Is your flat white expensive? Or insanely cheap?
When you're forking out around £3 for a cup of coffee it's easy to think coffee shops must be making a fortune. However, by breaking down the price of your coffee into it's component parts, we hope to show why that's not necessarily the case!
The following breakdown is based on a Crumbs Flat White. All figures are approx. and it goes without saying that these will vary across cafes (chains vs independents) and geographies, where rent and labour costs can vary significantly.
Full Disclosure(!), after almost finishing this post I came across a video by UK coffee expert, James Hoffman on his YouTube channel which does a way better job at explaining this topic than I do! It's definitely worth checking out if you're interested in this kind of stuff! https://www.youtube.com/watch?v=7SM2Jrot-ZM
Crumbs Takeaway Flat White
Cup & Lid
Let's take a look at each element in turn;
Currently charged at 20%, a large chunk of the retail price goes straight to HMRC, not the cafe owner. This is exactly why the recent reduction in VAT rates during the Covid pandemic provided a lifeline for many hospitality firms.
Perhaps the most interesting component of the analysis not just for it's flavour, but also for it's journey. One of the things most people say when they see a breakdown like this is "wow, the coffee is actually a really small part of the overall cost". When you stop to think about it, this is amazing. Coffee is grown exclusively within the tropics where the conditions are suitable in terms of temperature, altitude and rainfall. So, your coffee beans have to be shipped halfway around the world before they can even be brewed for you. Even before this, it will take around 6-9 months of growing time before a coffee cherry is ripe and ready to be picked. And even before this a new coffee plant will take around 3-4 years to establish itself and start bearing ripe fruit. Once the cherries are ripe they are then picked (in a lot of cases by hand!) and then processed. Processing methods vary but they are all pretty manually intensive with beans being washed, de-pulped and dried by hand. Once they have been shipped they will be roasted, packed and shipped again to a cafe. (Bear in mind that a medium-large scale roaster will have invested >£100k in roasting equipment (and in some case lots more) not to mention rent costs and other tooling for packaging etc. Your chosen cafe will then grind your beans on a grinder that will have cost somewhere between £1-2k (they will likely have more than one of these) and brew it on an espresso machine which will have cost anywhere between £3k and £20k. And still the coffee costs just 40p! (And this is nowhere near a fully exhaustive list!) Really, the question is, given it's so cheap why would any cafe choose to serve bad coffee...??! The financial saving of choosing a lower grade coffee is so small it just doesn't make sense.
A good quality, organic, locally produced, unhomogenised milk (like most speciality coffee shops will use) will cost around £1 per litre (2022 prices). It is also worth bearing in mind that a growing proportion of drinks are now made using some form of alternative milk, such as Oat milk. These alternatives typically cost around twice the cost of dairy milk which is why so many cafes (understandably) charge a premium for non-dairy milks.
Cup & Lid
Compostable items cost slightly more than non-recyclable or non-compostable alternatives but again the difference is so small I don't know why you wouldn't choose compostable.
For most cafes the biggest component in here will be wages (c. 30% of revenue) and rent (c. 10-15% of revenue). Energy costs also make up a significant and increasing proportion of these costs putting further pressure on margins for the hospitality industry (and practically all industries for that matter).