superbarista

blog from the ceo & superbarista of phoenix coffee, home of the best baristas in cleveland, ohio

Friday, September 17, 2010

Coffee Price Crisis in Cleveland

It's not just in Cleveland that coffee prices have reached a 13 year high. It's all over the country. But here in Cleveland, we're feeling the pinch. My coffee bill is going to be over 50% higher than the previous month, and that was already inflated. I am tempted to just follow Intelly's lead and go to manual drip and charge $4.00 for 12 ounces of expertly brewed coffee, served by a smartly dressed barista. But that wouldn't be Phoenix, would it?

We decided at our emergency manager's meeting the other day to go to all French Press and to set 12 ounces at $2.00, which is a $.40 increase from where we are now. We were so convinced that this was the right solution that Kate and Marcie even announced it on Fox 8 News. But then today I started looking at the logistics of this and in order to really present the coffee to the customer, we'd need a completely different layout in our stores. Which just makes my stomach turn, since we just finished a $20,000 renovation of the Lee Road cafe, and it now works better than it ever has. Furthermore, it's hard to justify taking tens of thousands of dollars worth of perfectly good coffee brewing equipment out of the stores and putting it on the shelf at our warehouse where it will probably just collect dust for a while. Selling used equipment is not easy. Furthermore, a dozen french presses for each store will cost around $4,000. Spending this money doesn't help me pay my coffee bill.

So another option, which we've already partially enacted, is switching over to all Fair Trade coffee. When I realized that conventionally traded varietals were at the same price as Fair Trade, I immediately switched over as many of them as possible at that point. That was easy. How about if we just went all the way and switched the rest of them? "We only serve Fair Trade coffee in our stores." That would mean our blends would need to be adapted to use Fair Trade coffees, which is challenging since Fair Trade coffees are usually not consistently available. But this could be surmounted. However, this policy would also mean not having Blue Moon, one of our most popular, and cheapest coffees. We could make Blue Moon with Fair Trade coffee, but instead of costing $11 per pound, it would cost $16. We'd probably lose a lot of Blue Moon customers. Maybe they'd just have to order in bulk from the warehouse or online?

What's the most fiscally responsible yet progressive and innovative solution here?

I'm calculating that we need around a $.30 per cup increase, at least, in order to make these coffee prices work. And about a $.15 per cup increase on lattes and mochas and other specialty drinks. What change could we make that would make this price increase easier to swallow and also move the company forward strategically and qualitatively? When prices go down, we would then have the necessary margin to pay baristas better and further increase the level of professionalism and coffee quality at our stores, and even to buy more "Cup of Excellence" and other super-premium coffees that are tough to afford now.

I suppose this could be a great example of "what doesn't kill you makes you stronger", but I thought we had already done our share of that just by getting Phoenix through the last year and a half of tough economic times. So here we go again. At least it's familiar territory, in a way. We're good at challenges like this, actually. We live in Cleveland, where only the tough(and smart)survive.

28 Comments:

Blogger Rob Pitingolo said...

Hi Sarah, I'm sorry to hear that Phoenix is going through some tough times. I have to admit that since moving to DC, I miss Phoenix more than just about anything. A good cup of drip coffee is a lot harder to find than I'd ever imagined. I've gotten used to paying $2.50 for an inferior tasting cup of drip coffee. At first it was tough, but I've gotten used to it. I guess what I'm saying is that while 30-cents per cup is a significant increase, the sticker shock may wear off quickly.

I really like the idea of French Press coffee to go. I hope that you can figure out a way to make it work in some capacity.

When I visit Cleveland next month, Phoenix will surely be one of my first stops. Even though I'm 350 miles away now, I want to support your business to the extent that I can.

7:16 PM, September 17, 2010  
Anonymous Denise Rynes said...

I would pay .30 more for a cup of coffee at Phoenix, but I would probably prefer brewing coffee the way you do now. The French Press method sounds very time consuming for a line of customers on a typical busy morning, and you might lose more customers who simply can't wait because they have to be at work. Right now, getting a house light roast, dark roast, decaf, or flavor is pretty quick and convenient for customers who might be in a hurry.

One question: how much coffee do you have to throw away because it's too old to serve? Would it be possible to make half the amount of coffee during slower parts of the day so you can decrease waste? I'm sure this idea has crossed your mind already. I was just curious.

I love Phoenix Coffee and will continue to promote and patronize your stores. Thank you for being so up front about the issues you are facing right now.

Denise Rynes

8:17 PM, September 17, 2010  
Anonymous Anonymous said...

pheonix definitly has the best coffee around. the closest one to me is about 25min, so i dont get to enjoy it often, but i wouldnt care too much if the prices went up a bit. every other coffee shop is doing the same thing. you still have my loyalty.

2:11 PM, September 18, 2010  
Anonymous Anonymous said...

I'm not sure what the solution is. I do frequent Phoenix coffee both on Lee Road and on Coventry. One statement you made though has me concerned:

"When prices go down, we would then have the necessary margin to pay baristas better and further increase the level of professionalism and coffee quality at our stores, and even to buy more "Cup of Excellence" and other super-premium coffees that are tough to afford now."

This statement suggests that after raising prices, due to increases in the costs to you of beans, you would keep the price of coffee at those same higher levels when the price of beans drops, and use that increased profit margin for other purposes. That's actually offensive. The price you charge CAN be reduced if your costs go down. It's not a one way path, up up up. There is a limit to what people can and will be willing to pay for a cup of coffee. When I buy coffee I want coffee, not an experience. I would never pay more for ambiance, etc. If someone wants a "super-premium" coffee, then they should be charged more for it. It shouldn't be subsidized by everyone else.

This is something that often concerns me with businesses. When the costs of raw materials / ingredients goes up, and they realize their customers will pay the higher prices, then I've always wondered do they do the right thing and lower the prices when their costs decrease or do they say, "Hey, the customer is willing to pay this price so it seems a workable price point. We'll just keep the price at that level and pocket the difference, or whatever.

So, while I enjoy going to Phoenix Coffee, I'm a bit rattled by that statement.

7:22 PM, September 19, 2010  
Blogger Meghan Conrad said...

Just bump the prices up. Even if you tack another 25 or 30c on to all your drinks (and, really, you may as well do an across-the-board increase,) you're still cheaper and more delicious than any of the other local coffeeshops.

I wouldn't hesitate to pay an extra quarter a drink at Phoenix, and I bet that after the first week or so, no one else would, either.

8:33 AM, September 23, 2010  
Anonymous Mimi said...

Yours is the best coffee in town. I go out of my way to stop in. I am in favor of you carrying more Fair Trade coffee. I don't look at the price when I see that label. Organic, too. The other thing you mentioned was buying bulk from the warehouse. You can keep the Blue Moon (which I don't buy) and stock New Guinea coffee (my favorite of all)and others that are hard to get at any price.

When I lived in California and came back for family stuff, my first stop was always Phoenix. So, do what you have to. I'll support you all the way.

11:10 AM, September 23, 2010  
Anonymous Anonymous said...

I head over to Phoenix Coffee all the time in downtown Cleveland because frankly there is no other coffee shop in downtown Cleveland that is open (other than Starbucks but who wants that.) I would continue to go if you increased the cost across the board, but just might mean that the baristas might get less of a tip than they normally do or potentially none even.

However, when you start totaling close to a $4.00 drink including tip, it will definitely impact sales especially with the college kids.

8:45 PM, September 23, 2010  
Anonymous Anonymous said...

I agree with all of the above. But really believe there should be something available for people on a budget otherwise you will lose their business...and coffee shouldn't be only available to those who can afford it. That really doesn't fall in line with what I believe phoenix's mission to be embracing culture on all economic levels. I understand the difficulty to juggle the economics of the increased coffee prices and having to adapt to make the bottom line, but I still think there should be a cheap alternative for customers who simply want a cup of coffee...no frills.

People like myself who frequent blogs and coffee websites aren't the ones you will really lose to a significant price increase. It's the casual coffee drinker who, in the end of the day may or may not ever embrace coffee culture...but its still important to make sure you give them a chance.

11:57 PM, September 25, 2010  
Anonymous Anonymous said...

I like the french press idea. I must say that I refrain from buying coffee in your cafes because I have often gotten a cup of coffee that has been held too long. I would be willing to pay the premium price to insure a freshly brewed cup of coffee. Perhaps, a cheaper solution would be using drip cones.

11:06 AM, October 03, 2010  
Anonymous Anonymous said...

Today I received the news of a 55 cent increase in a large cup of Phoenix regular coffee, something I purchase at least 3 times a week. This is on top of the 10 cent increase only a few months ago due to mandatory use of a compostable cup (which I think holds less coffee than the previous cup and is poor at maintaining hot coffee). 65 cents added to the former $1.95 price is a 33.3% increase in a few months time. Although I realize Phoenix caters to coffee and tea connoisseurs, I imagine many people like myself frequent your store for convenience and the caffeine fix. At $2.05, I could justify the cost. Even at $2.25, I wouldn't have felt cause to comment. But $2.60 was more than "sticker shock" to me - it was silly. While I paid the price today, pocketing my quarter, dime, and nickel in change, I'm sad to report that you've lost a regular.

12:51 PM, October 08, 2010  
Blogger Sarah Wilson-Jones said...

That last anonymous comment is hard to read. We worked hard to bring more value to our customers, by offering Fair Trade and French Press options, but the fact is that some just won't agree that what we're offering is worth it. I have heard the complaints about the new cups; it's true, they don't insulate as well and we definitely will not be re-ordering them when our current inventory is gone. Thank you for taking the time to comment.

1:11 PM, October 08, 2010  
Blogger herman nasir said...

was very impressed with what you serve with a cup of coffee only, I can not imagine the beauty of my day.salam create success for all, from herman Indonesia

1:15 AM, October 12, 2010  
Anonymous Anonymous said...

I used to stop in at Phoenix six mornings a week for my coffee before work, but the last time was MY last time. The price went up to $2.35 a cup from $1.90, which I found egregious. 25% increase? Please. I have a choice of Starbucks, Phoenix, Caribou and Dunkin Donuts on my way to work, but I preferred Phoenix. But last week, I had to wait in a line while the French press did its thing. The advantage a coffee shop has is that its coffee is ready, not being pressed while I wait behind a gaggle of other impatient customers. And the difference in taste is negligible. My free advice? Go back to brewing, raise prices 10%if you must.

7:32 AM, October 21, 2010  
Anonymous Craig said...

I prefer french press. That is the way to go for sure. I like your solution because it increases quality along with the price. If you have to get something more, you offer something more. Phoenix has the best coffee in town and I wouldn't bat an eye at paying $.30 more and $.15 more for a latte as long as it is driven by market forces out of your control.

5:28 PM, February 24, 2011  
Anonymous Nic Habat said...

I am not happy about any of the price increases these days. With that said, I have no intention of giving up my "vice" namely your french press java. Keep up the fine work and, please, keep the Phoenix coffee brewing. I need your peeps in South Euclid to keep it steaming for my hubby and me.

12:45 PM, March 10, 2011  
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12:49 AM, August 18, 2011  
Blogger heckrazer said...

These are tough times indeed. I wish I had the answer. My knee-jerk 1st thought is to stay on top of the training to ease buyer dissidence. I bought a french press from the S. Euclid store and was told it was eight cups but it was barely two, the press was broken and I was upset. Eye contact, the personal touch and clean/nice facility/environment make a difference. I hate the new prices but unlike Anonymous the experience is still worth it to me. I have a coffeepot, espresso maker and internet so the experience has a lot to do with why I come in. Also I come in to support you and Phoenix a LOCAL INDY business. I also support why you do it. Aside from money I believe in coffee culture (I prefer the "coffeehouse culture.") Maybe if some of these issues were brought to the forefront people would feel more comfortable with rate hikes understanding that it is more than a cup of coffee. It sounds like you need to pay the baristas more so I too would keep the prices up after coffee went down. I'd return some of the difference to the customer if i could. I would keep Blue Moon's price low I think although I don't know if it pays to have a loss leader (so to speak) in coffee. I think perhaps it does when one considers "goodwill". I might promote Blue Moon sales in the stores also. Also I think dessert sales could help out so why don't counter folk "push" desserts just a bit? When i get coffee the transaction ends, "Is that it?" and sometimes, "Do you want anything else?" I don't think it is intrusive to say, "Would you like a doughnut or cookie?" It's a service like when they ask me do I want my receipt, I'm always grateful and say so, sometimes I want it and sometimes I don't.

8:19 AM, October 10, 2011  
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5:08 AM, April 25, 2012  
Blogger jordonious said...

"Furthermore, a dozen french presses for each store will cost around $4,000. Spending this money doesn't help me pay my coffee bill."

Hey Sarah, no need to be outrageous.

Online, you can purchase a stylish Bodum Brazil 8-cup French press for as low as $18.17 after tax/shipping.

Found here @ http://tinyurl.com/8ph8zbq

Ordering four dozen of these would only cost less than $900.

Or you could buy the same French press from Target for $30.

Found here @ http://tinyurl.com/97swcn2

$30 x one dozen x four locations = $1440 (minus tax)

During economic hardship, there's no shame in purchasing a more affordable French press. After all, this is what the average person has in his/her cabinets, and what your customers are probably used to anyway.

JS

9:38 PM, August 07, 2012  
Blogger Sarah Wilson-Jones said...

jordonius, my calculations were based on metal insulated french presses that won't break easily. We did end up buying a few of them... certainly not a dozen for each store! And we spent about $100 each for them, and they have lasted really well. Truly a great investment.

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