Money, Money, Money…must be funny, in a rich man’s world

It’s that time of year, when I start to review what our prices look like, and whether I need to make any changes. I do this every six months or so, and as some of you will remember, I needed to do a price increase in March of this year, due to increases in both the coffee industry and the cocoa industry. Instead of doing massive price jumps, I only increased our prices by 10-20p, but due to the increases in employer NI contributions and the increase in minimum wage brackets, I am afraid that I will need to make a couple more changes over the next month or so. 

On a positive note, the removal of toasties from our menus and the introduction of more baked savoury goods, has seen a significant reduction in food waste. The new products have been met with positive reactions from customers, so we plan to continue with this new approach. 

As with all our previous price increases, I only plan to increase prices by 10-20p, and keep as many products as they are, where possible.

Back in March, I shared a breakdown of how much a cup of coffee costs in 2025, and it was met with a lot of positive feedback, many from customers and other coffee shop owners who were also feeling the pinch. I’ve altered it slightly to reflect the new prices we will be setting and also gone one step further and created a breakdown for one of our cakes as well.

A Large Latte will now cost £3.90 to the customer...

It costs this to produce it:

- Espresso 32p 

- Milk 50p

- Cup & Lid 25p 

- Staff 81p 

- Electricity 24p 

- Water 5p 

- VAT 49p 

- Rent 43p 

Total: £3.17

Total profit: 73p

This breakdown only takes into account things directly associated with the cup of coffee in question, I chose a Large Latte as it's our most popular drink, and quite easy to calculate.

However, there are many other costs that don't get taken into consideration. Such as:

- shop insurance - a necessity for any business

- PAYE, employers NI and pension contributions

- general maintenance of fixtures and fittings  

- waste removal – we pay to have our waste collected and recycled

- advertising and printing – our loyalty cards, coffee cards, menus, advertising on local maps, sponsorship of local events (where possible)

- internet/phone bill – we need the internet to run our till, card machine and music, as well as being able to offer free Wi-Fi to customers

- the cost of a music license – we pay over £600 a year just to have music playing in the shop, as without music a coffee shop has a very different atmosphere!

- the cost of the POS system -without a till, it would be very hard to keep everything in order

did the customer pay by card or cash? banking charges for using card machine (1.75% of sale) and charges for depositing cash at the post office (0.5%)

- did the customer use the loo? That's loo roll and cleaning to account for

- did the customer have sugar?

- other disposables like carry trays, napkins, stirrers, cup sleeves, straws

- wages for staff to clean the shop throughout the day and at the end of the day 

- the cost of products used to clean.

That 73p per cup has to cover all the other considerations you see above. As you can see, it's all quite a lot to be totally honest with you, but we make it work. Yes, there are some products that have a higher profit margin than coffee, but not by much. Coffee is seen by many as a great money maker, as it generally has a high gross profit margin – but this is if only the cost of ingredients is taken into account. If you purely look at Espresso + Milk = Cost, then it will look like the greatest money maker in the world, but as you can see, that just isn’t the case.

Now for the cake - I’ve chosen Ginger Slice, as it is without doubt, our most popular sweet product. This took a bit more time to calculate as I make a batch rather than individually like with coffee, and I also make our cakes at home, so use my own home oven, electricity etc.

Ginger Slice will now cost £3.70 to the customer, and it costs this much to produce it:

-  Ingredients 45p

- Oven/Hob use 5p

- Wage to bake 65p*

- Staff cost to serve 81p

- VAT 45p

- Rent 43p

- Electricity 24p

Total cost per slice: £3.08

Profit : 62p

*It should be noted that I don’t actually pay myself for my time when baking. This is just an illustration of what it would cost if I did pay myself minimum wage. As a business owner (and I think I can speak for many other small business owners out there) I pay myself far less than I pay my staff, preferring to keep as much money in the business as possible. By working in the shop myself, I am not earning more money, I am saving money. By making our own cakes and baked goods, I am saving on buying them in, which will be sold at a price to account for the baker’s time, as well as the ingredients and whatever else.

I’ve used the same staff cost, rent and electricity figures as the coffee calculation, and I realise that if someone bought a coffee and a ginger slice, it would mean that these costs would be halved, but it’s only an illustration, and should not be taken literally. The other considerations discussed above, regarding costs that haven’t been taken into account, also apply here too. 

I think it is important to be honest, and I always try to be as honest with our customers as possible. It doesn’t need to be stressed that the hospitality industry is facing tough times, and our customers are more important than ever before. Without our customers, we wouldn’t be here, it’s that simple. So please, know that this isn’t to make myself rich, this is a bid for survival.