Coffe Prices

Is it Finally Time to Increase Coffee Prices?

While the prices of almost everything else, from milk to water to labour, has increased, coffee prices have remained, for the most part, the same for at least a decade.

Kiwi customers expect inflation on certain items but seem unwilling to pay an extra dollar for that medium flat white. Coffee prices do need to go up, however, particularly in light of the minimum wage increase which goes into effect on April 1st.

Advice from Employment New Zealand regarding the wage increase read: “You should add any expected increased costs to your short and medium-term budget forecasts, to help you plan for and manage the effect of higher wage and holiday pay liabilities.” Well, thanks for nothing – was the resounding response from the industry. The average customer often isn’t aware of increases to costs for your business, and few take the time to understand why their coffee that cost $4 yesterday might have to cost $5 today. Customers are increasingly in want of transparency from businesses and brands, however, so clearly communicating why prices need to increase will often settle a customer’s hesitation or annoyance.

Of course, you can’t individually go through your accounts with every customer that walks through the door, so announcing a price increase by use of in-store notices on boards or by the door and through social media is a good way to get the message out there – and this needs to be done in advance of the actual price rise.

Be clear and concise in your explanation for the price increase. If it is because of the new minimum wage, explain that you want to keep your fabulous staff on board and how this small increase in the price of the coffee or food can help you do this. This shows customers your willingness to be transparent.

Communicate to your customers that higher prices mean better quality. It can be confusing to customers as to why a price increase would be necessary, especially if they’ve been purchasing the same product for years. This makes it vital that you stress the importance of product quality. Since the outbreak of the pandemic consumers have been more willing to pay higher amounts for better quality goods and better service.

It is also important to communicate any price increases and the reasons behind them to all staff before you announce it to customers, no one wants to be served by someone who doesn’t know what’s going on.

Allow customers to reach out with their queries and concerns, remember this is about transparency and most customers will accept the new prices without complaint, especially once they understand the need for the increase.

So, how much should a customer pay for a coffee?

These are the prices from three of the large coffee chains operating in New Zealand. While chains have the ability to be more competitive in their pricing, it’s a good indication of what the average Kiwi is spending (and is willing to spend) on their morning fix.

These are their prices for a flat white (standard shots, regular milk):

• The Coffee Club: S: $4.50, M/

Regular: $5.60, L: $6.30 • Starbucks: S: $4.40, Tall: $5.20,

Grande: $6.00, Vente: $6.80 • Columbus Coffee: S: $4.50, upsize is 70c extra so a medium flat white would be $5.20 • (The average size of a small takeaway coffee is 280-290mls.)

With this in mind, if you’re charging less than $4.50 for a small flat white, you’re charging too little. If you think a small flat white from your establishment is worth $5.00, then explain to your customers why that is. It might be because you choose to invest in compostable takeaway cups that cost more, therefore explain your sustainability ethos to your customers and incorporate the eco-friendly story into your brand. It’s all about communication, Kiwi customers respond well to authenticity and clear messaging from the businesses they choose to spend their money with.

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