One of the first things a coffee customer does upon walking into a cafe is to look at the prices on the menu. Prior to entering, the customer may have an idea of what beverage they want to drink and what it might cost. But, they will always look at the menu, scanning the beverages and the prices next to them. The customer’s end goal in visiting the cafe is to drink and enjoy a beverage that is being sold for a price they are willing to pay—i.e., their idea of value.
The retail price is crucial in business. Depending on a company’s strategy, there are many potential objectives that could be achieved with the end price: such as pricing low for market penetration, or pricing high to maximize profits. Regardless of our individual strategies, as specialty coffee retailers we share a fundamental pricing goal: to keep customers happy so that we can stay in business.
Certainly, retail prices vary across the nation’s cafes. But, how much do they vary? How often do they change? What causes them to change? What, fundamentally, is the collective retail price of a cup of coffee in the United States?
For a retailer to find this out would be a daunting task, one that comes with a high cost of investment which might not be worth the value received. That is where SCAA comes in. We want to do the legwork that will help the community feel more confident and informed. We want to find the answers to these questions to better serve our members and community.
The new SCAA Specialty Coffee Price Index (SCPI) will address the question: what is the retail price of a cup of coffee in the U.S.? In order to streamline and make the process of gathering prices consistent, three coffee beverages were chosen as indicators: small cappuccino, medium drip coffee, and medium iced coffee.
The first round of data collection was exploratory, providing research for the development of the future methodology. SCAA created a survey asking what the retail prices are for small cappuccino, medium drip coffee, and medium iced coffee. The survey was emailed to 2,113 coffee retailers across the country. Respondents were required to be coffee retailers with one or more retail outlets. Results are presented as a single index price.
Of the 2,113 companies who received the survey, 164 individual companies returned completed responses and were segmented out into two groups based on the retailers’ number of cafes: one to three cafes and four or more cafes. The results represent prices from almost 8,000 locations.
Companies with multiple retail locations, such as Starbucks and Caribou Coffee, submitted a median price that reflects all their national stores (over 300 and 7,000 stores respectively). The prices submitted from such companies impact more on the index, so the number of locations was weighted in the calculations.
So why should we care about a Specialty Coffee Price Index? This initial industry benchmark may be useful for a retailer planning to open a cafe and working on the pricing strategy for their business plan. The index could also be valuable to a retailer who has been in business for many years, who is working on adjusting their pricing strategy to better compensate the specialty coffee farmer.
This index could be useful for any stakeholder in the supply chain who may be trying to gain more insight on different aspects of the market, but has little time to research. The purpose of the research is to support the community, and to increase confidence to make informed business decisions.
There are layers of value that will become more prominent when there is a longitudinal set of data that can be analyzed and interpreted. Over time, the index will reveal potential trends or correlations with other sets of data, such as SCAA’s Specialty Coffee Retail Sentiment Index (RSI), a new economic index that measures the specialty coffee industry’s degree of optimism at the retail level. The RSI will be used as a metric in assessing and forecasting coffee’s vigor in the retail sector, and two iterations have already been published at scaa.org.
As we collect more data, the results will continue to become more meaningful. We look forward to providing further context on U.S. retail coffee prices, and appreciate your support in providing this information during data collection periods.
If you have any questions or would like to get involved by providing retail price information, please email SCAA’s research analyst Heather Ward at email@example.com.
Heather is SCAA’s research analyst and is responsible for providing leadership and vision in gathering, analyzing, and reporting coffee-related industry research. Before moving into the coffee industry, she completed her MBA at Point Loma Nazarene University in San Diego with studies focusing on the economics of coffee. She is passionate about coffee, market analysis, and helping the coffee community better understand the landscape of the industry.