How much should café owners charge for their coffee?
Hey, coffee shop owner, want to know the best price to put on your brew? Let’s find out…
Good coffee is at the heart of your business. It’s what starts early birds off on the right foot and brings your Saturday visitors together over cake. It is also, of course, what can bring you the highest return. Because the potential mark up on coffee really is impressive. With the average cup of speciality coffee costing just 27p to make, plus milk, you can easily make £2.50 profit. Per drink. And if you get your coffee spot on, you’ll be serving lots of those…
Yet, setting your prices isn’t as simple as it sounds. Do you copy the shop over the road? How do you calculate the cost of each cup? And what about the milk?
Let’s take it step by step and work out how much you should charge for each cup. We’re going to get mathsy but don’t worry – why not download the calculator for an easy-to-edit coffee price guide you can keep? It’s free!
Wholesale coffee: how much does – and should – it cost?
Let’s kick things off with the coffee (always a good place to start). We’d always recommend paying between £20 and £25 for a one-kilogram bag of beans. If prices start tipping downwards to £15 or £10, you can be pretty sure you’re being sold the sub-standard stuff. This is commodity coffee; over-roasted, poor-quality coffee your customers can buy anywhere. It’s less likely to be sustainable and much more likely to taste dull and lifeless. Not words you want associated with your brand.
Here at Two Chimps, we charge £20.50 per kilogram bag, with discounts for continuous custom. We don’t call these ‘bulk-buying’ discounts because we never encourage coffee stockpiling. All our coffees are roasted fresh each week, and we’d much rather you serve up fresh beans rather than ones left on the shelf for months.
The £10 difference between commodity and speciality might seem steep, but what if we told you that it only amounts to a 13p difference per cup? That’s right; for just 13p more, you can serve up aromatic, high-scoring speciality beans rather than flat-flavoured commodity cups no one will remember. And, when you can charge upwards of £2.70 for each speciality coffee you serve (and make 66% profit), is that not 13p very well spent? We think so.
Setting the price for one cup of coffee
But hold up, where did that 13p figure come from? Let’s rewind and show you how we got there. Maths head on? Goodo, because we’re going to help you work out the cost of each cup you make!
Firstly, we need to divide the number of cups you can get from a kg bag by the cost of that bag. This gives you the cost of the coffee in each cup. A 1kg bag of beans makes, on average, 74 cups, which means a speciality bag priced at £20 produces cups estimating 27p each. A commodity bag bought for £10 will make a cup for 14p. So there’s your 13p difference. Following so far?
But why should I serve speciality coffee in my coffee shop?
We’ve mentioned the unforgettable flavour and distinctive aroma (key to all good coffee shops), but what else do you get from speciality coffee? Rather a lot…
Source your beans from an artisan roaster like Two Chimps and you’ll receive fresh, high-scoring beans awarded 80 points or above on the Q Grader’s scale. We chimps roast by hand multiple times each week and deliver to you in small batches to guarantee unparalleled freshness every time. Why not advertise your roaster’s logo and share their sustainable credentials with your customers? This will create a real sense of identity for your business – something every customer wants.
Serving speciality is also the way to increase your customer retention. Commodity coffee isn’t exceptional: you can buy it at any chain café or motorway drive-thru. Give it to your customers and they’ll be in and out before you can say ‘java’. With speciality coffee, meanwhile, you’ll be treating your valued customers to coffee tailored to your machine and unique to your brand. This will become your coffee.
So, you might save 13p with commodity, but is it not better to build a happy following of customers who come back each weekend, spending £3 plus every time? And bring their friends? And follow your social? And give you some sparkling five-star reviews on Trip Advisor?
Embrace the milk moustache!
Coffee is just part of the story. Milk matters, too. Each coffee contains different amounts of milk, from lattes with 300ml to frothy cappuccinos with around 255ml ansd a flat white with even less. Taking the various coffees into account, we calculated the average milky coffee to contain 255ml of milk. With this figure, we can work out that the cost of the milk in each cup is 12p. We used the price of a standard shop-bought 4 pints (£1.09), but you can, of course, choose locally sourced or organic milk and adjust your prices accordingly.
So, how much does each cup cost me?
Ready for the big reveal…
Add together the 27p for your speciality coffee beans and the 12p for the milk in each cup, and you’ve got a total of 39p. Correct, you can serve high-scoring, ethically sourced speciality coffee for less than 40p. But the real gem? That each speciality cup costs just a fraction more than commodity, yet brings bucketloads of good stuff in return. Get brewing!
So, how much should I charge for each cup?
Now you know how much the ingredients in each cup cost, you can decide on the price you want to charge.
Quick tangent here, because we need to chat VAT. There is no VAT when you, the café owner, buy beans from us, your roaster. If you are VAT registered, VAT will be added once you make the coffee into a hot drink to serve to customers. The current VAT threshold is £85,000, so you will pay VAT if your taxable turnover exceeds this amount.
You need to bear this in mind when settling on your prices. To work out the profit you will make from each cup, simply take the VAT and that 39p figure from the price on your menu. VAT currently stands at 20%, which means that you’d make £2.11 profit from a £3 cup of coffee (£3 – 20% – 39p).
How much are coffee shops charging for their coffee?
We’ve done the digging for you and found the average price coffee shops are charging right now. The £3 number used above was a ballpark figure, but we know you came here for precision, so that’s what we’re going to give! We visited 15 coffee shops serving speciality coffee to calculate the average price of our most-bought coffee shop drinks. The Americano came in at £2.47, while the average price of a cappuccino was £2.73. Luxe mochas cost a little more – we found most chocolately brews priced at £3.10.
It doesn’t stop there, we know…
Of course, there’s more to think about, and the cost of rent, wages, and takeaway packaging will all play their part. But knowing the numbers will show you that you can become a speciality-serving coffee shop. You really can!
What’s more, getting your head around the figures will point out other ways you can spotlight your shop. Think about plant milks, for example. With such a significant profit margin on each cup, why not be kinder to the dairy-free drinkers and keep all milk the same price? It’s a sure way to set yourself apart from the Big Four coffee chains (almost all charge extra for plant-based milks).
You can also think about keeping your decaf prices down. Decaf coffee is more expensive to produce due to the extra stages involved, but we see a set price as a set price, so don’t charge you more for decaf beans. This means you don’t need to, either! Watch other cafes turn decaf drinkers away with their costly cups and serve up fixed-price decaf they’ll love!
Speciality coffee is a sure way to make your business sparkle. Find out how much you should charge with our free coffee cup pricing guide. Get started!
Find out how to calculate the cost of your coffee using our step-by-step calculator.
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