Cafe owners should raise their coffee prices. Here’s why.
Your daily cup of rocket fuel is about to get more expensive – and it’s about time.
Of course, most people don’t want to pay more for their coffee. We get it – but it’s important to understand the ecosystem behind your morning brew.
“If we pay more, the cafe owner can pay more for their roasted coffee, and the roaster can pay more for their green beans,” says Phillip Di Bella, founder of The Coffee Commune.
Read More: How coffee prices are determined
The rising cost of green beans
Since 2021 the price of raw green coffee beans has increased by 90 per cent. This is due to a number of reasons, the predominant one being a coffee shortage in Brazil caused by drought and severe frost that destroyed roughly 20 per cent of the country’s coffee plants.
“That’s caused the world price of coffee, based on averaging the monthly prices of arabica and robusta green coffee beans, to surge 90 per cent,” says Raihaan Esat, General Manager of International Coffee Traders.
With global shipping prices also up by 500% as a result of the ongoing pandemic, this has seen the price of green coffee beans skyrocket.
But coffee prices haven’t risen…yet
Some cafe owners have been hesitant to increase their coffee prices for fear of pushback from the public.
David Parnham, president of the Cafe Owners and Baristas Association of Australia, says prices should be sitting at around $6 to $7. “It’s just that cafés are holding back on passing that pricing on per cup to the consumer,” he says.
And in some cases, coffee is a losing proposition for owners altogether.
The thing is, all cafe owners have the right to make profit. But Phillip Di Bella says restoring it requires a bit of understanding from customers.
“Often these venues are barely covering costs and people need to know it,” he says. “You wouldn’t turn up to work to make no money, so why should they?”
Shafeen Mussa – former cafe owner, industry consultant and founder of the Brisbane Cafe & Restaurant Owners group on Facebook – says now is a really good time for cafe owners to increase their prices.
“We’re experiencing price rises across every industry sector, from energy and fuel to clothing and groceries,” he says. “It can be a shock to raise prices, but it’s normalised right now. But it’s not just a matter of charging more – with it needs to come more value and a better service experience for the consumer.”
Quality and value over convenience
Convenience might be the biggest driver of coffee-buying behavior for now, but it won’t be for much longer.
Shafeen says cafe owners need to rethink their value proposition and brand value – or “the reason why people go there”.
“There are two types of businesses in hospitality – those that build an emotional engagement with their audience and customers, and those that don’t,” he says. “The ones who don’t are going to risk a higher rate of churn with their customers leaving them.
“If a large coffee is now $6.50, there is an expectation of service and quality that comes with it. The vast majority [of cafe owners] do a really good job. But many may need to revisit and make sure they are serving the highest quality goods, and that service is top notch.
“Cafe owners need to think outside the box, revisit their customer experience and assess what is and isn’t working.”
Raihaan says eventually there’ll be a tipping point where people choose quality and value over convenience, because “people can justify any purchase as long as they see the value in it. At that point, the question people ask themselves won’t be, ‘Should I drink coffee or not?’ It will be, ‘Where do I go to ensure I get the most value for my $6 or $7?’”
Christian Bianco, General Manager of Coffee Alliance, agrees.
“Engaging with your customers is crucial and goes a long way towards creating a great experience from start to finish. Ensure your team is actively working on at least knowing your customer’s names and their coffee orders, then build up from there. A little banter along the way is always nice.”
For cafe owners, if there’s something special about your coffee, let your customers know.
“If you put your prices up because you buy coffee from a more ethical supply chain, for instance, then you should educate your customers about the benefits of that in your face-to-face interactions, instead of being worried that your customers will complain because they’re just there for cheap coffee,” says Raihaan.
“At the end of the day, if I’m going to spend $6 on a cup of coffee, I’m going to go the place where they remember my name, I get great service, and I know I’m drinking a good cup of coffee, as opposed to the place that might be slightly more convenient, but I know the quality isn’t there.”
How cafe owners can bring in additional revenue
One method Shafeen says can assist cafe owners is cross-selling and upselling.
“When I was roasting coffee and working closely with cafe owners, this is the one thing that we focused on quite a bit,” he says. “Of course, it has to be done in the right way – when people are ready to pay, they are ready to buy. If someone runs an espresso bar with high volume trade, that $5 coffee could become $7 with a chocolate brownie.
“Even though prices have increased, you need to continually add value and ask for people’s business.
“When you get to that level, you get a really high engagement rate with your customer base. Yes, it’s a long game, but it pays dividends at the end. The upsell aspect doesn’t get practiced enough.”
Most staff that are employed in hospitality want more hours, which equates to more dollars. Shafeen says to look at it like an incentive program for staff members.
“If you give your baristas an extra incentive at the POS, and give them a KPI of ‘We’d like to see you sell to 30 per cent of people that come in today’, then automatically you’ve shifted that incentive.”
Savour Cafe in New Farm have adopted this method, rewarding their staff based on measurable outcomes.
“We believe that if the right outcomes are rewarded, our business and our staff will both benefit,” says owner Matt Jefferis.
Read More: 10 ways to increase your cafe’s profits
What can consumers do to support the coffee industry?
Ultimately, we as consumers can all be more mindful of small business owners and their staff, and be prepared to pay a little bit more for our local brew.
“These are independently-run cafes and restaurants, not large franchises,” says Shafeen. “They employ 60-70 per cent of our workforce, and right now they are trading on thin ice. They love what they do and enjoy serving people.”
If you’re happy to fork out $10 for a bartender to crack open a beer for you and pour it into a glass, but not prepared to pay $7 for a specialty coffee, ask yourself why.
“It’s all about educating the consumer,” says Phillip Di Bella. “When you’re sipping that perfect cup of coffee, these are the things people need to understand. There’s a whole ecosystem that goes into the coffee market – it starts at the farm and ends with the consumer.”
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