The price of a small (illogically called the ‘Tall’) Starbucks Cappuccino is now £2.05. The Venti now costs £2.65 (2008 prices)
This year the price of Starbucks drinks have increased by more than the rate of inflation.
Costa Coffe and Cafe Nero have both kept their prices below £2, but, industry analysts argue that it is highly likely they will be tempted to increase the price of their drinks.
Unlike alcoholic drinks, coffee is not subject to excise duty. Therefore, how can coffee companies such as Starbucks justify such as high price?
The Price of a Cup of Coffee
- Milk 6%
- Coffee 2%
- Labour 18%
- Rent 13%
- Admin 26%
- Cup / sugar / lid e.t.c 4%
- V.A.T. 15%
- Profit 14%
It is interesting that the smallest part of the price is the actual coffee beans. Even if the price of coffee doubled, it would only have a negligible impact on the final price of coffee.
In recent months the wholesale price of milk has increased significantly. This is due to both growing demand (including demand from China) and a shortage of supply from the British milk industry. Therefore, this has contributed to higher costs.
Rent is a big factor, especially in city centres. Also one feature of coffee drinking is that there is quite a low volume. People may buy 1 coffee and sit for other an hour.
In my personal experience, I find Starbucks coffee a little disappointing. (though on a recent trip to US, I had a really great dry cappuccino – so quality does vary) Generally, in UK I prefer the taste and quality of Costa Coffee and Cafe Nero. I don’t object to paying £2 or even £3 for a cappuccino, but, I would like higher quality standards.
Buying Office Space
In this era of laptops, one of the main attractions of a coffee shop, is that it makes a break from working at home. Often I take a laptop, and write for an hour. As much as buying a coffee, I’m renting office space. I’m particularly fond of a nice Blackwells cafe (Cafe Nero) in the centre of Oxford. It’s a great cafe because it’s in a bookshop; there isn’t irritating music and there is a literary vibe which helps with writing.
To be honest, if the price of a cappuccino increased from £2.30 to £3.30, I’d probably still go there.In that context the price of a starbucks isn’t a rip off, if you’re getting a nice environment.
- By the Way your welcome to buy me a coffee ;)
- The Economics of the price of Coffee
- Starbucks – about
- Starbucks Coffee at Telegraph
About The Author
Adding my pennyworth to the floor…I agree that Costa coffee tastes better…but you dont have all the options that Starbucks offers. For those of us who want the latte without the calories … I am perfectly content with a tall, skinny latte with sugar free hazelnut syrup extra hot….and I just can’t seem to get that anywhere else. However when it comes to a basic coffee Costa wins hands down every time.
I’ve also just bought one of the Starbucks cards. I get a free first drink and I get all my syrup shots or extra coffee shots free. Keeps the cost down that teeny tiny bit. Just dont get suckered into buying more just because you have a card!
Vernom,
Yes, I agree, Starbucks is overpriced in terms of the cost of the actual product they sell — medium-quality coffee and materials produced cheaply in third-world countries. However, you have to remember that the customer is not always a “sucker”. They know Starbucks is expensive, but they pay for the ambience, for the experience. Not only that, but an emotion. Whether the pleasure be “real” (they genuinely enjoy the taste and experience of drinking a Starbucks coffee) or “fake” (they are driven to a store because of peer pressure, advertisement or for prestige), they, to some extent, are buying their happiness. Can you honestly say that genuine happiness can only be bought at less than £2 a cup?
lets see how many of these coffee outlets are left at the end of 2009. Of course these joints are a rip off and as for their “experience”, half of em didnt exist 10 years ago. they set up primarily because a cup of coffee is peanuts to make, you employ cheap minimum wage young people, give the places a snazzy name and feel and just watch the suckers queue up for their overprice cup of coffee. all these joints are a luxury no one needs, just want. I predict fewer of them by the end of 2009 when people truly do wake up and smell the economic coffee.
Is the price of Starbucks coffee a rip off you ask… I have seen on this website you have written some article on supply and demand and therefore the answer should be quite obvious.
Starbucks coffee as sold from their many outlets which need to cover the cost of each shop, packaging, staff, etc etc.
Remember when buying their coffee you are also buying a brand and also their experince – that costs money so no it is not a rip off they have simply put a value on their product to distinguish themselves in the market.