What's the profit on a cup of coffee?

TAMPA - It’s no secret that restaurants have sizable profit margins on their beverages.  After all, you need something to wash down that oversized order of over-salted fries.

In the last few years, coffee has become one of the big profit-makers for the food service industry.  According to the Specialty Coffee Association of America (SCAA), coffee and coffee drink sales in coffee houses and quick service restaurants are expected to reach nearly $19 billion in 2011.

But how much of that nearly $19 billion is actually going to be profit? The cost breaks down into these components: the coffee, the water, condiments (like cream, steamed milk, sweeteners, etc…), the cup and lid, the labor and the overhead. All of these factors are built into the final consumer price.

Ric Rhinehart, executive director of the SCAA, “The cost of the coffee is a relative small part of the equation.” Based on a 16 oz. cup of coffee at $1.85, the costs break down like this:

$0.64 for the coffee itself

$0.13 for the cup

$0.03 for the lid

$0.04 for cream and sugar

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$0.84 for what the barrista hands you. But what if you add in all the unseen costs of simply being in the business of selling coffee? Then you have to add in these additional costs:

 $0.33 for the labor

$0.11 for the lease on the land

$0.04 for utilities

$0.05 for advertising and marketing

$0.03 for research

$0.22 for general administration

$0.13 for taxes, interest, etc…

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$0.91 in intangibles are then added to cover the cost of production.

So of your $1.85 cup of coffee, $1.75 is simply the cost needed for a retailer to break even. But we do live in a consumer economy meaning your favorite coffee retailer gets to keep a big, fat, shiny dime for every cup you purchase.