Posh coffee has taken over the UK during the last decade. There are 15,000 coffee shops in the UK and more than 5,000 of those are chain coffee shops. Most of us have our favourite brand and our coffee orders are getting longer by the minute – decaf, wet, skinny cappuccino with extra foam anyone?
How much we pay for a cup of coffee has also soared in recent years. In 2003 the average price was £1.30 but now it is 70% more, costing £2.20 on average.
But at more than two pounds a pop, just how much of a profit are the coffee shops making from our caffeine habit? Exactly how much does it cost to make a cup of coffee?
Perhaps surprisingly, the cheapest component of your cup of coffee is the coffee itself. A study by retail analyst Allegra Strategies found that the coffee used to make a medium-sized cappuccino costs just 8p.
The cappuccino that they studied is typically made up of one-third coffee, one-third hot milk and one-third frothed milk. With the milk costing a further 8p that means the total cost of what you actually drink is just 16p.
The packaging your coffee comes in is far more expensive than the coffee itself. Forget pricey, quality coffee beans it’s the cup you are really paying for. The cup, lid, stirrer, napkin and sugar offered by your coffee shop make up 16p of the cost of your caffeine fix.
The most expensive element of your coffee is the people who make it. Their wages make up over a quarter of the £2.20 retail price at 55p a cup.
The taxman takes the second biggest cut. An average of 37p from the cost of your cappuccino goes to the government in the form of VAT.
On top of the costs directly associated with making your cup of coffee there are the additional large costs that every coffee sold contributes to.
For example, Allegra Strategies believes 15% (33p) of the price you pay goes to cover the cost of renting the premises your coffee is sold from. And a further 15% (33p) goes towards the administrative costs of running the coffee shop.
The total cost of your coffee once all these factors have been considered is £1.90, leaving the coffee shop with a 30p profit per cup sold.
But, some still believe that is cheap. “I think customers are getting extremely good value,” said Jeffrey Young, of Allegra Strategies. “The time that consumers spend in coffee shops is generally time well spent for them. Sometimes two or three people can get together and spend a few hours and collectively spend a fiver. That is extremely good value.”