Cup of Coffee Pricing Strategies

by Kennedi Rose; Updated July 27, 2017
Price coffee for low- and high-end customers

When deciding how to price the cups of coffee that your cafe, restaurant or coffee shop sells, include options that appeal to a variety of customers. Cost-conscious customers, who scrutinize the prices, will want a basic and inexpensive cup, while their luxury-coffee-oriented friends are willing to pay huge markups to have flavored or frothy beverages.

Cost-Conscious Customers

Even if your coffee shop or restaurant is designed to be more upscale, your clients may still bring cost-conscious friends. Generally, a plain cup of coffee, served with only basic cream and sugar, should be offered at a low price so price-sensitive customers have an option. Price this cup for the cost of your materials, plus a 20 percent to 30 percent markup.

Syrups and Flavors

You'll make your best profits in cups of coffee with syrups, froths and flavors in them. Mocha-flavored coffees, caramel coffee and various flavors of iced coffees can be sold at substantially higher prices than your basic cup of plain, black coffee. While these syrups and flavors cost you only a few dollars per bottle, you can mark up each cup of coffee by 30 to 50 cents per squirt. These flavored coffees will be purchased by customers who are focused more on a luxury cup of coffee and less on price.

Fair Trade Coffee

Your cost to buy wholesale Fair Trade Certified coffee will usually be the same as your cost of purchasing free-trade coffee -- at most, you'll pay your supplier an extra one cent per cup. Yet you can sell Fair Trade Certified coffee to environmentally- and social-justice-concerned customers for a markup of 10 to 25 cents per cup. While there has been some backlash against this markup -- causing some coffee shops in Britain to start selling Fair Trade at the same price as free trade -- most coffee shops in the United States levy this markup on their Fair Trade products.

Foams and Froths

Frothy and foamy coffee drinks, like cappuccinos and espressos, can also be sold for as much double the price of a regular price of coffee. Despite the price difference, though, your profit margins will be substantially less than your margins on flavored coffees or fair trade coffee, because you'll need to purchase high-end machines to create these cups of coffee. Depending on your volume of sales, you'll find that it takes one to four years to pay off the cost of the machines, after which point the price differential generates a higher profit.

References

  • "Freakonomics," Steven Levitt and Stephen Dubner, 2005

About the Author

Kennedi Rose is an Atlanta-based journalist who began her career in 2005 as a newspaper reporter covering the education beat. She has written for a wide variety of commercial, trade and online magazines covering food, drink and the retail sector. She holds a Bachelor of Arts in sociology.

Photo Credits

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