Why is that Cappuccino so expensive ?

Well, most of us have wondered as to why the coffee is so expensive at good coffee shops, haven’t we ?  You don’t have to wonder anymore as the answer to this question is answered to a certain extent in this post.

To begin with, you might have noticed that all expensive coffee shops are located in posh areas or fancy malls. Well this implies a heavy rent on real estate. For example, assume the rent for a 1000 sq. ft. coffee shop in a good location to be 1 lakh INR per month. Which further implies that it costs rupees 100 per sq. ft. for 30 days. For one day the cost per sq. ft. would be INR 3.33. Assuming that the coffee shop functions 12 hours in a day, the cost of 1 square feet per hour would be 0.27 INR. Assuming that an average coffee table along with two chairs, occupies an area of 5 sq. ft. The cost per table for an hour would be INR 1.35.

You can’t run a coffee shop without staff, right ? Let’s assume that there are 5 workers in the coffee shop and the average salary per head to be INR 10000. So for 5 workers the total salary will be INR 50000. That’s INR 1666.66 per day for 5 employees. Per hour the salary for 5 employees would be INR 138.88, assuming that they work for 12 hours.

On top of this, in order to produce coffee you need raw materials which adds to the cost. And then there is tax that again adds up the cost. Good coffee shops are known for their ambience along with their excellent coffees, and maintaining a good ambience isn’t free of cost, the air conditioners, the complimentary Wi-Fi etc. all adds up the cost. Then there is the brand value, the heritage and history, and all that can make the price go up. And now the most important of them all, the PROFIT, nobody sells a product without some profit, and this in turn adds up the final cost of the Coffee.

From the second paragraph of this post we understand that you pay for real estate too. You might have noticed that most love birds spend more than an hour in the coffee shop with just two cups of coffees. And the staff do not shoo them away post their coffee cup is empty. Yes, this implies that if the love birds are spending their time in the shop for say two hours, the cost of real estate is now calculated for two hours. And this implies that coffee shops aren’t just selling coffee, they are selling temporary floor space in a prime location, along with good ambience. Has anyone wondered how much it would cost for renting comfy furniture for two hours ? (and yeah don’t forget the profit in this case too).

Now let’s move to the quality aspect, the coffee in the pro coffee shops tastes the same on all the 365 days in the calendar, and maintaining the same taste isn’t easy. The coffee machine may be same but the contents in water, the coffee beans and all the raw materials involved in production too must be the same to achieve this, and that isn’t an easy task. And the cost of raw materials is subjected to inflation along with time.  Moreover, if a new variant of coffee is launched, there would be some money spent on R&D too (and this has to be recovered along with profit). Starting a business requires licenses, permits, renewals etc. and this too can affect the price of the product sold by the company.

These are some of the reasons that makes the coffee expensive.

Note : The facts and figures used in this post are for understanding purpose only. In real scenarios the numbers vary by a huge margin and there are lot of other factors that affect the price of coffee.

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