Understanding the true cost behind making a cup of coffee can be quite revealing, especially for those who cherish their daily caffeine fix or for café owners aiming to balance their books. The common belief is that a cup of coffee brings in substantial profit, but it's essential to delve into the specifics. From the price of the coffee beans and milk to the cost of labour and other overheads, numerous factors play a role in determining the final profitability of each cup. In this piece, we will break down the various costs involved in making a regular flat white and explore how these factors influence the café's bottom line. So, how much does it cost to make a cup of coffee? Let's find out.
Ingredient Costs
When calculating how much it costs to make a cup of coffee, the primary components are the coffee beans and milk. For a standard flat white with a single shot, you'll need about 12 grams of coffee beans. At an industry average wholesale cost, this comes to approximately 38 cents per cup.
Next, there's the milk. A regular flat white typically uses around 200ml of milk. If you're paying $4.00 for a 2-litre bottle, that's $2.00 per litre, making the milk cost about 40 cents per cup.
Additionally, don't forget the cup and lid, which usually cost around 20 cents together. Summing these up, the total ingredient costs for a single cup of coffee come to roughly 98 cents.
Labour Costs
Labour is one of the most significant costs in making a cup of coffee. Consider a full-time, permanent barista working an 8-hour shift from 6 am to 2 pm. The award hourly rate is $27.17. When adding superannuation at 11%, holiday pay at 7%, sick pay at 3%, and workers' compensation at 3%, the total cost to the business per hour is $33.75, or $270 for the entire shift. If a barista can make 200 coffees during this shift, the labour cost per cup is $1.35.
However, this cost can increase on weekends, reaching around $40 per hour on Saturdays and $50 per hour on Sundays. Therefore, how much it costs to make a cup of coffee can vary significantly based on the day and the number of cups sold.
Gross Profit Calculation
Understanding the gross profit from a cup of coffee involves subtracting the ingredient and labour costs from the selling price. Let's assume a flat white sells for $5.00. First, we remove the 10% GST, which is 45 cents, leaving $4.55. Next, we deduct the ingredient costs: 38 cents for coffee beans, 40 cents for milk, and 20 cents for the cup and lid, totaling 98 cents. This leaves us with a gross profit of $3.57 before labour costs are factored in. Now, considering the labour cost of $1.35 per cup, the final gross profit per cup is $2.22.
Café economics
But what if it’s a quiet day and the barista only makes 100 cups? The barista earns $270 per shift regardless of how many coffees are made, so now we have to pay for the labour cost with 100 cups. The cost is now $2.70 per cup and profit is $0.89 per cup. So, the café could make between $2.22 per cup (good) or $0.89 per cup (not so good) depending on how busy the café is on any given day.
Let's not forget that from that profit, the café then has to pay for rent, power, insurance, and other operational costs like cleaning and garbage disposal. These costs can add up to thousands of dollars per week. The combination of profit from the coffee and other items sold at the café all have to contribute to covering these expenses.
While coffee margins can be excellent, the highest expense in making a cup of coffee is the labour. The cost of labour is variable and heavily dependent on the café's customer volume. Profitability is therefore influenced by how busy the café is, which, in turn, depends on offering consistently great coffee. Achieving this consistency requires high-quality coffee beans, well-maintained equipment, and skilled baristas providing excellent service. Hence, the true profitability of a café extends beyond just ingredient costs and includes factors like barista efficiency and customer satisfaction.
