A big question we always get asked by our brand new start up trade partners is ‘how much shall we charge for our coffees’ so we thought this blog post will help you to work out a pricing structure that will really help drive the sales in your business, whilst ensuring your remain profitable.
A few key things to really think about are:
- Location
- Competition
- Demand
- Target Market
- Quality
- Cost price
Location:
Whilst most towns and cities will charge roughly the same for a coffee, it is worth thinking about rent and business rates you’ll be paying, what your footfall will be like, how affluent your area is, and what your market is like. City centre of London, for example, will charge higher prices than say a small market town due to the ever rising costs of rental space, however, the small market town coffee shop will still need to charge a reasonable price to make up for the lack of available footfall.
Competition:
It’s no secret that over the past ten years we have seen a huge boom in coffee shops opening up all around the UK, and we see this as only the very start which makes it extremely exciting. Whilst some will see the branded high street coffee shops as competition, it is also worth looking at the smaller independent coffee shops who offer a similar offering to you as these will most likely be using higher quality products so will need to charge accordingly
Demand
You will have to do your market research to understand what the demand is like for your area. Are you opening with a large sitting in area, or are you close to a business park with a big emphasis on takeaway coffee. Whilst we have seen a huge increase in reusable takeaway cups in recent years, if you are selling a large % of coffee to takeaway it’s worth thinking about the costs of the cups that you using to incorporate that into your costs
Target Market
Who are you aiming to target your business to? Are you looking to open a niche specialist coffee shop with an emphasis on unique and exciting coffees, or are you looking to offer a reliable, but beautiful experience to customers looking for comfort away from home. Whilst there is no right and wrong, it is important to price correctly for the product you are selling.
Quality:
Its probably no surprise that we are starting to see a real rise in people expecting a quality product presented to them, and we are seeing a rise in people wanting a more premium coffee experience. So using a coffee that will be a real crowd pleaser will always bring customers back to your business, whilst some coffees may be more expensive than others, it is worth noting that this is a product you will build your coffee shop around and choosing between a £12 per kg bag of coffee to a £20 per kg bag of coffee will only ever be the difference of a few pence in the cup price but which one is more likely to lead to repeated business?
Cost Price:
Touching back on to our previous point, cost price of your ingredients actually have a smaller impact on your sale price than you’d imagine and the difference between 3-4p per coffee, which can lead you to selling your coffee for maybe 10-20p more than you could for an inferior product actually leads to a higher GP so it is definitely worth thinking about what can help you drive more sales, as the GP on a cup of coffee can be one of the highest you can have in your business.
We have built a purpose built coffee costing calculator which can access here to help you perfect the GP on your coffee.
