The Price of a Flat White
Words by Jonny McKenzie - Founder and Cocktail Maker at posBoss
Over the last 3 months we ran a series of evenings across New Zealand to discuss the hot topic of: The Price of a Flat White.
We were fortunate to have 6 incredible guest speakers share their knowledge on the coffee industry - from international pricing to wholesale bean market price changes. Having these details helped deliver evenings of highly engaged conversation from over 100 industry operators and suppliers about coffee prices, direction of the market and what we should be thinking about.
The top three points that came from our panel chats were:
What are we charging?
What does it cost to make?
Who’s responsible for educating the customers - Suppliers or Operators?
What are we charging?
To start each evening we pitched the question to all in attendance - ‘What do you charge for a Flat White?’
Wellington seemed to be a good 50/50 split between $4 and $4.50 for a standard Flat White with a few sitting at $3.50 (who decided that night to update their pricing the next day).
Auckland was sitting steady at $4.50 with one guest, Saskia from Red Rabbit, who told us her experience of raising the price from $4.50 to $5 - a new price that is reflective of the passion and quality that goes into their coffee.
Christchurch sat at $4 with a number of attendees talking about the use of Early Bird pricing at $3.50 to win the customer.
It goes without saying that the tone of all three events was that the current $4-$4.50 feels light compared to the time and effort that goes into making a coffee in today’s market. The question “Are people prepared to increase their prices to feel more comfortable?” was tabled; and the outcome is that no, operators don’t feel they’re in a position to charge any more than what they currently do.
Which lead us to the next key discussion point...
What does it cost to make?
Frank Hsu from Franks and David Huang from Black & Gold delivered compelling presentations on what it currently costs to serve a Flat White. With increases in wages, ingredients, equipment and competition, the Flat White is no longer an item that can be taken lightly.
Customers now expect to see the latest coffee machine holding centre stage at your counter - a sign of quality and confirmation that you, the operators, know how to make a coffee. Next comes the brand of coffee you’ve contracted with, and then strangely, the look of your baristas.
All these expectations are placed on operators to invest in so that they can then have the opportunity to make the patron a Flat White. Once the Flat White is ordered then comes the extra costs to show that you are being socially conscious… for if they can’t see it they won’t believe it.
Having heard from these two coffee legends talk about what has happened to the market and the demands that have been placed on operators to serve a Flat White, the worrying notion from each room was that less than 15% of the attendees knew what it cost them to make a Flat White. This insight to how we price our menus is concerning for many reasons.
Firstly, we all pay different prices for our coffee beans.
Secondly, we all have different contracts for all other ingredients that go into making a Flat White e.g. milk, cups, take away cups and so on.
And finally, as operators you decide the level of training that you put into your team to deliver different levels of quality. If Flat White prices are all the same across the market, then how does one inform the customer of the quality and passion that goes into your Flat White?
Who is responsible for educating the customer?
The point was raised as it relates to the continuous challenge that all operators face - educating their customers about the quality of the bean they have decided to serve, and why.
In the first instance it feels obvious that this responsibility should fall on operators to educate customers as in the end, they are their customers. The challenge here is the extra cost of telling such a story is and why tell this story above the other stories that make your business unique?
The coffee you have chosen to serve is not unique to your cafe however you are guided to tell the story on the suppliers behalf.
Information cards are supplied with tasting notes and stories of the origin. Trainings are offered to help ensure the Flat White is made to match the profile of the blend. General help about the running of your business is even offered by many great coffee suppliers, as it is in the best interest of both parties that you do.
So with all this support and knowledge being delivered to yourself and staff, what are we doing to make sure this information is being passed on and delivered to those who are drinking the coffee? How do we find the time, budget, and opportunity to pass on this story? Who should be educating the drinkers what it costs to make a Flat White with this bean? & why has the Craft Beer market managed to do it so well?
In Conclusion
Having travelled the country and participated in all of the conversations, it is my conclusion that we all need to be more aware of what it actually costs to serve a Flat White and then be confident in charging a price that reflects this.
You may work out that you make good margin on $3.50 as you sell coffee as part of a bigger offer. You may work out that you need to charge $5 because the number one item that you sell is coffee and this is why you focus on quality of product and up-skilling your team. Whatever the price is, be comfortable that it is what you need to charge to keep your doors open, sales happening and customers returning.
We want to say thank you to everyone who attended the evenings, shared their stories, thoughts and insights.
A special thank you to Mike de Lang - Seize, Frank Hsu - Frank’s, Aymon Mcquade - One Eight Recruitment, Dove Chen - Grey St Kitchen, David Huang - Black & Gold Coffee Eatery, & Henrik Ryler - Langdon Coffee Merchants for helping us put these evenings together.