What’s It Worth?

Espresso doesn’t cost enough.

Picture this with me for a moment: a coffee tree takes four years to mature and bear fruit. This fruit is painstakingly picked and sorted, processed with the utmost care and attention to detail, and the seed is sold to an importer or a roaster for around three dollars per pound. The roaster then uses their years of experience and knowledge to coax the full flavor from this seed, and sells it to a café for around ten dollars per pound. At the café, a barista with years of training—of experimentation and learning and dedication to their craft—tames the assorted volatile and complicated processes of brewing to distill from this seed a deep, multi-faceted, delicious espresso. The end price of all these cumulative years of work, knowledge and training? Two dollars.

This is, despite recent media backlash against the rising price of coffee, about what an espresso cost ten years ago. In the last decade, however, a number of things have happened: overall cost of living in almost every American city has gone up; increased attention to trade practices and quality have (quite rightly) driven up the price of green coffee; roasters have gotten better and better at their craft, pushing the envelope of available flavor; baristas and cafés have made monumental strides in technique, equipment, peak quality and consistency. At the same time (and partially as a result), profit margins for independent cafés have become tighter and tighter, making it extremely difficult for cafés who don’t roast their own coffee to stay afloat. So why don’t prices reflect this?

First, a great deal of coffee pricing is based not on costs, but on market research. The basic questions for cafés evaluating menu prices are “What is everyone else charging?” and “What can we get away with?” With these as the central concerns, the only way for an independent café to make money is to cut costs. This means either that the café has to become its own roaster (which often isn’t enough) or that they have to cut corners somewhere in search of profitability (either by reducing ingredient costs, cutting payroll, making compromises on build-out or training, or accepting lower quality coffee).

Second, public perception is that coffee isn’t worth even as much as it currently costs. All too frequently, a customer standing in line will wonder aloud when a latte got so expensive, or who in their right mind would pay thirteen dollars for a bag of beans. While this is certainly fed by news stories about the “outlandish” price of coffee, a lack of proactive education from the coffee community is also partially to blame. There are still huge swaths of the American populace who have never known that Folgers is not, in fact, coffee.

The odds, then, seem weighted against any kind of significant price increase.  We’re in the middle of a recession, so most people are cutting excess expenses wherever possible. The common perception is that we’re already charging too much. The market will only bear so much, and we certainly can’t afford to scare customers away.

But significant price increases allow a number of things to happen which, together, may have the force to change public perception and create a new niche for high-quality cafés.

The first of these changes is that higher prices allow higher margins, which allow higher labor costs. One of the major problems with the barista profession is that, while the skills involved require years of experience and training, the average pay grade is roughly the same as an entry-level position anywhere else in the food industry. By offering higher wages and benefits, cafés have the opportunity to attract and hold on to high-caliber professional baristas, and to nurture their development. Baristas who feel their work is valued will be more likely to take pride in it, and less likely to resent both their customers and their employers.

Second, higher prices allow cafés to invest in better equipment, ingredients and coffee. These investments allow skilled baristas to produce better coffee more consistently. The customers will, in fact, get their money’s worth.

Finally, higher prices distinguish cafés and create buzz all by themselves. By and large, higher price is correlated with higher quality—at least in the eyes of American consumers. Hence, the mere act of significantly raising prices creates the perception that a café is in a different class. If the café can back up the price hike with consistently stellar coffee and atmosphere, word will spread. People who come in to see if a four or five dollar espresso can really be worth the extra money will stay—and come back—if it is.

So, if average market price isn’t a good indicator, what is it reasonable to charge? Start by going back to what coffee costs; great coffees aren’t cheap. Nor are great milk, ethically sourced sugar and chocolate, great grinders and espresso machines, or interesting, welcoming café build-outs. Figure out what baristas actually deserve for their work and use that as a starting point for overhead costs. Start by not cutting corners, by not making compromises, by not taking “no” for an answer. Decide what you want, do the math, and charge accordingly. Don’t be scared: if you really commit— if you pursue it all the way out to the end— people will follow you.

Why not?

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Categories: Barista, Coffee, Grind, Obsessive Quest, Spro'd Out!, Temperature


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25 Comments on “What’s It Worth?”

  1. 02/07/2010 at 12:00 am #

    “Maybe that’s the price it actually takes to get that made right.”

  2. 02/07/2010 at 8:42 am #

    To answer the “what’s it worth?” question, I’ve long held to the notion that the value of our coffee is exactly what the customers will pay for it.

    So, for me, the question comes down to how do I find those customers who’s value of coffee is aligned with mine.

    Finding those customers takes time. It takes a penchant for storytelling. It takes an active listener who follows up. It takes the courage to recommend another roaster who will satisfy the desires of a customer if their value of coffee isn’t on par w/ mine. Lastly, it takes the conviction to raise prices.

    (I quite enjoy your blog, guys. Thanks so much.)

  3. Matt
    02/07/2010 at 10:01 am #

    Excellent post.

    How do you get the customers to not only accept to pay $4 for an espresso but to accept that this is a reasonable price?

    I believe there has to be some customer education that goes in to the process, but how do we get this across before they come in look at the price board and leave?

    Absolutely they will be able to taste the difference, but understanding why it tastes so much better is what will not only convince them to pay more, but turn them into loyal customers.

  4. Maria
    02/07/2010 at 10:22 pm #

    I agree that espresso doesn’t cost enough for the reasons you present.

    I’m willing to pay more if it is really good:
    1. to experience the rich flavor and location atmosphere;
    2. to have the feeling that I belong to an elite;
    3. to help baristas, coffee shop owners, roasters, equipment manufacturers, importers and farmers have a better life.

    I believe businesses should define customer prices based on the value of the goods/services for the customer, not on cost (as long as the value is higher than the cost).

    On the cost side, continuing the equation on your second paragraph, the end price of one espresso (17 grams for 2 dollars) corresponds to 53 dollars per pound.

    On the value side, you have to consider in the business case the amount of people that would be willing or able to pay 5 dollars (addressable market). A person that drinks one espresso per day would need to have US$ 150 per month to receive that value (sensory experience, belonging, contribution to society).

    I’m sure there are other factors. Which other values do you think the customers would consider?

  5. Jale
    02/08/2010 at 12:02 am #

    As a PDXer, I’m happy not to shop at Starbucks, but when choosing among the local coffee places, price is usually the deciding factor. The $2.10 Americano 6 blocks away always beats the $2.50 one two blocks away. When you’re ordering an espresso drink daily, these differences start to not only add up for the consumer, but also for the Barista. Raising prices would put downward pressure on her tips, and not all proprietors (probably a tiny minority, actually) would raise the barista’s wage to compensate.

    And let’s not kid ourselves, people don’t really care about the flavor of their coffee. They can sometimes tell if the shot is burned, but that’s the extent to which most are connoisseurs. In fact, many seem to regard coffee as a natural alternative to those 5 Hour Energy Drinks and nothing more.

    For me, coffee is an admission ticket into a comfortable alternative to my living room. Coffee is wifi and a couch and the energy of strangers all feigning productivity on their laptops. Coffee has nothing to do with coffee.

    And until coffee starts to have everything to do with coffee, I seriously doubt companies will be able to justify raising their prices. Maybe a lone $4.00 (or even $12) drip spot could survive in PDX or Seattle, but this is not a model that extends much further than that.

    In the meantime, espresso could stand to learn a lesson from wine. In a lot of ways the economies are similar, and yet only one gets the respect and attention it deserves. One reason for this is that wine is a part of the slower-paced dinner culture, while coffee is served through drive-up windows. Most importantly, though, is that when consumers buy wine, they are a buying the story of the winemaker — the year, the location, even the plums that once grew on the land. When consumers buy coffee, they know nothing of the story. Hell, unless they order drip, they don’t even usually know what country (or countries) the beans came from.

    The first step to raising prices is to raise the awareness of coffee. Transform the culture. Lose the drive-up windows. Maybe even lose the counter. Make customers order their coffee restaurant-style, instead of “Welcome to McDonald’s” style. Also, never forget the value of a good story. Create blends for their narrative harmonies as well as their flavor harmonies. Send your customers on mental journeys from the misty mountains of Ecuador to the foothills of Columbia. In Real Terms the only extra thing consumers get for buying Fair Trade Coffee, is the story of the well-paid farmer, and yet this story, and others like it are enough to justify 40-50% price increases on the product.

    Like the $6 glass of wine, the $6 cup of coffee will never work as a daily indulgence. The $14 coffee experience, however, might work as a luxury item.

    But then maybe not.

    • 03/25/2011 at 1:45 pm #

      Read this post awhile ago, Sam, and still think it’s a great one.

      The story of coffee absolutely matters and deserves a more accurate telling on all counts. Is that the best way to justify higher costs of coffee, though?

      Sincere, efficient, and professional service is what will get people coming back and paying more. Sometimes that will mean telling about how a Panama pulped nat differs from a washed Yirg, talking about progress being made by the coffee buyer working with the producer at origin, etc., but other times it means working harder and faster to serve a beverage.

      I’m sure you guys at Why Not? have hit on this point–can you link to posts on here where you’ve mentioned importance of service? For others, James Hoffman has put quite a few smart thoughts out there over at his blog as well.

  6. frustrated barista
    02/08/2010 at 3:25 pm #

    Have you noticed that the majority (meaning more than 50% so don’t get all technical) of the posts on this blog are guys talking about coffee and baristas and management and there is a definite lack of women’s input? Maybe an issue in keeping committed, hard-working, and talented baristas is gender relations at workplaces and sexist, patriarchal, and alienating environments for women working as baristas in workplaces dominated by men who talk in very exclusive, alienating ways? Who are usually considered the “best” baristas? Who make up the majority of the barista teams, in the long run, at the “best” coffeehouses? Who make up the majority of the “talented” baristas at competitions? I see a lot of women doing the gruntwork at smaller coffeehouses that are considered lower quality (like Starbucks, drive-thrus, other chains, etc) or not the “best” coffeehouses, and yet women are poorly represented in the community of high-end coffee such as competitions, etc. I also see a lot of women working their asses off at coffeehouses, never getting credit for their work, and consistently being looked over in favor of male coworkers who make “excellent” or simply “better” coffee and talk endlessly to cutomers about coffee while never shouldering their portion of the gruntwork (cleaning, stocking, etc).

    So, if you’re going to problematize why its hard to find and keep excellent baristas, maybe men who dominate coffeehouse workplaces need to analyze their roles and actions, take notice of who stays on in the long-run, and how coworkers can work on making workplace environments more welcoming and less alienating and exploitative.

    • Sam Lewontin
      02/08/2010 at 7:07 pm #

      Hi, Stephanie.

      Thanks for the critique! It is certainly worth noting that this blog—like any piece of writing—is inherently biased by the circumstances of its authorship. While I can’t speak for my co-author, I’ve chosen not to address gender issues in the coffee industry here because I don’t feel qualified to address them in a way which does them justice.

      I look forward to reading more of your writing on the issue!

    • 02/08/2010 at 11:43 pm #

      Usually when reading comments like this, I skip them and refuse to have to be the one to confront the issue at hand, but since this IS my blog, I’ll weigh in. =)

      To start out with, I AM GAY. This doesn’t make me a sexist. Also, it doesn’t make me a patriarchal barista who’s out to exclude women from making high quality, artisan crafted coffee, and I refuse to let someone drag gender into an issue that’s based purely on how we can help fairly compensate all involved in the seed-to-cup process while protecting the artisan craft of high quality coffee, regardless of their gender.

      A while back, I thought about writing a blog for another website– as I did not have my own yet– on the number of homosexuals in coffee. I did some research and realized that I was crazy, and unappreciative of my heterosexual counterparts.

      The only sexist experience I’ve had in a cafe environment as a barista was in a cafe I worked at where EVERY employee in 7 years, except me, was a female. Every new hire we had while I was there was female. EVERY coffee shop I’ve worked at has been owned, or co-owned, by someone who happens to be a female. I might point out also that the majority of the more-than-extraordinary-baristas I work with are female; most quality focused cafes are worried about bigger things then what’s in your pants.

      Also, I’d like to point out an amazing coffee woman: Sarah Allen (editor of Barista Magazine). If you subscribe to Barista Magazine, then you’ll know that last year’s Anniversary Issue (April/May 2008) was “Ten Incredible Women in Coffee.” Yet, if the lovely Sarah Allen had decided to do “Ten Incredible Men in Coffee,” there’d be an uproar. Seems sexist to me… But great women in coffee would rather work on better things than tearing down their male counterparts.

      If you’d like the Anniversary Issue of Barista Magazine that features “Ten Incredible Women in Coffee”, I will more than gladly order one and have it sent to you. Please e-mail your address to me at BaristaAlex@gmail.com and you can be reading it by next Tuesday while sipping on some El Salvador Finca Kilimanjaro (produced by Aida Battle, a female).

      For The Rest of the Readers:
      Thank you for all of your POSITIVE contribution. I’ll weigh in on the rest of this blog once I finish this Cosmopolitan.

    • 11/06/2010 at 9:51 pm #

      About half of my heroes in the specialty coffee world are women. Wendy De Jung, Andy Trendell (spelling?), and Katy perry come imeadatly to mind. I think coffee is more of a meritocracy than many fields. I’m just saying.

      However I don’t think that reflects gender issues at large which effect all work places.
      It’s complicated and I am just another man shouting into the vacuum of the Internet within my chosen feiod.

      I guess I somewhat agree with you in that generally women are undervalued (paid less) in the American workforce. I don’t however see how it’s relevant to the concept of consumers paying legit prices for coffee.

      Sorry if there are typos. On teh iPhone.

      • 11/06/2010 at 9:53 pm #

        Ha. Heather. It’s late. Shoot. I’ll have 1 foot sandwitch please.
        Sorry everybody.

  7. 02/08/2010 at 9:55 pm #

    I think the pivotal point in the answer to the article’s big question is this statement:

    “At the café, a barista with years of training—of experimentation and learning and dedication to their craft—tames the assorted volatile and complicated processes of brewing to distill from this seed a deep, multi-faceted, delicious espresso.”

    I would estimate that only 5% (if that) of the cafes I’ve been to would fall into this category. I would pay up to $10 for an awesome coffee. When I moved to where we now live I tried about 20 cafes before I found one that truly cared about espresso and continual improvement. The sad reality is that most cafes are just there to make money and I’d actually them $4 NOT to drink their coffee.

  8. 02/08/2010 at 9:57 pm #

    Sorry, missed a word in my the last sentence – it should have read: “I’d actually pay them $4 NOT to drink their coffee.”

  9. Kasey Klimes
    02/09/2010 at 11:27 am #

    “…women are poorly represented in the community of high-end coffee such as competitions”

    …with all due respect, Heather Perry is the only two-time USBC champion and the only American to crack 2nd place at WBC. My co-worker Morgan Smith (a young lady) placed 3rd in this year’s MWRBC (beating me, by the way). Morgan and I’s competition trainer, Holly Bastin, is a certified WBC judge and yes, a lady. Laila Ghambari placed 3rd in this year’s NWRBC, Sarah Dooley is at the forefront of raising the bar in Seattle’s coffee community, Lucia Ortiz produced my morning’s cup, Las Mercedes…. etc. etc.

    Granted, women may not be quite as common in coffee as men, but the ones that are in it are blowing the rest of us guys out of the water.

    oh, and Sam, as I expressed to you over the weekend, I couldn’t agree more 🙂

  10. Jay
    02/09/2010 at 7:19 pm #

    Hey Guys,
    I apprecaite the sentiments and agree w/most of your points but wanted to point out that the introductory paragraph is incorrect. Coffee trees are fully mature in 4 years, and they begin producing fruit at 2. Brazilian coffees are commonly used in espresso blends and are picked mechanically (Not exactly painstakingly IMHO). Processing is (unfortunately) not typically attentive (Not entirely the fault of the growers.) High quality is the exception and not the norm…$3 per pound is a great price, but unfortunately a very rare one paid for green. Depending on the market, net to the farmers is closer to $1/lb for most specialty…I would gladly pay $4 or $5 for an espresso but in my experience 90% of the shots I’ve had are not even close to their full potential. (If you regularly clean your machine – more than once a day, then you’re already better than 90% of the shops out there.) Keep on bloggin’ and cheers to good coffee!

    • 02/09/2010 at 7:47 pm #

      Opening paragraph amended– thanks for catching me on that! I’m certainly assuming some preconditions; I’d be the last one to ask that a customer pay $4 (or $2, for that matter) for a mediocre espresso, regardless of where in the chain that mediocrity comes from. It seemed apt to note right off the bat that the vast majority of espressos cost the same amount, regardless of their quality or the cost of their constituent parts.

      Thanks for reading, and thanks again for the great feedback!

  11. Scott Davis
    02/18/2010 at 4:53 pm #

    Bravo Sam! Encore!

    I appreciate the honesty and the excitement. I would love to design a cafe along these premises, and perhaps we can sit a few times and have a few cups and discuss. I still have a lot to learn about everything beyond the cafe’s walls, and this blog makes me think about what is the proper allocation of revenue along the whole supply chain. I’m with you – let’s figure out what it would cost in ideal scenarios, and try and make it happen.

    A little birdie told me I have more of your writing to look forward to. Can’t wait.


  12. 07/20/2010 at 3:03 pm #

    Important, very important post.
    And very worthy reactions as well.
    so, Thank you!

    These questions and points are nothing new to me. I guess to many they are not. But who dares to go all the way? And why do we not?

    I guess most are not at all confident in this approach and thus affraid the consumer or better said, the customer will not go along.

    In my view we have several problems.
    – Some (no names!) are charging much more than average, but do NOT deliver higher than average quality, so how is the customer going to believe that higher price could indeed mean higher quality?

    – much too many things could and (often) do go wrong between the raw product and the cup. To blame could be the roaster, the café owner or the barista. That means, the possibilities of making mistakes leading to a bad cup are in my view immense. Is there a price that we could honestly charge and the customer is willing to pay, if we are going to secure the deserved earnings for roaster, owner, barista AND grower in some 3rd world country? In other words, are we honestly able to charge enough so that the farmer earns enough and the field worker earns more than 50 cents a day?

    – when setting the prices for coffee at these international meetings, none of the producing countries are at the dealing tables, but the rich importers. Are Ethipians or Ecuatorians allowed to set the price of BMWs and Mercedes Benz cars instead of the German producer?

    – compared with the coffee preparation, there is nothing that could go wrong when opening a wine bottle and serving it. Wine is nevertheless much more expensive (per glass) in Restaurants and Cafés. Why this discrepancy?

    In other words, we have ALL reasons to charge much more. How can the customer be informed in such a way, that he/she understands the “new fairness” of a price increase?

  13. 07/20/2010 at 3:21 pm #

    …and one more thing
    when I make an Espresso or any other type of coffee, I do it, I prepare it with body and mind and talent and experience ALL focused on one thing alone: it must be good.

    That the customer is perhaps not able or not interested in how my coffee tastes is a secondary thing which has not at all to interest me, while I am preparing his/her cup.

    Hence our focus ought to be the price based on its quality – covering production in the country of origin and preparation elsewhere. Our focus should never be that the customer has low expectations anyways.

    It all revolves around our abilities to make good coffee and our responsibility to do it well.

  14. 11/06/2010 at 9:31 pm #

    I basically agree with everything in this post. When my company was trying to justify paying the recently raised green coffee prices (for the most part I think that if the trend toward a 2.50 or higher C market price is sustained this is good for farmers and thus good period.) I mused on an old anecdote.

    There is a jeweler and he has a series of necklaces that are just not moving. He asked his assistant to lower the price by 50%. The next day he comes in and they are all gone. “well I guess I was just charging to much” the jeweler says. “what do you mean?” replies the assistant, “I raised them by 50% just like you said and they sold out.”

    I know this represents something possibly menacing starbuxian even but what I’m driving at is that we paid for the new high priced but also high quality coffees we had to buy, put them by the cash register and people bought them. And I am fine with that. Those people bought a great coffee under the presumption that it was exceptional and it was in fact exceptional. Just because some of that expectation was fostered by a steep price tag and good placement doesn’t change the fact that they left the cafe with great beans.
    I say charge what it costs and make it cost what it’s worth.

  15. 08/10/2011 at 4:54 am #

    Hey Guys,
    I apprecaite the sentiments and agree w/most of your points but wanted to point out that the introductory paragraph is incorrect. Coffee trees are fully mature in 4 years, and they begin producing fruit at 2. Brazilian coffees are commonly used in espresso blends and are picked mechanically (Not exactly painstakingly IMHO). Processing is (unfortunately) not typically attentive (Not entirely the fault of the growers.) High quality is the exception and not the norm…$3 per pound is a great price, but unfortunately a very rare one paid for green. Depending on the market, net to the farmers is closer to $1/lb for most specialty…I would gladly pay $4 or $5 for an espresso but in my experience 90% of the shots I’ve had are not even close to their full potential. (If you regularly clean your machine – more than once a day, then you’re already better than 90% of the shops out there.) Keep on bloggin’ and cheers to good coffee!


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