with businesses on a reasonable basis. These are units they are quite happy to leave empty earning no income. But then expecting top whack in rent .... when the alternative is no income. Its crazy, but they really are that greedy - rather than considering long term sustainability of having a business there.
@@Sashan2012 simple solution, dont live in a city or set your business up in one, literally hundreds of towns big and small have dead highstreets with rent on stores at rock bottom prices and with customer bases who are driving all the way to citys to be able to do anything
and it works, I come from a tiny old mining village, the high street was dead, a few people invested some money into cafes and stuff and now they have thriving businesses to a point where it even attracted some bigger ones like MacDonalds (not on the highstreet but down the road a little) and now the towns on the up again
Government restrictive zoning rules are certainly driving up housing costs. Supply restrictions in the face of demand means increased price.
Landlords are profiting off that market.
Lets not forget that a good barista cafe needs excellent equipment. A good esspresso machine can cost a lot of money. Then there is al the extra equipment needed. That needs to be replaced every couple of years. People want to sit in a good looking cafe so interior has to be kept up to date. Nowadays people require a good website that also cost money to make and maintain. All in all I respect anyone wanting to open their own barista cafe
If I understand it correctly, most cafes lease their expensive equipment, no? That being said, I don't know what monthly rates are. SWAG would be $500 - 1k/month? Or maybe free if they agree to purchase coffee from a coffee supplier?
Sahand Dilmaghani Most cafés lease their equipment to a supplier of coffee (usually pretty bad, making cheap industrial blend of Arabica and Robusta like Cafés Richard, Lavazza and so on).
Specialty coffees hire the best baristas (who are basically like « wine waiters » but for coffee, people have no idea what this job requires) and buy the best equipment CASH.
This equipment when serviced carefully can last decades, but it’s expensive.
This particular reason and the cost of green specialty coffee beans (the best places freshly roast themselves their beans every morning) will make your cappuccino expensive.
A reliable, durable, easy to use and easy to service coffee machine is a minimum two groups/ dual boiler from a top notch italian maker : Marzocco, Simonelli, Rocket... minimum $6-7000 plus taxes
Not if you use today's sponsor: Squarespace.
@@sahanddilmaghani7340 No, most simply do not lease grinders and espresso machines
I have no issue with expensive coffee when it's good. But so long as it's good.
You get the problem wrong. What you call expensive coffee actually is just a fair price paid to Third World farmers. It’s not a promise for a good coffee. Specialty coffee is different, not better, because taste is personnal. I find some specialty coffees truely amazing, like Huehuetenango or Blue Mountain, but I also found some that were bland and not even matching a good Illy blend.
Specialty coffee is just a way among many others to change the world.
@@vab120 I think you're right on it being fairly priced - especially if it is fairly sourced. I also agree re: taste profiles sometimes not aligning with my preferences. I work in a hospital and most of my week hospital cafes are my best option, in this case I don't like paying the same, if not more for mass produced, stale and poorly made (burned) coffee.
MrAnhedonic I understand your situation. But if you take a look at the big picture, it’s really a « first world problem ». Paying an extra buck for every coffee won’t change anything for us (I mean, $300/350 a year come on...) but for them, it’s their kid at school, it’s medicine for the elder.
@@vab120 The last few months I've started sourcing green beans to roast at home; to experiment, save money but also to buy from smaller, more fairly paid growers. If it's not fair trade I won't buy it.
Totally agree, most mall's cafe put ridiculous price tag with Starbucks quality brew and of course they are chain cafe, not artisinal one.
This is why I hate going to mall, everything is so expensive yet so shitty
Also, especially don't get angry at cafes that pay their staff well and increase their prices as a result. Great thoughts as always.
Absolutely. I own a small cafe where we get the best of the best coffee we can... And if we keep 10% of the price, we can really be happy about it
This video could be applied across the board to the restaurant / bar sectors too. The model remains the same resulting in tiny margins for the business. The unfortunate reality is that most people aren't prepared to pay what it really should cost to go out to eat and drink.
Indeed people that du the actual work (cook, prepare ingridients, clean, serve, etc) that many or most of the time include the owners of the business are maken small profits when some guy sitting on a desk is making a lot os money just trading and playing with the prices of comodities and have really big profits. The people that harvest the coffee grains are paid $100 or less a month, the processed coffee is sold for $60 the 100 pound bag and do you know how many cups can be make with 100 pounds of grains? Also the producer don't just plant and harvest, they must maintain the plantation "altura" coffee need shade from other trees like orange and mango ones (they contribute to the aroma also) so they have give mainteinance to this trees so people on both ends of the production chain are just surviving and is the greed of al the people inbetween from local production brookers to big cities landlords the ones pushing the price up and getting the real profits.
>people aren't prepared to pay what it really should cost to go out to eat and drink.
that's because the cost of practically everything has risen tremendously while wages have not. it's not that everyone has suddenly become cheap - we just have to... you know... eat and have a roof over our heads. goin out one night a week for a meal, a few drinks and some entertainment could easily drain 20% of your income if you're min wage. it's fucking *absurd*
Liquor has huge margins this is a terrible take. Bar tenders and waitresses work on tips you dipshit. lol
I agree, and disagree. Whenever minimum wage rises, the price of goods and services also must rise (to cover the increase in staffing costs). When the cost of goods and services rise, the living wage must also rise. It's one of numerous circular problems with capitalism.
But I agree as a minimum wage worker you are priced out of just about every modest luxury the middle class seem to enjoy.
Regulation would solve a bunch of these issues, but that's unlikely from a government of (mostly) greedy landlords.
Slow your roll there. Wages have stagnated, but there has also been a race to the bottom where supply and production is concerned - way too many companies outsource to cheap labour, prison labour, etc to attain rock-bottom prices for anything from shirts to shoes and phones. A cotton shirt should cost $40, $50, but you can walk into any H&M and get one for dirt cheap. And since this has been going on for so many years, now familiarity bias has kicked in and people are so accustomed to the cheapet shirts that they perceive a $60 cotton shirt as "overpriced for what you get". Not in relation to their wage, but what they believe you should need to pay for a standalone product. It's a multi pronged issue.
And if you’re Starbucks, you save money by not paying tax!
Yeah but don't just blame Starbucks, blame the 'elite' people who allow it and line their own pockets while doing so. Corporation tax should be homogeneoous across the world with variable rates based on factors such as turnover, GP, ethical ranking and more but sadly fairness is a rarity in business. Chains are an entirely different business model too.
This tax is VAT which, as far as I know, Starbucks have not avoided paying. What he didn’t mention is that companies will then be taxed on that 10% profit at the corporate rate which all companies avoid paying as best they can
@rabitman3000 There are soooo many ways to 'manage profit' to achieve a desired outcome whether that's paying less tax and/or satisfying stakeholders. In general though the bigger the organisation the bigger the 'exploit'. This vid is talking about small coffee shops and I don't think there's anyone getting rich doing that - but then it's not all about the money.
@@north.by.northeast Small coffee shops have to struggle a lot, I live in El Salvador and use to go to a cafe the in his staff they had the Golden Cup winner the best barista in the world and was not just that they offer you the option of choosing a wide variety of coffee from different coffe plantations with different levels of accidity, different notes, different aromas was a total delight for us that drink coffee form an early age and they have to close because the landlord of the prime location they occupy raised the rent, they move to another location with less traffic they have to lower prices change staff and lower the variety and with that follows less clients and now is gone.
@@EPortillo5000 Aw man that's awful. In the UK small/medlium businesses employ around 60% of the workers (excluding Govt, hospitals, police etc.) yet it's big businesses who (generally) get what they want.
1st of all I would like to say sorry about my English.
I have been watching yours content for a few months and have to say. I really like yours content and appreciate yours effort to help coffee lover to understand more about coffee.
As a new comer in Coffee industry (I just start agriculture Arabica coffee for about 2 years so my coffee still not ready to be sold but I was in my country specialty coffee community for a while now) I can say that in one ton of coffee Cherry there will only be around 100-200 Kilo of good quality green bean after all the process. While the world demand is so high the price on demand is very low for producer like me (due to most customers have no idea what is high quality coffee). So what happened? We sell low-quality (Deflect) to mass market and hog all high quality one for niche market we have (Mostly auction or face to face deal). Not to mention middle man. XD
I hope someday you will go more in-dept in region/species taste profile and what coffee deflect look like.
Have a good day
Your English is fine. Good luck with your business.
In Russia we also pay 2-3£ per cup of coffee. Some cafés cell it for 5-7£. But monthly we earn just about 400£. Don't think someone in UK earns the same)))
Is a dedicated pour video still coming? The one about different ratios explains some things about pour over, but I've really been looking forward to your in depth version.
And thank you, you're doing such a great job with all the videos.
The same thing is true in the restaurant industry as well. Even in places where the tables are constantly full and the prices are high, those profit margins are razor thin.
Sometimes you make me worry that my dream of quitting my day job and opening a specialty coffee shop might be best left as a dream. I do really appreciate your videos about the coffee industry. It really helps put a lot of the risk into perspective.
@Seth Pandah not in the middle of a pandemic haha
Set yourself up in a wealthy area where people have money to burn and no time to make coffee at home. Negotiate a deal on the rent, and you might cover your upfront investment.... eventually. Know that the value is in doing something you love and working for yourself, but abandon any hopes of getting rich. Maybe there's some ingenius hacks to increase margins, but I don't know of any.
Thanks for the video. I get asked these questions a lot too. It's nice having a video I can show for a general perspective.
Coming from Spain, I found coffee in the UK initially terribly expensive and also very homogeneously priced across the country. A Spanish "café con leche" at a bar in a large city like Madrid will cost €1.50 to €2. It can go down to €1 outside of large cities and in less fancy bars. But in the UK the cost of a latte is pretty much standard at £2.70 everywhere, about twice as much as in Spain. And it's the same in central London as in Derby.
Very interesting! I was a barista is San Diego for a little and I became infatuated with the coffee culture and the whole world behind it, especially in terms of business and quality. I observed the cafe I worked at and saw that unless you have a very high volume of customers, it’s extremely difficult to turn a consistent profit. A great espresso and cup of coffee will make regulars (besides the normal customer service and atmosphere in the shop). Didn’t realize that a high quality versus low quality coffee would be almost insignificant to the cost of running a cafe! Our espresso was okay... but that is something to think about! Quality in the long run. *Side note, the cafe unfortunately closed down a couple weeks after I left and was only open for about 9 months... so this video helped clear up some of my financial questions!
The problem is, that most Cafés don‘t serve good coffee
Depends on where you live. I live in a university town and you can't throw a stone without hitting a great coffee shop.
if they don't serve good coffee, that means the farmers behind those coffees get even less paid. only drink specialty coffee
Dan R. It depends on what is your standard for "good coffee".
@@zoeyloco Wel Monigrams and Cafe O roast their beans in house and most places in uptown waterloo sell fair trade.
@Vin Nuehl Surely you have a bunch of options though. Specifically the people at Monigrams coffee are all really good at what they do.
great breakdown of where the £3 goes
but what about full economics involved, from a field in Peru to the cup, how much do the people buying and selling the beans make before the coffee is even roasted?
Why would anyone need to give a shit about that?
James thank you for always making your viewers feel like they matter as people
Thank you for addressing this issue. It helps me to feel not as alone as it was as a café owner trying to explain this. I love your videos. Thank you for existing. Hugs from Indonesia. 🤗
I would pay extra if the quality is good and the vibe of the cafe is positive, i would also be happy because I know the coffee community is being aided
your videos are very well made and so informative! great work! keep it up!
"If you wanna be angry, be angry at landlords."
Oh, I have been, for a while now, so if that's all you're asking for...
Join the local Maoist party.
Well, as James explained the costs of coffee, you could explain the costs of rent in the same manner. Taxes, maintaining and other side costs take a huge part of the cake before the landlord gets a bite from it. They may could lower the rent, but the result will be shortages in maintaining and service. Don't hate the player, hate the game. Or understand the rules and win. Your choice.
@@HardSmartfuxu no, you do not get to equate coffee and housing, one is a luxary good and the other is a basic necessity. Landlordism and its rise has hurt a lot of people, I can hate the player and the game. Because it isn't a game, people still freeze to death every winter because of a housing shortage, people still starve to death because they've used all their money to pay off the mortgage on the landlords fourth house. They shouldn't be creating an artificial shortage in the first place, let alone driving up the rent because they know no one can afford to be homeless.
Thanks James, as usual a clear, concise video, love this channel.
Worded better than I've ever been able to explain to my friends on pretty much the same subject (usually regarding prices I'm used to paying in comparison to starbucks filter/mcdonalds black coffee prices). Thank you for this!
Great presentation as always, James. So glad I subscribed to your CZcams channel. Thanks very much for everything. 😀👍👏☕️
Another great video, James, and one to show my GCSE Business classes. Thank you.
Never get tired of hearing have a great day :)
The situation in Italy is really different. Here, we have espresso at bars: usually, the only available option is single espresso. People expect to pay it in a range between 0.60 - 1.20 euro, depending on where you are. And still, to let prices be stable, they are lowering the quality of coffee. So now the result is that we have tons of small bars that have a very low-quality espresso and some very few activities that have delicious espresso at a price that is 20-40 cents above the average and have a very hard time arguing about the fact that their product is not overpriced.
On top of that people want their coffee to be delivered very fast. This comes at the cost of quality since they don't clean properly the equipment between shoots, to save time.
Not to mention that often the staff is underpaid and with an irregular contract. Not the ideal conditions to develop passion and skills.
I strongly prefer how it is in northern Europe, where maybe you can't afford to have a coffee in a place every day, but when you do you can have a very delicious one and a good experience, rather than just have bad daily coffees.
Hmm, it costs 2-2.50e for an expresso and 4.50e for coffee with milk in a normal bar/resto in Paris. I don't find the quality to be in any way superior, if not far inferior, than a normal bar in Rome/Milan. What quality upgrade are you talking abiut here?
Super agree, the problem is the rent. But just loved the way you put it! And a lot of Cafes don't serve good coffee.
Well put together and explained, thanks Jim
A really interesting subject thanks for giving your perspective!
I liken a nice coffee at a cafe to a good mixed drink at a nice bar. And I think you raise good points to highlight why the prices are higher at both of these. Sure, at my own house I can make an espresso drink (or a cocktail) for a fraction of the cost of going out for one, but it's not all about the drink itself. A good cafe is about stepping into the original Italian model of coffee, taking a minute out of the day for a simple pleasure. And considering the price people pay for a starbucks' coffee that completely misses that aspect of the drink, the price of a specialty cafe's brew really doesn't seem expensive, especially with the small profit margins you mentioned. Great content as always, James, keep it up!
Excellent as always.
Three years ago, I decided to give up traditional living. And in doing so, gave up having to pay rent. The hundreds of dollars that used to be spent on housing now is available to spend on making my life more enjoyable. One of the truly delightful indulgences I can now afford is spending $5 on a really good cup of coffee. And I never, ever feel it’s money wasted.
Thank you for your videos.
How did you get around having to paying rent?
@@user-ll4tw9xp7h He's probably been living in a small RV as more and more folks do in North America.
I spend .50 cents on a really good cup of coffee by roasting and brewing at home. You don’t have to be homeless to afford a great cup of coffee.
Joshua Henderson rather embarrassingly, I know very little about home roasting. Of course, I know even less about homelessness. But , even if I had room for dedicated coffee roasting equipment, I would still frequent cafes. I would miss meeting new people and enjoying the space. I also enjoy the variety of beans that might not be available to a home roaster/brewer.
It’s a discussion of value. Most days are filled with home brewed V60. My weekends, though, are mostly specialty cafe coffee. And I never regret the money spent as long as the experience is stellar.
甘明忠 I built a campervan that I live in full time.
Oh, you open our eyes James! Thank you
Wow, very informative! Thank you for breakdown! It’s good information for someone that’s on the verge of opening a coffee shop to think on. It even makes Starbucks look less guilty of overpricing...oh wait, you were talking about GOOD coffee 😂
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On the point of rent, here in the United States, food trucks are becoming WAY MORE popular. A mobile cafe might be a good way to bring down rent.
Hi James,
It was about time for someone to talk about this. To be honest I didn’t consider before the costs of rent and taxes, is not something we, costumers, think much when looking at the prices in a café. Thank you so much for addressing this “issue” in such a educational way.
I just learned so much thanks!
Great work! Thank you so much. Helped me with writing business plan for cafe.
Thanks for this James!
The issue of increased rent in urban settings is a worldwide issue. In the states at least, it truly is a fascinating and complex issue. I won't pretend like I know what I'm talking about, so I will refrain from opining, but it will definitely be interesting to watch what happens as rent continues to skyrocket. I always considered the impact it would have on housing for people, and I forgot that it also heavily impacts businesses and the prices of goods/services. As always, great video!
In Argentina (the land of taxes) there is a specific tax that is applied to coffee to pay for music royalties on a per cup basis! I couldn’t quite find the information online but I recall having a business meeting where they explained that and everybody connected to the industry was well aware of that. So there you are! Also here Starbucks is usually very expensive compared to local coffee stores mainly (I think) because they have to pay royalties in USD to Starbucks HQ and USD’s are generally expensive locally. Thanks for the great video James!
The problem is massive chains with market dominance and huge margins charging the same price as a small speciality cafe serving high quality beverages. Creates a price dichotomy which isn’t reflected in cost to produce or quality unfortunately.
This is the reason for high rents too. They can outspend independents on rent, and make high street rents too expensive.
Thank you, James. This makes so much sense.
Great video. It’s really good to actually get a decent breakdown of costs like this :):)
Brilliant and very well explained!
Great points. Needed to be said.
Amazing, thank you! I think every quality specialty roaster should be thanking you. I have long held the same belief yet am constantly surprised at how few cafes are willing to invest in quality coffee.
Thank you for your videos,you do an excellent job. ☕️
Thank you for your videos
Very enlightening, thanks
Great video as always! I wish you had touched on the price of retail bags of coffee. I’ve had several conversations with friends about the rising price of coffee bags in specialty shops. I do an alright job of explaining the costs associated with roasting coffee but you are far more eloquent.
James: Let me casually take an incredibly complex and involved process and break it down in the simplest and most easy-to-digest format so that it's entirely accessible to everyone, even those that would have a difficult time understanding the incredibly complex economic principles behind it.
Videos like these are why I subbed. Bravo.
So nicely explain..thank you
Dear James, thanks for the insights. I enjoy your clear and humble style. You really opened the entrance to the world of coffee for me. Staying with the topic of P&L of a coffee, could you elaborate a bit more upstream in the value chain, meaning the breakdown of production costs? After the opening sentences of this video, I would have expected (and loved to hear about) this. It may open one’s eyes to see how much money actually stays with farmers, traders, distributors, retailers... all the best from Germany!
What a great video. That said, I think coffee lovers should seriously think of getting their own personal machine at home if they really want to save on costs. A Hario V60 and a decent Lelit should do the trick most days :)
Thank You! You've managed to lay out the problem very factually and without any unnecessary rant. And I've learnt something new, too! Have a nice day.
Awesome video, really enlightening. I would have thought the profit margin would have been a lot higher. Always assumed the majority of the cost would be staffing, but I did always struggle to understand why certain coffees have such different costs associated... now I know it’s just a difference in margin.
That's net profit though. Gross profit is a lot higher of course and you'd normally expect the percent of GP to be reasonably stable compared to net because your fixed costs are, well, pretty much fixed e.g. on a quiet day you still have to pay the staff, rent, rates etc. so percent of net profit is generally less useful IMHO but I do appreciate James is being general in this vid as stated. My company (not 'my' as in I own it because I don't) makes about 1% net profit which sounds insane to some people but is typical but... 1% of £100 is not much, 1% of £10m is a lot more.
Best luck to you.we always enjoy you. very helpful.. Thanks
Fantastic explanation!
This is very true, and applied to my cafe in Poland twenty years ago just as much as it does to cafes around the world today. Add to that seasonal variations in business traffic (which I'm not sure the pie chart adjusts for) and you can have many days during the year when you operate at a loss. Scary stuff.
It also is a good illustration of how vulnerable privately owned coffee shops are against companies like Starbucks where, even if margins are similar, daily turnover is not (many Starbucks here in the US with both counter and drive thru service are seeing turnover of more than $60,000 per day).
In india, a roadside tea shop will sell coffee for 10rs.(0.14usd)
Even cheaper in areas with low rent.
They have hot milk with dissolved sugar ready, they add some instant coffee and give it to you...
1 litre milk = 23rs
1 cup = 100ml or so.
Given they probably add a lot of water to milk,
I cup of milk costs them 1.15rs
Plus a 2rs sachet of instant coffee.
Whereas a coffee in a proper coffee shop, i.e, with an espresso machine and actual beans,
It costs upwards of 100rs.
This is exactly how it is where I live, except that profit and staff cost switched places.
Specialty coffee here will cost you $2 on average, yet baristas are getting paid $100 a month for 56hour weeks.
Great little video.
It’s cheaper for me to have bought my Breville Barista Express for 600$ and make all the drinks at home then spend $4-5 a drink sometimes more than 5 times a week. It will have paid for itself in 6 months and I can really customize everything every drink I make. So now the cafe is a special trip once a week or every so often. But this really sheds light on why that cup of roasty, foamy heaven in a cup costs what costs. I like to support my local cafes and roasters and will never go to a chain cafe. I like putting money in the pockets of my community small business owners.
I love your videos. I’ve watched and rewatched several and have inspired me to get my own machine and grinder. They have changed how I approach and buy coffee, and it’s all greatly appreciated.
I say all this as disclaimer before making the wry joke/observation in how when you say “as always I’d love to hear from you down in the comments” right after an inherently controversial statement, all I can hear is “it’s okay to be wrong and you’re welcome to be wrong in my comments section.” and I love it. Keep up the amazing work!
Cape Town, South Africa; I am not in the coffee business but have friends who are. Your model is pretty much accurate for our environment too. Establishment owners generally rely on other products to make them profitable, coffee being the drawcard. Thanks for another informative video. ✨🌈
Love your work James, thanks for making the effort. Please tell us about the specific cost of coffee as a percentage of total product costs for a typical cafe, and then look at a breakdown of where that money goes. How much of the £3 does the coffee farmer get? Between £0.05 and £0.10?
Here’s a thought: As a cafe owner could you (would you?) put a tip jar for the farmers who produced the coffee you sell? If you couldn’t identify the farmers, perhaps any identifiable coffee farmers would do? Would your customers trust you to get it to them? Could you get it to them? Challenge?
It would be nice to think that when people wake up to the fact that almost all coffee growers are some of the poorest people on the planet, they might stop complaining about the cost of their latte. Perhaps they may even tone down their left leaning rants in favor of some gratitude even if only for the opportunities that the good luck of their place of birth affords them.
I think regardless of people's opinions about cost, this is still a beautiful piece of work about how there is so much more than just roasting/origin when it comes to coffee price. Coffee is almost a canary in the coal mine for the socio-economic state of the world. Your expertise on the subject, but more-so your judgement-free factual demeanor really is a testiment to your work to improve the Coffee industry, and I think this will both help coffee vloggers (vloffers?) shift their commentary from `Its all about coffee and Heirloom` to the coffee industry as a whole, and the not-so-friendly sides that you mentioned like profitability of farmers, and the impact of global warming. Thanks for the fantastic videos!
Spot on James!
Thank you for the enlightenment.
Very interesting !
Thanks 🙏
Its true, luckily not as expensive as yours
At our country the price of specialty about 2-3 pound, depend on the coffee shop. But at our village just half pound
I'd love to see more insights in to the business side of things James. Quite an interesting topic it seems.
Really like the intro music you use in your videos. Would you perhaps consider sharing a playlist of sorts on Spotify of the songs you use? or perhaps even just listing them in the video description?
Currently writing a research paper on the coffee price crisis, fair trade, ESG disclosures, and things of that nature. This was a great starting point for me!
Coffee shop per peeve. When they charge £0.15-0.20 difference between a med and large for just extra water and non extra shot!
I don't find it expensive, really. In my city (Minsk, Belarus) the coffee prices in specialty coffee shops are not much higher than in other "just good" cafes. And I know what I pay for, I know what is their philosophy and ideas and I am ready to pay that money to support them
Spot on, being a coffee shop owner once the bills are paid I’m really not rolling in it 😭
I love the industry, I love the knowledge I’ve built up and ultimately love my customers we serve every day.
Thank you, comrade Hoffmann
Fresh beans through my letter box is more than reasonable. And anything up to 3.50 in a coffee shop is fine by me if the (black) coffee is exceptional. I'm outside London mind.
In Italy they have prices set by law for all forms of coffee all over the country, be it an espresso, a cappuccino, etc. For instance at the moment an espresso costs just €1 all over Italy. It doesn't matter where you have it, whether it's in a village in the middle of nowhere or on the main square of Venice. However, for that price to apply you have to drink it standing at the bar. If you sit down at a table, then every bar can set its own prices.
This difference in price, whether the customer is seated or not, makes sense because customers who drink their coffee standing don't spend too much time at the bar and quickly make way for more customers.
Great thoughts 👌
Great video, there is a cafe here in York who received a bad review as the customer only wanted hot water.. in a cup and could not believe they were charged. The owner replied with how they needed to serve the hot water, wash that cup and the time taken by the customer to sit at their table was all a cost to them, and how absurd it was to receive a 1 star review for the service.
I think a key issue as well is the difference between paying a full staff of well-trained baristas a competative salary. and the costs of hiring perhaps less qualified baristas and educating them in house or using machines like the clover or decent which allow people to learn on the job and produce a higher quality product with less experience. There is a trade off there that many coffee shops are working out consistently. My favorite coffee shop in the US started out as strictly a roaster, then added a tasting room with 2 baristas. both award-winning. That enabled them to expand, purchase other properties in the area, partner with other established coffee shops and hire more staff, more overhead etc.
Wonderful viedeo as always
James: Maybe I am showing my ignorance here but: 1) Businesses under the VAT threshold (~£75k turnover) do not pay VAT (assuming they remember to claim it all back), and 2) VAT is a tax on value, so even if you are VAT registered you are not paying the VAT on the whole value of the item, only the difference between the price you charge for it and the price you paid for the ingredients. Have I missed something obvious?
We'll done Jim, great to break down this misconception
Very interesting James.
4:15 "That cafe may save 15, maaybe 20 cents." So you mean they can almost double their profit (which you said was about 25 cents).
4:29 "20p more, 30p more, you can have something incredible" Taking a cut of 30p on a profit of 25p means you're at a 5 cent loss per cup of coffee.
So no matter what you're selling (incredible or cheap coffee) you need to push that coffee cost to the customer, since (all things the same) the impact on profit would be outrageous.
Very important point!!
At my local specialty coffee spot, I can get a cup of coffee for between 4-5 NZD. I can get a prepaid 10-cup card for around a 10% discount too. I also get 200g of beans shipped to my house for $13 a week (usually roasted the day before I receive them) - it’s really not that expensive considering what it is and how far it comes to get to your cup
Benjamin Love I hope those beans are from flight coffee because most of NZ coffee is disgusting
I believe you when you say "I hope you have a great day!", So thank you! :)
we have pretty much the same cost problems in Buenos Aires, plus the high inflation makes the cafes markup their prices to not lose to the inflation,which produces more inflation in return.It’s crazy
Where I live there is no such a VAT so far, the rents are around £10 per Square Metre, and the staff cost is very cheap due to Foreign labor, but the cub of coffee still costs between £3.5 to £4.
After owning a Coffee machine and using the most premium beans available in the market, my cup of coffee now costs me less than £1.
Interesting topic. I would love to watch a video about the actual business model of a cafe as such. Where the profit comes from, if not from the coffee etc. :)
I am about a year late, but nothing has really changed other than rent steadily increasing. I’m from Orange County, California and I’ve seen a very large trend of cafés open mobile shops where they can bring a coffee bar to events such as weddings, parties, business events, etc., which makes sense because you don’t have those large operating costs. My friend and his fiancée have done this and prior to COVID-19, they were making excellent profit for a side business. They loved it and were able to do it at low operating costs and served high quality coffee. Granted, it wasn’t their full time gig, I know they could have translated that into a larger operation based on what they’ve told me. I’ve also noticed more and more of these propped up within the last year when I look on Yelp and other services. That being said, I love me a good coffee shop and the ambience they provide, but feel so bad for many due to COVID-19. I’ve been trying to buy roasted beans directly from a variety of specialty roasters to try and help as much as I can. ❤️
All makes sense. Which is also why I’m almost completely stopping drinking out. Wages went up, rent has gone up, so has my coffee. And it’s reached a point where the cost of the good has gone beyond the value I see in getting it. Especially when 2-3 espressos out equates to 1lb of unroasted coffee, I begin to see more value in my own output as I can control the quality and the product I make
Great video! What I do consider to be ironic, is that in those countries where great coffee is actually sourced, cafes end up selling the worst quality coffee there is to be served. Most of the grounds harvested goes to exports, leaving the origin countries with the worst. Having said that, we end up paying the cheapest possible coffee but rarely get any quality grounds to consume.
Thanks James for your analysis!
I agreed that the business model in different region is way different. To some extent, by comparing a normal filter coffee price to let say, a set lunch in different places, in Asia (i.e in Hong Kong, Taiwan), a cup of coffee is equal to or even more expensive than having a lunch. However, thing is different in Europe. Normally it wont cost you a pasta, a sandwich or a set lunch to buy a filter coffee.
Maybe the culture? Shipping cost? or the consumer behavior? That may be an interesting topic.