Why we are in Coffee business!

by chee Leng (on coffee makers)
(Singapore)

If you are not yet in coffee business, you might be tempted to join after reading this.

Consumerist.com recently showcase the Workonomix survey stating that average US workers spend $20 a week on coffee.

We know more or less, consumers patterns follows that of a developed country, so on that assumptions, let's see how much an individual spend on coffee/

For $20 a week, it would be $1092 per year. And if you think $20 seems like alot of money, it is not. It is actually $4 a day, which is a tall long black in a Starbucks cafe.

Incidentally, consumerist also highlights how Starbucks has assisted consumers to drink more coffee.

It shows that workers 45 and above spend on average $14.15 while younger workers spend $24.74 per week. The latter higher spending primarily due to the fact that they grew up knowing and drinking Starbucks.

So, love it or hate it, Starbucks has done alot to push the coffee culture. In fact, most gourmet coffee shops benefited from Starbucks.

Starbucks marketing is the reason why consumers do not feel the pinch paying $5 for a cup of coffee.

For folks that have yet to see the impact of the earnings, let me do a breakdown:

COGS for most cafes and coffee shops are usually not more than 25% and supposedly the miscellaneous cost are contained at another 10% and rental is managed at 25%, the overall cost of a cup of coffee is 60%.

So, for a $4 that consumers spend at your coffee shop you earn, $1.60 net profit.

Let's say you sell a cup of coffee every few minutes, or 20 cups per hour and you open 10 hours per day, you get 200 cups of coffee per day.

That is 200 X 1.60 = $320.00 of earnings per day

320 X 30 = $9600.00 per month.

Not too bad earnings taking into consideration that you are only selling coffee.

My $0.02

The importance of this survey is not so much about how much each consumer is willing to spend, but that they are spending.

It shows that despite the economy, people need their coffee.

Thus, other than coffee shops, businesses that are related to coffee if well managed should be fairly resilient.

So, are you thinking of going into coffee business now?