profit on lb of coffee
QUESTION: Dear Bob:
Approximately how much Starbucks or a spe michael kors watch cialty roaster pay per lb of coffee and approximately what is the profit margin? (I realize the price varies depending on the type of bean?) For example, Starbucks is selling a new blend for about $13/1b; anyw way to guesstimate their profit on this item? Thanks.
ANSWER: The simple answer is: use $2.25 as a basic price although prices will be much higher this year. We’re paying close to $3 for our Ethiopians. We also pay well above the so called Fair Trade minimum for organic coffee, $1.55 per pound. Decaf coffees can be about 50 cents to $1.00 more per pound.
The next thing to remember, is that there is a 15% 20% loss of coffee during the michael kors watch roasting process. Thus for every 1 pound ($2.25)you roast, you end up with 80% to 85% of a pound. Therefore, actual price is more like $2.65 to $2.80.
Now, add shipping. This is shipping from country to a port and then from the port to the roaster. Estimate: add 75 cents per pound here.
Next, add packaging: the bag is really about michael kors watch 20 cents and if there is a label, add another 5 cents per label. That makes pound price as high as $3.80.
Now, remember that the $13 is a retail price. Most specialty roasters sell it wholesale for about $6.00 to $7.00 per pound. Thus, they get a bit more than double the cost (not including labor, gas and overhead expenses). Our wholesale price is in the $6 $6.50 range. Then again, we don’t charge for shipping (a growing, growing expense).
Starbucks and others that roast and retail of course have better margins. We actually “sell” coffee at wholesale prices from our roasting division to our retail division. The profit is then split. (We sell our cofffess for up to $10.99 per pound because we’re not as greedy).
Again, remember at the retail level there are a whole bunch of other overhead expenses that need to be accounted for (more rent, m michael kors watch ore labor, etc).
This sound like big margins? Not really! The bigger margins are when the retailer sells it by the cup. At 35 cups per pound and $1.50 per cup, the retailer just got $52 per pound. Then again, add the cup cost (12 cents), that cup wrapper (5 cents) and milk (don’t get me started on the increase in dairy costs), bags and such and the margins drop considerably.
At the end of the day, coffee isn’t much better than the typical restauarant profit picture: the cost of goods will be about 33% of sales.
Probably not as big of a mark up as you expected, huh?QUESTION: Some specialty roasters will indicate a roast date;however other companies use a use by date.
If you go to a a grocery store or a Costco/Sam’s club you’ll see Starbucks and other coffees with “best used by” dates sometimes as far out as one year from today.
We claim (and our new bags will state) that you shouldn’t buy WHOLE BEAN COFFEE that lasts longer than the oil in your car. In other words, if whole bean coffee is packaged correctly, I’d be okay saying 90 days from roasting. However, we preach buy what you’ll use in a week from your neighborhood roasting company. No reason to buy too much.
If whole bean bag is opened, put it in an air tight container that doesn’t let light in and store it for a week or two at most. DO NOT PUT IT IN FRIDGE. Only put it in freezer if you are storing it for a long, long, long time (and then question why you are storing it for a long, long time).
Coffee’s biggest enemies are (as our coffee bags say) light, moisture, time and big corporations (corporations because they can only survive with long term dating and bad roasting).
Ground coffee is a whole nother issue. Coffee starts losing it’s flavor as soon as it is ground. Thus, we say don’t grind until you brew.
All the above can be adjusted based on your taste buds. Try coffee one or two days after roasting (it’s better than right after roasting). Then try it in a week, a month, six months. If you can’t tell the difference, then don’t worry about any of the above!
To be totally honest, I doubt most people can tell the difference between fresh and 3 or 4 month old coffee stored properly. After that, I bet they could.