Thursday, 15 November 2012

Coffee still too expensive?

This is not going to be a rant about Starbucks legitmately using the UK tax system to keep its corporate tax bills as low as possible.

 (Ok, it will be a little bit now, but this is just to say the MP's in Parliament so keen on grandstanding should be asking the Chancellor and HMRC how it is possible for companies to legally do this? Why is out corporate tax code so Byzantine in nature?)

No, what really strikes me is the lack of coffee price effects on the price of coffee in the high street. This year the wholesale price of coffee has droped by up to 40%. Next year there is predicted to be a global coffee glut for the first time in over 5 years.

Yet prices on the UK high street continue to be  as high as ever, in fact they have been increasing this year. As usual, UK property rents are the key driver and staff costs. Only 3% of the price of a coffee is the actual coffee - 3%! I found that quite surprising, Labour, VAT and Rents are each over 25% each of the costs - even the packaging costs more than the coffee.

With that in mind, perhaps it is not surprising that Starbucks struggles in the UK, after all upwards only rent reviews, increassing minimum wages and increases VAT have been a big part of the last 5 years in the UK.

Maybe they really cant't make any money after all then...

12 comments:

James Higham said...

At the lower end, the pound shop has 10 Maxwell House packets of cappuccino for a pound. Not bad.

DtP said...

Slightly OT but it really blinking irritates me having served on a million squillion committees - why don't senior people in either public or private have the wit, the sheer bloody common sense, the forethought to, yer know, watch a committee before turning up.

We used to rip the heads off people as soon as they started waffling just to make the Labour guys look like they supported said waffler. The arrogance in assuming that the manner in which they conduct themselves in their jobs, the supposed esteem in which they are held by from colleagues counts to nought as soon as the committee sits down.

Just take 3 hours to watch and prepare - get a colleague, a freind, partner etc to ask you layman questions etc etc....

There really is no excuse - unless they're lying ofcourse, in which case - fair play.

dearieme said...

I'm baffled as to why anyone buys Starbucks coffee - it surely can't only be people wanting to be indoors out of the rain.

Nick Drew said...

I am distinctly out of tune with the zeitgeist as regards coffee in cardboard cups (see below), so that's the caveat

but I'd say the 3% figure makes for such large arbitrage potential, the whole business model must be pretty fragile

(I find myself in an office where a comfortable & congenial departmental lounge area offers - free of charge and with decent crockery - good fresh-ground coffee

however a large proportion of staff go instead to the canteen where they can pay EUR 1.85 for exactly the same stuff and sit on uncomfortable seats

and another significant section go out into the street for something not dissimilar (except in price) in cardboard - which they bring back to their desks

then again, what do I know? you always suspected as much)

Blue Eyes said...

I'm with Dearime and ND.

For me coffee-shop coffee is for convenience or somewhere to kill a few minutes between other things. If there's instant in the office kitchen I won't spend £4 on a Starbucks.

It's a lifestyle habit. In the area I used to work there was a Starbucks which was always rammed in the run-up to 9am. Next door was a Costa where you could go straight to the bar. Twenty yards down there was another Starbucks which was always quiet. Yet all the un-dead would queue up for quite some time in order to get their fix.

You can't say "the wholesale price has fallen" and get a meaningful prediction of a change in the retail price. It's a bit like telephones and houses, the more people pay the more value they feel they've had.

Umbongo said...

Forget about Starbucks.

Everyone knows that the best coffee in the world is Lavazza Qualita Oro (around £4/250 gms at Tesco) freshly made in a cafetiere. And no, I'm not connected with that excellent company (how I wish I were).

DtP said...

Highly apologetic but i'm off to the pub so can I chuck my QT answers down now, please?

1) A bit of Mensching and a veritable smorgasboard of Harman bashing Le femme Tories for being out of touch, useless, etc ad infinitum

2) Ave a bananna or indeed Abu Quatada

3) Unemployment - and how to generate growth specifically - don't know the Saatchi dude of the LibDummer

4) Europe in peril, in peril I tells thee

5) Wind farms, Le Dellingpole and various opportunities for whattaboutery.

Good luck

DtP

Demetrius said...

Back in the 1950's Soho coffee bars there were some corking gels there but the coffee was nearly as bad as Starbuck's.

Steven_L said...

I keep a cafitere in the office and spend 4 quid on a whole packet every other week. Best of both worlds but won't keep em in business.

Electro-Kevin said...

Very informative.


There is something better about coffee when someone else makes it. I grind and perculate my own coffee at home and it is as good as the best coffee house - for some reason it just doesn't taste quite the same as when I've paid three quid for someone else to make it.

My loyalty card and bite card mean that I get a 30% reduction over 5 cups and I only ever treat myself to one when I am working my rest day on overtime. (Twice a month)

I prefer coffee in a paper cup on a cold day. With my beanie hat and scarf on.

Puff Puff said...

Perhaps thirsty people just pop out for a fag or two as not allowed in the office.

Agence communication said...

This is not going to be a rant about Starbucks legitmately using the UK tax system to keep its corporate tax bills as low as possible.

(Ok, it will be a little bit now, but this is just to say the MP's in Parliament so keen on grandstanding should be asking the Chancellor and HMRC how it is possible for companies to legally do this? Why is out corporate tax code so Byzantine in nature?)