The maths on your morning coffee, from someone who has stood on both sides of the machine.
Every time coffee prices move, the same word turns up in the comments. Greedy. Greedy cafes, greedy roasters, greedy baristas apparently rolling in it at 5am. I have read that word a hundred times this year, and not once has the person typing it done the maths. So let me do it for them.
Earlier this year, Yahoo Finance published a cost breakdown on a $4.88 cup of coffee. Here is where your money actually goes. The coffee itself, the thing the whole argument is supposedly about, is 56 cents. About 11.5 per cent of the cup. Wages are $1.76, or 36 per cent. Another $1.30 goes to rent, equipment, utilities, repairs, insurance and merchant fees. Then there is the milk, the cup, the lid and the GST. Whatever is left after all of that is the margin, and I can tell you from more than two decades in this trade, it is a sliver.
Now hold that 56 cents in your head, because here is the part nobody in the comments mentions. Green bean prices roughly tripled over two years, up around 200 per cent according to Commonwealth Bank analysis, after drought hammered Brazil and supply tightened everywhere. The single most volatile cost in that cup exploded, and most cafes wore it. They trimmed, they scrimped, they put off fixing the grinder, and they passed on as little as they could get away with. If cafe owners were greedy, they picked a strange way to show it.
The truth is less satisfying than a villain. There is no villain. There is a room full of costs that all went up at once, and a customer base trained for twenty years to believe coffee should cost four dollars forever. When owners around the country were asked what they would need to charge to run a sustainable business, most landed somewhere between $5.50 and $7. Not to get rich. To break even properly, pay their people award rates, fix the machine when it dies and still be open next winter.
Here is what I want you to take away. One, the beans are the smallest slice of your cup, so cheaper coffee mostly means cheaper labour or cheaper standards, not cheaper beans. Two, the person making your coffee is the biggest cost in it, and that is exactly how it should be in a country that takes coffee seriously. Three, when your local puts the price up 30 cents, that is not a business having a lend of you. That is a business trying to stay a business.
You do not have to like paying more. I do not like paying more for anything. But next time the price on the board ticks over, spare a thought for the 56 cents of coffee, the $1.76 of wages, and the owner lying awake doing this same arithmetic with much higher stakes than your morning routine. Greed is not the story here. Survival is.
Stay caffeinated. I'm out.
Carlos
Sources: Yahoo Finance, Commonwealth Bank.
