Any Other Industry…

Can you name one where the wholesaler is continually undersold by the reseller?

I’m constantly learning in my new role. Thinking about things other than serving as many people as possible, as quickly as possible. I’m seeing other angles of this business. Rising commodity prices, our current economy, and other factors have me continually talking to folks about the appropriate price for a cup of coffee.

Portland coffee drinkers have been ridiculously spoiled for far too long… and that’s a whole different subject. However, I can’t think of many other industries where the product costs the most from the source. An espresso at Stumptown costs $2.25. 95% of our wholesale customers charge the same or less… and are fearful to charge more. The same applies to our bags of coffee available all over the city.
I paid $1.50 for a double americano yesterday.

In what other industry do the resellers charge less, when paying wholesale prices, than the the actual source of the product charges. It’s not just Portland… I’ve seen it all over. Why does this trend exist and how have we let it continue this way for so long?

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4 thoughts on “Any Other Industry…

  1. A lot of it has to do with the fact that consumers aren’t seeing the value of a cup of coffee for its ingredients, rather they see a nice place on High Street and their expectation is to pay more.

    Personally I think we need to be careful with our customers, and teach them not only the value of a good cup of coffee, but also the very bad value of a bad cup. It will only be our customers who regulate who can and who can’t increase their price, and hopefully if we teach our consumers well enough, they will reward quality and punish exploitation.

  2. I think this is a great starting point for more than one great conversation relative to price. While it seems absolutely freaking cuckoo that retail-reseller shops are selling drinks and beans at markdowns from roaster-retailers, it does make a degree of sense from the standpoint of quality and value-added features (both actual and perceived) associated with procuring one’s goods at the roaster retailer. What I mean to say, is that there are very few retailer-reseller shops (though the few I know of are wonderful examples, and glimmers of hope) whether multi-roaster or exclusively one roaster, where I’ve had a reasonable expectation of the same level of quality drink as I’d receive at a retail outlet of the roaster in question. From the customer’s side of the counter, this is an entirely sensible pricing structure. I don’t have any idea how it makes sense from the retailer’s side, but my guess is that it is only a feasible model where the coffee is being used to draw customers in for significantly more profitable complimentary purchases.

    I don’t think this trend is the problem so much as it is the overall ridiculously low prices charged for espresso drinks, even by the roasters themselves. As you and I both well know, you can only make so many of them an hour.

    My question, would be more along the lines of, In what other industry can you expect to get a best of class item for $2.25 or $2.50 or whatever? Even a latte made with some real expensive milk for $4.00 is insane if you think about the fact that it really might actually be the best latte you can buy, ANYWHERE IN THE WORLD! You can’t get a 1.5 ounce pour of awful well-whisky (the less than 5 dollars a bottle, wholesale kind) for less than 5 bucks most nights, but you can get a world class milk drink for $4 or less. Coffee drinkers are beyond spoiled.

  3. Agree a bit with Jason. Also I think that people going to the retail location of the roaster are more willing to pay the full retail prices whereas people who resell the coffee feel like they have to compete with the official retail location (and its shortcomings and lack of personnel/resources) with lower prices. Also, resellers are often in less than ideal locations where people might not be willing to pay the higher price for the cup, so in order to entice those customers resellers have to lower the price.

  4. When selling a glass of wine, the first glass should cover, or come close to, the wholesale cost of the bottle (at least that’s what my wine rep says, and as I understand, is a fairly common practice for wine by the glass).

    But I’m guaranteed, within a very reasonable certainty, that the wine I will be drinking is an accurate representation of the vinter/producer’s vision, not so much with an espresso, or even filter coffee. If you can guarantee me that the shot you are pulling will be delicious, I’d by $3-$5 for it, and $5-$8 for a cup of coffee.

    However, you must deliver, consistantly, on that promise of quality. Perception of value is absolutely key, and that perception relies not just on quality of the product, but also the quality of the experience. Just some random thoughts I’m trying to string together, as I think this is a very important topic for us as an industry to confront head on…

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