Café Owners: Should you increase the price of your lattes?

Just wanted to get a Poll on prices: How much are you charging for a small takeaway coffee? I’m currently charging $4 for a single shot milk coffee. Thinking of raising prices soon.

We saw this question on Facebook recently. It was a café owner in a Sydney CBD location keen to know whether they could increase the cost of their takeaway coffee without upsetting their loyal customers. 

And it’s something we’re seeing a lot of recently, foodservice owner-operators making difficult decisions about pricing as costs increase across the board. 

And it’s only getting worse with coffee. The "world price of coffee" has surged 21.6 per cent this year to $3.65 a kilogram, according to IBISWorld, after a July cold snap in a major arabica coffee-producing region of Brazil wiped out a third of the crop. 

This doesn’t sound like much but, as we all know, small increases add up. The Australian Financial Review recently did a breakdown of the humble long black: growers of the coffee get 10¢, exporters 23¢, roasters 50¢. Rents make up 40¢ and labour 85¢. Equipment, repairs, cups, administration and other costs make up 90¢. This all adds up to about a $3 cost to produce a cup of coffee. You can see why the cheapest coffee in most neighbourhoods is $3.50 and the Australian average is $4.12.

In fact, in response to the initial question on Facebook there were many café owner-operators encouraging the original poster to increase his prices. 

“We just changed to $4.50 from $4 as the base price and no one batted an eyelid. +$1 for large and +$.50 for Alt milks. I stewed on it for 4 months before I did it but it was stressing for nothing.”

“Those that don’t rise their prices across the board unfortunately WILL GO BUST.”

Pricing decisions are difficult, especially when you’re dealing with a loyal customer base. In most cases, your customers are happy to pay the little bit extra to keep their favourite café in business. But there are a few things to consider that will make the transition run smoothly: 

Communicate the change ahead of time

Put up a sign at your cash register or coffee machine letting customers know there will be a price increase in a few weeks. Encourage them to ask questions if they like, and calmly explain where the cost increase is coming from. 99% of people will be understanding and rational about it (and they’re the ones you want to keep around). 

Save costs where you can 

If you have to increase the cost of something on your menu, it’s important to make an effort to save costs before you pass it on to your customers. For example, telling customers you’re removing straws (which is also great for the planet) will save you a few cents per cold coffee. The same applies with your food menu. Consider ordering frozen items you only need to thaw when you need them so you’re not throwing out food at the end of the day.    

Make the change big enough 

There is no point increasing the cost of coffee by 20c if you think you’ll be increasing it again in 6 months’ time. Do your maths carefully and if anything, go a little bit over. Go for the 50c increase, customers will notice two small price increases much more than they’ll notice one larger one. 

Have you had to deal with increased costs in the past few months? We’d love to hear how you dealt with it and any feedback from your customers. Plus, as always, the team is available to chat about cost-saving techniques through ordering and storage. Get in touch via our facebook page.

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