Retail coffee prices

Spjarli_Coffee

I would be interested in hearing about the prices people are paying for their (whole bean) coffee. I have just been looking at the prices on a Sydney website and just about fell out of my chair when I saw their price for roasted coffees. Would be interested in the comparisons between cities and within cities. Personally, I have been buying my beans for between $20 - $24 here in Melbourne, although there are prices of up to $36. And no, there does not appear to be a correlation between price and quality; my favourite roasters sell at the lower end of the price range.
:D

john

Spjarli We retail roasted beans for between 25 and 30 bucks. Out of curiosity, are your beans stamped or identified with: a use by date a roast date a packaged date JD

over_extracted

$24.00 but i do get good roasted beans.by the way i was reading an iternational coffee web site and you can buy a ton yes 1000 kilos of green beans for us$600 dollars now thats a good profit margin for our friends the roasters.

FreshCoffee2

Hi OE, afraid your (their) costings are way way way way way way......OUT, bearing absolutely no relationship to real world prices paid by roasters over here. Nor do they (atleast in your post here) make any attempt to try and correlate this so called information to real world costs incurred by the roasting industry that this kind of comment appears to be aimed at. For example even if the info was correct, the cost of roasting packaging and distributing the end product may well amount to $15.00 per kilo (that is, the cost of "running business"). Unless those reading the article from where you lifted the information are also  given all the other related facts, the info is not worth a cracker and only serves to (perhaps maliciously) hurt the industry that the comment appears to be aimed at. The comment is kind of like noting that petrol is $1.00 per litre but I pay close enough to $10.00 to travel about a kilometer in the taxi. What does this prove??? Not much I'm afraid other than on face value, to unfairly denigrate taxi drivers. Cheers, FC.

Spjarli_Coffee

Perhaps a clarification should be added to my original post. I am only interested in retail prices for coffee beans purchased directly from roasters, not through a second retail outlet and certainly not supermarket coffee. I'm not interested in the prices of the big players but your local roaster. John, in answer to your question: Out of curiosity, are your beans stamped or identified with: a use by date a roast date a packaged date No to all of the above. I buy coffee once or twice a week for my local roaster who roasts daily and packages upon purchase. They probably last a week maximum once in my kitchen. ;D

sharkboy

I usually pay about $32 a kilo from a local roaster. It can be as much as $45/kg for single origins. When I first heard that grean beans could be bought for around $8/kg I started doing the sums in my head and thought to myself that coffee roasters should all be millionaires, but then I thought about it some more. I'm never really sure just how much is paid for green beans. I'm sure it varies with quality, supply etc Something else I hadn't factored into the equation was the moisture lost during roasting. Approx 20% (quick net research) of the green bean's weight is lost during roasting. So with all the miscellaneous cost factored in, roasters aren't making quite as much profit as I first thought. I'm sure some of the less scrupulous roasters out there could use cheap beans and or robusta beans and pump out a product with bigger profit margins. Although I don't know how long an informed marketplace would continue to buy from them...

Unknown

Great to see somebody doing a bit of research into the real costs of roasting.  The net profit on quality roasting is not as high as many might think.  We also pay for wastage, depreciation on very expensive roasting machines that can cost up to $120,000.00.  Pop rent, insurance on this flamethrowing equipment, wages, etc. and $32.00 per kilo is a very reasonable deal for the consumer.

Unknown

Dear Coffee lovers.. Just a quick note to the 2 roasters in this forum, you know who you are...In regards to the cost of roasting is not the big profit margin people think... MY BUM it isnt.. be honest tell the truth..it wont hurt your end market thats for sure..

pab

what about the cost of converting the roasted coffee into instant!!!

FreshCoffee2

Marcus, am afraid you have not understood the content of my previous post. In any case everyone needs to make a good profit, no matter what industry they are in, otherwise they go down the drain.   Selling prices are governed by   a) the cost of running a business and   b) competition, and   NOT by placing a simplistic profit margin on top of the incoming cost of a raw material.   I dont really think any industry does that (place a simplistic margin on top of the cost of a raw material)  now do they?   In fact I understand roasters GROSS profit margins on the cost of the raw material are far smaller than those enjoyed by the cafe industry. Cheers, FC.

lars

I'm afraid i just don't believe this 'crying poor' FC.   If anything the cost of raw materials has been underestimated by the post which started this thread.  As you know, the price that most roasters pay for their green beans is more like $5 per kilo than the $8.00 per kilo that Sparjli suggested. So even taking account of fixed costs (investment in roaster, warehouse, etc) & minimal cost of labour etc, $24 per kilo would seem to be a great mark-up compared to most businesses, and when you consider that in NSW prices are often a lot higher than that, I honestly can't believe you put your profits margins close to that of a cafe - many of which run at around 2-3%! -L

Spjarli_Coffee

Now stop right there Lars because you're starting to misquote me! My original post was concerned with roasted coffee, not green beans, and I stated retail prices of $20 - $24 per kilo so I'm not sure where the $5-$8 comes from for green beans (I do not know what the cost is). I suppose I started this post because I was interested in the price differences for roasted coffee and why these prices vary. What are the variables in determining the selling price? I certainly am not having a go at anyone, we live in a free market society after all. I realise the price of green beans is just one cost, although it is interesting to see the same bean retailing at differnt prices, so perhaps an example may illustrate my point. In the last month I have purchased Bali Gunung Batur beans from 3 different roasters here in Melbourne. All were good but the prices charged were $24, $30 and $34.

Reschsmooth

It is an interesting discussion. Forsyth's in Naremburn (Syd) have quite a range of beans with prices ranging from about $28 - $38/kg. Fresh, perhaps you should post a copy of your 2003/04 accounts for Lars and others to get a better understanding of the TOTAL costs in running the business. All too often, people think that: COGS $8, Rent for premises $5, Depreciation of machinery $7, etc - total cost per kilo - $20. People forget that the proprietor is allowed to pay him/herself and make a profit. Anyway, it's after 3:00pm The way it was

FreshCoffee2

With regard to Quote: "...I honestly can't believe you put your profits margins close to that of a cafe - many of which run at around 2-3%!...."     I never did!       I have been talking GROSS profit margins only, whilst it appears you are trying to compare what you apparently think are high GROSS profit margins in the roasting industry, with very small NETT profit margins in poorly run cafes...this is very misleading dont you think?     Anyone making 2 to 3 % needs to close and go back to working for wages on the council. So taking the quote in the context in which it appears to have been intended, and that is to use NETT profit figures for poorly performing cafes to discredit coffee roasters because it appears to someone outside the industry that their GROSS profit is too high...     Let's take a real life situation and say a cafe buys their coffee at wholesale, on average, for about $20.00/kg. They produce with that kilo, sales of around about 100 cups of coffee, and at city prices, these cups sell for about $3.00 per cup. I guess that makes the cafe owner a filthy squillionaire because he turned $20.00 into $300.00....I believe that's 1,500% GROSS profit on primary raw material.     A) The facts are "strictly" correct but even blind freddie can see this is a simplistic and misleading line of thinking, SO WHY ARE YOU APPLYING THE SAME LINE OF THINKING TO THE ROASTING INDUSTRY?     This is off topic here fellas so if you really must have a go at roasters for being filthy capitalists, suggest you could start another thread where you can knock yourselves right out.     Cheers,   FC.

admin

Hi guys -just checking in from India and have observed this latest bout on Australian prices - personally I think the price of raw materials as delivered to the grower is of equal or greater long-term importance - see my resurrection of 'Fair trade' in the Trade page thread. However, I have to say Fresh that i don't agree that this is 'off topic' - and you shouldn't take this personally of behalf of the roasting industry in general. While there is clearly quite a degree of confusion between nett and gross profit, it seems like there is a genuine interest in understanding the equations...would it be possible for you to give a very quick & simple run-down of how it works eg say it is $5.00 per kilo for raw materials (ie green beans) and fixed costs would be $x? per kilo, variable costs $y per kilo (eg cost of person roasting is normally $1 per kilo) and then sale price (let's use Lars' figure of around $24 per kilo (even though I understand it's usually quite a bit higher in Sydney). That way, people might be able to see a tangible example of how it pans out...?

john

HOLD THE PHONE I think that before making assumptions about profits etc. one should get their facts right. Also, in many cases there is a middleman or middle person in the equation from the roaster to the retail level. I buy my beans from a roaster and then put my margin on them before reselling them. I do not have any complaints about my pricing which is between 25 and 30 bucks. My customers love my beans and appreciate my service, which I charge them for. JD

FreshCoffee2

Hello Admin,         afraid I have to respectfully disagree as I do happen to think all this about profits has gone right off topic from my understading of the original post asking what retail clients are paying for coffee.         Secondly, individuals who wish to question others about their financial affairs should first reflect upon how they might react if a total stranger came to their own door and demanded to be allowed to take a peek at **their** financial affairs or make uninformed judgements about the level of profitability in their profession. I think I know what the reaction might be.         Thirdly, it would serve no purpose to generalise about the perceived running costs and resultant profitability of an "ideal"  roasting business. Individual businesses, in individual markets, sustaining individually differing costs and competition, being run by individual directors with individual levels of available start up and running capital, with individual levels of turnover, and individual leves of DEBT, require individual levels of profitability to be able to continue to function and rightly, earn a decent living for the owners.         You cannot generalise that.         Lastly, coffee roasters with huge turnover can afford to work with much lower levels of gross profit on the cost of the raw beans but generally speaking are not always well thought of in these "coffee head" type circles in terms of quality. Much smaller companies with generally very small coffee turnover require to make much higher gross profit otherwise they simply cannot earn a living and remain viable....there is no point in having made 10,000% percent gross profit on the initial cost of the beans if you only sold 1 kilo for the whole week. Did you pay your rent?         So, clients make a conscious decision to pay more for what they perceive to be a fresh roasted high quality product which is usaully purveyed to them by smaller, "specialty" roasters.         If you therefore want to continue to be able to get your really good fresh roasted hiqual coffee from the nice local bloke with the specialty roasting business, rather than have to make your selection from the vastly smaller range, cheaper but nicely staled and lower quality offerings packaged for you by the very large supermarket brand roasters and made available down on the supermarket shelf, you will have to find something other than the nonsence of the perceived level of profitability of your friendly supplier, to worry about.   Cheers,     FC.

admin

Hi guys - back from India - Fresh, I have no particular interest in having your personal business details on the forum, however I believe a lot of people would be interested in how (in general) the figures for roasting pan out...however, if for whatever reason you don't wish to post something along those lines, obviously that's fine. John, I'm confused - HOLD THE PHONE?? - Que? -Admin.

FreshCoffee2

Hi Admin, re: "....I believe a lot of people would be interested in how (in general) the figures for roasting pan out..." ok, on the total processing, around 20% weight of the original raw beans is lost. We roughly budget around about $1.00 per kilo for the cost of gas for roasting however this varies depending on type of gas, location, and type of AFTERBURNER (smoke pollution eliminator), as these affect cost/cubic meter of gas and its useage. I have not done an actual analysis of the actual useage/cost of gas per kilo of coffee, as it is just one of many variable overheads on the P & L (Profit and Loss Statement). You want to roast, you use the gas irrespective of cost. The afterburner uses around 3 TIMES the amount of gas that the actual roaster uses. Most smaller johnnycomelately roasters (woke up yesterday morning and decided to go into coffee roasting, bought a small, cheap roaster from Greece / Turkey, and threw a shingle up next to the door saying "Master Roaster") do not have anti pollution devices fitted and their roasting cost is therefore significantly cheaper than that of roasters that are doing the right thing. Those running coffee roasters WITHOUT antipollution devices should be reported to the EPA and closed down...simple as that. The above PLUS, the overall cost of running the business around this. This cost is the variable that "varies" from business to business as already outlined in previous posts and cannot be generalised. A simple example of this would be how many employees you have on the books compared to someone else, what location you are in (cost of rent) and whether your roasting plant and equipment is financed and what the finance costs you... In addition, many roasters are importing equipment and running service operations. This is all factored into the overall running cost. Cheers, FC.

Reschsmooth

Fresh, don't forget that you, as the proprietors (who generally put their own assets on the line) are allowed to get paid for what they do. Despite many outsiders expecting you to operate as a charity. Different industry, but I often get people saying to me, when I quote my cost of, say $2000 for providing my services, that X down the road quoted $500. The best trick for me was to walk them downstairs, point to the nearest bank, and tell them that they can provide 'advice' for free, and whilst you wait also. People often want the best, and pay nothing for it. P