The Economics of the Cup

Keith Martel, here and here, has been having an interesting and important back and forth concerning free refills of coffee at coffeeshops. I thought I'd throw my two cents in (hey, I thought these were free refills), since supposedly I'm supposed to know more about this topic. There are three points that I think need to be brought up: (1) what are we paying for in a cup (2) the americano versus drip debate (3) waste. I don't intend these comments to be taken as a pro-con of free refills, but more as important background considerations to the debate.

(1) Jason and Keith have an interesting interchange in the comments section of Keith's post about the cost going into a cup of coffee. The specific numbers and there accuracy isn't my concern. The thing that does concern me, however, is what numbers need to be added to the analysis. Jason and Keith's breakdown is good enough as far as it goes, but as a business owner, the overriding concern in pricing is not necessarily profit, but place. Each cup of coffee sold provides for our inventory, our labor costs, our tax costs (which are huge and ever growing), our mortgage on the property, the utilities, the care and improvement of the shop/property, the ability to buy more varietals of beans/leaves (for tea, that is--we're not that kind of coffeeshop), debt payments (hey, coffee doesn't grow on trees, at least not in Beaver Falls), and a modest profit to (a) eventually train and skill more people and more locations possibly and (b) get something for the work we put in. Our primary concern is our place and only secondary (if even that) on pure profit. The thing that most consumers or customers or whatever you want to call them don't realize is that every penny they spend on a product isn't for that product: it is for a place. Every time we go to the grocery store, we are supporting the farms and factories and places that the grocer does business with. That is the vital importance of farm markets: our monetary influence goes farther when it is passed between neighbors you, by constraints of space and time, have to share the same geographical area. Every cup of coffee bought at a coffeeshop supports some farmers instead of others (which is very significant concerning some of the social dilemmas that Fair Trade is causing in Latin America and elsewhere); some paper companies and some forests and not others; some corporations and not others. Everytime you buy something, you aren't supporting an abstract product, but a real, concrete place.

(2) Many of my friends prefer the Cafe Americano to any other espresso drink. It is relatively simple (since it doesn't involve the art of steaming milk), but easy to mess up. It is a shot (or two) of espresso mixed in with hot water to make whatever size drink you order. Basically, it is a strong cup of coffee. Most espresso consultants that we have run into have recommended offering the Americano to customers when they order drip coffee. There are a variety of reasons for this. Some are economic (you can sell an Americano at a higher price than a drip cup for less materials cost), some are quality based. Frankly, coffee through an espresso machine--if done correctly--tastes better than drip coffee. The extraction and pressure and saturation and heat time of the espresso machine allow for more favor and less burn to come through in the cup (although, it must be said, most espresso bars burn their espresso so badly or over-extract that the differences are minimal--ideally, though...). So, theoretically, an Americano is going to taste better than a cup of drip. Plus, an Americano doesn't sit in an airpot (or on a burner *shudder*) becoming rancid and tepid and over heated. The difficulty with this in the free refill debate is that each Americano requires barista attention, whereas the drip can be ignored and only requires one period of attention for a large quantity of brew. I've never seen any coffeeshop offer free Americano refills. You are paying for an art and a skill, not just for a caffeine buzz.

(3) This leads into the third problem: waste. Jason and Keith bring this up and rightly so. No coffeer worth his grounds will want to see good coffee (or coffe that you had a hand in preparing) wasted, whether by staleness or the infamous airpot dump out. If he puts up with it, it rends his heart a little bit each time a drop goes down the drain. So what to do :43 minutes after the brew has been made, when the coffee is on a quick, downward slide to viscous sludge? The point is to avoid the problem entirely. This can be done with free refills. However, the owner (and the place) misses that profit from that cup, even though it is good community relations. Keith brings up an interesting point, though, that the PR might be more profitable than the lost cup cost. For most business owners, that would require a pretty dramatic paradigm shift. Since it is largely unprovable, it remains in the entrepenuerial space of "risk." Thankfully, that is a quality that defines entrepenuers. What about what the Little Italian says? 10 cent or 20 cent refills? Is that a good compromise? I'm not sure at this point, but from the ledger it looks a whole lot better than 0 cents.

As of right now, I don't think that BiFC&T has come to a decision concerning the whole issue of refills. We want to be a community place, we want to do well, and we want to do good. Thanks to all involved for helping us think through these issues. And, Keith, bring in your own mug or we will supply you with one in the store. We plan on using real mugs for our in-store customers. Maybe I'll even give you a discount or a refill!

Bottoms up.