What really goes into your coffee cup

Last updated 05:00 01/02/2014

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Some long-time coffee drinkers may remember the glory days when a truly terrible cappuccino cost $3 and each drinker's character was defined by their choice of sprinkle - daredevil chocolate or mature cinnamon? A sprinkle of both was for the real thrill-seekers.

These days, people have standards.

Cappuccinos are no more trendy than socks and sandals, and the market trying to corner regular customers has become seriously competitive.

In 2014, coffee drinkers can expect to pay about $4.60 for a large flat white. For this price, they should expect a quality drop made by a barista earning more than minimum wage.

Memory can be deceiving. While we long for those $3 coffee days and marvel at how cheap it was, we tend to forget the trade-off. Coffee was a new product to New Zealand.

Knowledge was scarce, the skill more so. The coffee drinker, perhaps hampered by a developing palate, accepted whatever was served up. These days, we know better.

While we now pay more for a coffee, we expect more. This is the way it should be.

Today, there is a tendency to complain about the cost of coffee. Customers may look at the contents of their cup and assume the cafe is making cash hand-over-fist as it pops a 60-cent shot of coffee in and adds half a cup of hot milk.

They must be rich.

However, as many in the cafe game will explain, the coffee business is ruthless.

Hamish Evans started Christchurch roasting company Switch Espresso in 2006. He also owns cafe Black Betty, espresso bar Industrie, and Switch Espresso in New Brighton.

Ideally, cafes should operate on a 30-30-30 model. For the price charged, product cost should be 30 per cent - the beans, milk, sugar, and so on. About 30 per cent should be staff costs, including baristas, managers and dishwashers. On top of their hourly rate is holiday pay, Kiwisaver contributions and ACC levies.

The final 30 per cent covers fixed costs - rent, power, insurance, and the like. However, fixed costs are not always fixed. Insurance is up 30 per cent for some cafes, rent is through the roof and rates are inching higher each year.

Using this model might leave a cafe a 10 per cent profit margin if they are lucky.

"The reality of playing in a very competitive industry is maintaining a competitive sale price," he said.

When a cafe's rent or insurance increases, few pass the cost to customers. Most cafes will absorb such rises to keep customers.

"Competition means the customer benefits."

Wholesale milk prices per litre have gone up three times in the last year.

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Evans said that, since 2006, the cost of green Fair Trade organic coffee beans had risen 60 per cent. His price went up 3 per cent.

"When people hear the price of green coffee beans has gone down a few dollars, well, that's just our reward for absorbing those increases for years," he said.

While coffees may go up 10 cents a cup, chances are the cafe is still absorbing costs unseen by the customer, especially if every 10th coffee is free on a loyalty card.

"It's cut-throat," he said.

- The Press


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