Profits on coffee

[deniser]

Yesterday I waited in a queue for over 10 minutes while the lady serving made 2 cups of takeway coffee. At £2 per cup, I calculated that, on a minimum wage, each cup of coffee cost at least 50p in wages plus something for employer's national insurance plus the cost of the coffee, the cup, the cup holder, sugar, milk etc. I don't think coffee is a cheap commodity either with each cup using about 2 heaped tablespoons of coffee.

That is without the overheads of the premises, the cost of the machine etc..

I just can't see how coffee bars make any money? How do Starbucks/Costa and those places survive with their high rents let alone make a profit?

Or are the coffee drinkers subsidised by the tea drinkers?

 

[quikshop]

I was surprised when a large non-franchise coffee shop I use regularly was suddenly taken over. The service was always great as was the product and it always seemed to have a good buzz of punters.

The new owners have halved the size of the 'regular' drinks and removed about 1/3rd of the seating area.

I guess people are just buying a coffee and sitting there for an hour reading their paper... instead of changing that behaviour the owners should take advantage of it, perhaps send a cake or snack trolley round every half an hour. I know I'd buy from it :redface:

 

[Subbynet]

Each cup costs barely anything...

10p for the cup + lid, 1p for water (which isn't even a penny per cup), 5p heating costs, 5p sugar, 5p milk, and say 10p for the coffee itself. In fact I've overestimated most of those costs.

About 36p per cup. They then charge say £1.50-£2 per cup.

They're quids in if you can get the footfall.

 

[JTSystems]

Yesterday I waited in a queue for over 10 minutes while the lady serving made 2 cups of takeway coffee. At £2 per cup, I calculated that, on a minimum wage, each cup of coffee cost at least 50p in wages plus something for employer's national insurance plus the cost of the coffee, the cup, the cup holder, sugar, milk etc. I don't think coffee is a cheap commodity either with each cup using about 2 heaped tablespoons of coffee.

That is without the overheads of the premises, the cost of the machine etc..

I just can't see how coffee bars make any money? How do Starbucks/Costa and those places survive with their high rents let alone make a profit?

Or are the coffee drinkers subsidised by the tea drinkers?

Have you seen Starbucks, they're generally rammed with caffeine addicts!

Seriously though there costs will be less than 10p a cup. I pay 7p for a smoothie cup 12oz with domed lid.

the coffee costs when bought in bulk per coffee are next to nothing - yes some places the "service" isn't exactly fast but coffee shops can easily take £3-4k a day if in the right location.



For example I just googled bulk coffee:

Found this, sounds fancy:

Australia Skybury Fancy Skybury Farm (Arabica Bourbon) - Dec 2010 - 1KG Special
£21.50

Then i google how many grams of beans per cup and read there was a recommendation of 10

Well in a 1000g bag that's 100 cups, that makes one cup cost 21.5p of "premium" coffee.#

I'm sure if I went to wholesale who specialised in this I would get it a lot cheaper.

 

[deniser]

Each cup costs barely anything...

10p for the cup + lid, 1p for water (which isn't even a penny per cup), 5p heating costs, 5p sugar, 5p milk, and say 10p for the coffee itself. In fact I've overestimated most of those costs.

About 36p per cup. They then charge say £1.50-£2 per cup.

They're quids in if you can get the footfall.

Well, we're up to about 90p already cost including labour. I think the margins are very tight.

 

[JTSystems]

Well, we're up to about 90p already cost including labour. I think the margins are very tight.

Sugars about £5 per 5kg, and 1 teaspoon is about 4 grams. that's 4 pence a scoop.
The milk, I buy wholesale 2 litres for about a £1, about 50-100ml per coffee that's 2.5p per cup, 5p heating costs seems pretty high but lets go with it.

Lets add that all together

22 Pence for premium coffee (based on retail price)
4 Pence for sugar (based on retail price)
2.5 pence for milk (based on wholesale)
5 pence for heating (based on some figure from the air)
Thats

33.5 pence.

Hourly wage say £6 at most, that's £1 for every 10 minutes, a coffee takes AT MOST 2 minutes to make, that's 10-20p in labour.

Therefore a coffee price could easily be achieved for 50pence

a coffee "shop" rather than a cafe would charge a good £2+ for that.

that's £1.50 profit per drink.

and that's 2 minutes, that's £7.5 every 10 minutes or £45 an hour, if they are only busy for "half a day" that's 4 hours that's £180 a day.

The staff would have cost that person £48 making a profit before expenses of shop/rates of

£132, a week that's £924 and a month, £3960.

That's based simply on 1 server taking a long time to make a drink and paying quiet high costs per unit.

I would expect to be selling a lot more than that along with buns, and sandwiches etc.

 

[Subbynet]

Well, we're up to about 90p already cost including labour. I think the margins are very tight.

I think the shop you visited is not a good example. It shouldn't take anywhere near 10mins to serve 2 coffee's, more like 30-45 seconds - and if you're really quick (2 staff one serving, one pouring) you can get that down to 20-30 seconds per customer.

 

[quikshop]

I think the shop you visited is not a good example. It shouldn't take anywhere near 10mins to serve 2 coffee's, more like 30-45 seconds - and if you're really quick (2 staff one serving, one pouring) you can get that down to 20-30 seconds per customer.

It should be that quick but I find it takes minutes not seconds from ordering to being served in most coffee shops. I get the impression that coffee shops are purely high volume low margin businesses, even though ther raw materials are cheap the associated costs are high.

 

[alanc]

I get the impression that coffee shops are purely high volume low margin businesses, even though ther raw materials are cheap the associated costs are high.

This was my guess as well. That's the reason that the Costas of this world do so well - bulk buying of the materials, coupled with high brand awareness. I'm guessing that they make a lot bigger margin on the food than on the coffee.

 

[JTSystems]

^ that's like the opposite of big restaurants that make most of their money on the alcohol interesting observation!

 

[Subbynet]

It should be that quick but I find it takes minutes not seconds from ordering to being served in most coffee shops. I get the impression that coffee shops are purely high volume low margin businesses, even though ther raw materials are cheap the associated costs are high.

Yep, establishments like Starbucks and the likes do take longer, they offer many more options - plus they drip brew per cup instead of say just selling brewed drip coffee - or dare I say the instant stuff. They also keep asking if you have a Starbucks card , all those things add time, and not really any extra profit. Mind you its "customer service", and if you like it, you'll return again. Its more of a long term strategy and hell it seems to work for them.

A family member of mine ran a Tea / Coffee and Sandwich trailer outside a small but busy train station during the morning hours for a few years, always a cue to get served, was a cracking little earner until they redeveloped the station and included shops. Another company won the bid for the shop.

Its a case of choosing your strategy to match what you want to achieve.

 

[deniser]

Filter coffee in a pot I can easily understand, it's the Starbucks/Costa type of coffees, hot or cold ice cubes in a blender, syrup added, hot chocolates with cream, marshmallows, sprinkled chocolate on top, a flake sticking out, lattes with patterns on top etc. They take forever to make!

I don't think I have ever received a coffee that wasn't filter coffee from a jug in less than 5 minutes.

 

[andysmfc]

I have been looking for a while for a small town that does not have a decent coffe shop, I think there is good money to be made in tea/coffee and sandwiches etc..

 

[mdj101]

Theres a large retail park near me, and apart from a Pizza Hut it has no other food / drink outlet, (apart from a few offerings in boots)

Saw it as a potential gold mine for a coffee shop, contacted the owners of the park and said they couldn't do it because of an agreement with Pizza Hut although they agreed it was needed.

Year later a Costa opens on the site and has a queue out the door all day long!

P***ed off is not the word!

 

[Lee Jones Jnr]

Theres a large retail park near me, and apart from a Pizza Hut it has no other food / drink outlet, (apart from a few offerings in boots)

Saw it as a potential gold mine for a coffee shop, contacted the owners of the park and said they couldn't do it because of an agreement with Pizza Hut although they agreed it was needed.

Year later a Costa opens on the site and has a queue out the door all day long!

P***ed off is not the word!

It sounds like it was just you that they didn't want on the park?