The price for a cup of coffee can be set at any level? That's a trick question! Because right away one is tempted to distract the attention to other topics. What kind of coffee will you be able to sell cheaply? Remember, we are talking about the delicious coffee!
Coffee market experts usually get confused when answering this question, because they know that the price of a cup of coffee ingredients is 20-25 rubles at the most. Espresso or Americano do not require the use of milk so their cost is even lower. Selling a mass product with retail margin of 1000% - is a good business, which is being guarded by its "locals" in a very tough manner. Coffee makers position on this one - a "good cup of coffee can't cost more than 50 rubles".
I understand that it will be followed by an ironic question: "But you do not offer coffee for 50 rubles at gas stations!". Gas stations' cafes and shops offer impulse demand goods, so their price is not exactly built on the principle of the discounter. But just think about why the stations are so often to tempt you with «free coffee» offerings?
Nobody gets surprised by a sign on a cafe's facade: «Business lunch + coffee for 50 rubles», that's for sure.
But in addition to the gas stations and Moscow's city center there are still many places where the coffee business can develop and there are good examples of discounter's format. For example, in 2015, St. Petersburg COFiCO (Coffee Fix Company) was launched that sells everything at the same price - 50 rubles. By year's end, the chain owners were going to have 50 outlets in Moscow and St. Petersburg. Now according to their page on VKontakte, from June 1, 2016 there are three coffee shops where everything goes "for 59 rubles". In 2016 the time has come for a large-scale experiment. Finally an «enfan-terrible» company emerged which is going to work in a "hard discounter" mode, selling coffee for 50 rubles. Israeli Cofix reports that it found a partner to open 1000 outlets in Russia. The first phase stipulates opening of three Cofix own cafe, the second - 300 franchising outlets in Moscow, the third - additional 700 throughout the country.
Produced on a mass-market scale, inexpensive but still a delicious coffee means that we are talking about the flow production business model regarding the coffee sales. The principle of fixed price works due to the fact that the cost of most goods is much lower than the selling price. Cost of coffee beverages is really not that high, but trying to save money on the drinks' quality –is a bad job, given that the coffee business is based on repeat sales. The biggest selling point's expenditure is the rent of premises and staff's salary, so these are exactly where one should seek opportunities for savings.
Renting the premises must be treated carefully and intelligently, just understanding that you are here to stay. Study your customers here and now, at this particular point: universities and other educational institutions nearby, cinemas, stadiums, transport's routes etc. Permanent business or tourist flow can provide a point of sale with possibilities for fixed price for coffee.
We still need to talk in more detail about the staff. Flow coffee sales imply that such outlets do not need a professional barista, but that does not mean that you can start saving your money on the staff significantly or not to pay any attention to this issue. Savings on the people – either on customers or employees – are usually turning up to be too expensive for business.
But there are "reasonable" ways to save if you use the IT solutions that directly suppress sales opportunities "by cash", make substitution of grain or manipulation with recipes of drinks impossible. In the future, the cost of coffee machines' maintenance will decline due to its service. So "the perfect barista" for such a sales point – is a professional automatic coffee machine plus remote monitoring and responsible employee who complies with all the prescribed regulations.
Attention to the products' range
Coffee sells products for the different price categories from cars and jewelry to the buns and hot dogs. Yes, coffee is selling gas stations' related services for millions of dollars.
When intelligently compiled, products' range is open to include in it some decent quality products and selling them at not expensive prices. But you will have to think about it and work on that permanently. In the big city it will be hard to attract visitors by primitive donuts. The high-tech baking - it's high-quality semi-finished products from world-class leaders. So, again, professional equipment and remote monitoring of this kind of equipment. These are the costs which have to be met consciously. If all of a sudden there is an "accident" refrigerator defrost happened that caused damage to a monthly supply of semi-finished products for baking, such a force majeure threatens to ruin small businesses. Only large-scale chain companies like McDonald's will deal with similar incidents calmly and will survive them, for the small businesses they would mean company's closing.
The range should not be contrived or complicated positions. Being simple and please everyone, and yet not be boring or bothersome. This is a constant work for the leader of such a sales point. You made a mistake and you are bankrupt, you are afraid to make a mistake – and your products like the Nokia's, good quality, but no one wants to buy it.
But I believe that the "fixed price" approach certainly has a future. Even though retail margins in trendy coffee houses reach up to 1000%, there are players who would be interested in working with the margin of 100-150%. Coffee is a product, which is bought not because of the price, so in the market there will be enough space for any pricing model.