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.