'Latte price war'?

[hopkin]

This is an easy one for wearing your conciousness on your sleeve, but while some of us may support Starbucks here and there, I'm sure many opposers don't think twice about the Phillip Morris/Altria products they consistently keep in their homes without a second thought, or things of the like. 

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Kraft Foods, the largest branded food and beverage company headquartered in the United States markets and distributes Starbucks whole bean and ground coffee in grocery, mass merchandiser and club stores.

Kraft Foods is the food arm of the Altria group which also owns the Philip Morris tobacco group.

[kurtisk]

This is an easy one for wearing your conciousness on your sleeve, but while some of us may support Starbucks here and there, I'm sure many opposers don't think twice about the Phillip Morris/Altria products they consistently keep in their homes without a second thought, or things of the like. 

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Kraft Foods, the largest branded food and beverage company headquartered in the United States markets and distributes Starbucks whole bean and ground coffee in grocery, mass merchandiser and club stores.

Kraft Foods is the food arm of the Altria group which also owns the Philip Morris tobacco group.

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And same with the mass-produced beans that many other "indie" places carry...

I'm just saying that it's simply not as black and white as it may seem...

Edited July 29, 2005 by kurtisk (log)

[Keith Talent]

I thought Phillip Morris was being spun off from Kraft as a method of insulating the larger group from tobacco lawsuits? Did that not happen?

[Sam Salmon]

It is very easy to sit back and comment on Starbuck or any of the other big coffee chains. from our high speed connected / coffee infused desks, but let's remember that we are all supporting them. 

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Well some of us.

As it happens I've never drunk a cup of coffeee in all my time on earth and never will-a few sips was enough.

Furthermore I think the stuff is poison of the most noxious and insidious variety.

Poking a little fun at 'coffee culture' was my reason posting the article-the subsequent raving/growling/snarking and shaking-you all know where that comes from

[Irishgirl]

COFFEE WITHDRAWAL/ADDICTION!!!!!!!

(Of which I have none)

But it is interesting to me to read about some of this. Thanks Sam!

[Andrew Morrison]

I believe in coffee. It is my buddy.

[hopkin]

there's an article in today's vancouver sun about this. one of the owners of Take 5 Cafe is quoted explaining how they offered $2 lattes for a while when they first opened. he admits that it unrealistic to charge $2 for a latte unless you use lower-quality coffee.

[vin]

Actually Take 5 really started the 2 dollar latte thing. They did it to compete with us at Caffe Artigiano when we opened up our Hastings street cafe last year and they failed with the concept.

Customers want quality and value together. You can't fool customers with discounts. There's usually a reason to lower your price on something... and that's to create some sort of traffic. (i.e. let's get them in, fool them with an inferior product and sell it cheap... and just when we get them hooked[they never do] we raise our prices up!)

2 dollar lattes don't work in our industry and are a stupid way of promoting growth in our industry. I for one would be willing to create an espresso with very rare coffees ( such as Yemen, sold exclusively to Saudi Royals only, double processed Australian Mountain top, and more rare gems) and use some really fine Organic dairy products and serve a $5 latte. I think if we created this option in a coffee house setting we would raise the level up and beyound what is present available. Why not have a normal priced coffee and more pricer coffees and let the customer choose?

When we chooses wines we have a price range t choose from. Heck there's even a price range on water bottles.

Thinking like this is what has Starbucks worried, not dicounted lattes!

[Rebecca263]

Snobby Starbucks bashers make me laugh.

[Daddy-A]

Snobby Starbucks bashers make me laugh.

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Can you explain what you mean? I haven't seen any bashing, only people expressing opinions. I'm curious to find out what yours is.

A.

[vin]

Sorry about all the spelling mistakes. I was running out the door while posting. I was late for my reservation at Il Giardino. What a beautiful restaurant to experience in the Summer in Vancouver. By far, in my opinion, the nicest patio in the city.

Vin

[*Deborah*]

BTW I feel like my $2 less latte got turned into an apocryphal $2 latte...to clarify, the shop that I frequented charged nearly $4 including tax for a latte that cost nearly $6 including tax at the Starbucks that eventually opened across the street. And, actually, they were throwing in a shot for free as I went there 5 days a week for a latte and a muffin, and also went there for lunch several times a week. So I don't feel like they were skimping on anything or charging unreasonably low rates. The only change they made when the green machine opened was to increase their signage with a sandwich board and some neon in the window. They're still going strong, btw, several years later.

Edited July 31, 2005 by *Deborah* (log)

[Daddy-A]

After a discussion with phaelon56 (host of the Coffee & Tea Forum) we've decided to move this discussion to the Coffee & Tea Forum.

Is the $2 latte (or its equivalent) happening elsewhere?

Is a good latte possible for $2?

Thanks!

A.

[phaelon56]

A good latte for $2? It depends on definition but for all practical purposes the answer is a resounding NO!

For those who insist that a latte is just a coffee flavored milk drink I agree only if it's referring to the "1 ounce of espresso to 20 ounces of milk" mass market crap foisted on us by people like Starbucks but in the growing independent specialty coffeehouse scene that's often not the case.

My definition of a "latte" (as I drink them at home and at work) is a double shot of espresso (1.5 to 2.0 fluid ounces or so) combined with about 3 ounces of microfoamed milk that has been "stretched" to yield about 4 ounces of velvety goodness. It's really a traditional cappuccino served in a proper six ounce cup but without the foam "cap" that some folks seem to think is a prerequisite for being a cappuccino. If I'm in a cafe and want the closest equivalent I order a "tall" latte (12 oz cup) with a quad shot (4 ounces of espresso to about 7 ounces of foamed milk).

If I was opening a new coffeehouse, reopening one I'd acquired that had been mismanaged or had quality/reputation issues or doing a promotion such as an "X number of years in business" celebration... I'd offer $2 latte's for one week and make darn sure people understood that this was a promoted price only for a very limited time duration. Then advertise the hell out of it.

The cost of labor and overhead added to the cost of equipment, quality beans and milk (of which there is a fair amount of waste when it's properly steamed by the drink rather than in giant pitchers a la Starbucks) yields a unit cost per latte that's far higher than the public might think. if you think that $4 latte costs 50 cents to make you're way off in your calculations.

As others have pointed out, if you're a shop doing business with roasters or brokers who are making conscious buying decisions targeted at helping coffee farmers and their families earn a living wage - educate your customers about that fact. Although it seems to be common knowledge to many of us in the coffee business, the general public is NOT aware of the "coffee crisis" and doesn't understand why it matters (or how it will affect them eventually in terms of drastically higher coffee prices once market conditions and the big conglomerates drive enough commodity coffee growers to other crops.

But lowering prices to compete against Starbucks or anyone else? Hell no! There's a steadily growing group of independent coffeehouses in North America that are focused on the pursuit of the absolute highest quality in their espresso drink and coffee offerings. To lump all independents in together and suggest that they're willing to compromise quality in order to compete with Starbucks on price alone is absurd and unfair. The people who would do that are not true coffee people and in a few short years they'll probably have some other business selling something else that they think is "the next big thing".

As a case in point I look at a pizza shop in my neighborhood. When the owner "Junior" opened in 1971 he offered two slices or two pizzas for the price of one for the first week and advertised heavily (two slices for 25 cents - those were the days!). He moaned and groaned about the profit he was losing but his father, who'd been around the business for far longer, insisted that the promotion was crucial to driving traffic in the door early on and proved to be right. Fast forward to 2005. Junior is still in business and despite all the competition that has arisen in that time with constant "buy one get one" offers or "large cheese pizza only $6 to go on weeknights".... he has not fallen prey to discounting.

At one point back in the late 1970's when the local pizza discounting started he made a conscious decision to never deviate from the quality standards he'd established for ingredients and to base his selling price on the material costs plus necessary profit margins that his business model called for. His hunch, which has proven to be correct, was that he'd have a sizable customer base who were more interested in quality than quantity.

At this point his two item large pizza is about $13 - most of his competitors range from $7 to $11 for the same pie. But guess what? Business is thriving because people know the difference.

I look forward to the day that this analogy will carry over on a wider basis to the espresso and coffee market - we're already seeing it happen and it's developing slowly but surely.

The average Starbucks store has gross annual sales of almost one million $ US. That's a huge number and a large portion of those sales are from non-coffee items - pastries, premade sandwiches, non-coffee based frozen blended drinks etc. . It's tough to make a go of it on espresso and coffee alone unless you're in a fairly sophisticated urban market with high population density and lots of pedestrian traffic.

I suspect that some of my peers in the coffee business will disagree with me on this point but IMHO the way to compete with Starbucks in most markets is to do much of what they do - provide a product offering that encompasses far more than just coffee but outsource the non-coffee items. Bring in quality pastries, premade wraps/gourmet sandwiches etc. from other independent vendors. Get people in the door by offering what they're presently going elsewhere to buy but then up the ante by having far superior coffee and espresso quality relaive to what any chain can ever offer.

It's not rocket science - if Starbucks can sell a million $ per year of goods in coffee shop there's no good reason why a savvy independent can't equal that level and still blow away any chain when it comes to quality.

Gee... sounds almost as if I want to open my own shop

[Maria]

I went to college in Seattle in the 80s. Believe me, as a student, coffee was "it"! However, Starbucks was just not on our list for best coffee shops. Most of the people I knew preferred The Alegro, The Last Exit (that place has been around forever and if you are visiting Seattle you have to go there for the historic interest alone), and the B & O Espresso. These were places that had a distinct style and atmosphere to the sterile uniform cookie cutter Starbucks. I actually live in a city that does not have a single Starbucks (which is odd because it's a city of almost 1 million people.

Edited August 1, 2005 by Maria (log)

[sanrensho]

For those who insist that a latte is just a coffee flavored milk drink I agree only if it's referring to the "1 ounce of espresso to 20 ounces of milk" mass market crap foisted on us by people like Starbucks but in the growing independent specialty coffeehouse scene that's often not the case.

My definition of a "latte" (as I drink them at home and at work) is a double shot of espresso (1.5 to 2.0 fluid ounces or so) combined with about 3 ounces of microfoamed milk that has been "stretched" to yield about 4 ounces of velvety goodness.  It's really a traditional cappuccino served in a  proper six ounce cup but without the foam "cap" that some folks seem to think is a prerequisite for being a cappuccino.

As you say yourself, your latte is really a "cappuccino." Yours sounds much better than the typical x0:1 milk/coffee ratio that is foisted on the majority of the population. Literally, "milk with a bit of espresso."

Out of curiosity, what is the typical milk/coffee ratio of a latte if ordered in Italy, etc.?

[phaelon56]

I don't have the personal experience to confirm that but a traditonal cappuccino cup is six ounces. Depending on whether one gets a single or double shot, what the shot volume is in that cafe and whether the shot is regular or ristretto that would yield a foamed milk to espresso ratio ranging from as 5:1 to 1:1.

I suspect that in reality it varies from one place to the next but not to the extremes that my ratios suggest.

We need an Italy expert to weigh on this.

Whole Latte Love's web site claims that a "traditonal Italian cappuccino" is five parts milk to one part espresso or simply an 80:20 ratio.

Here in the US there's a sort of mass market definition that's been promulgated by Starbucks among others (despite the fact that their own drinks don't adhere to it) of a cappuccino as being equal parts espresso, steamed milk and foamed milk. By this definitio a latte is defined as being 2 parts steamed milk to 1 part espresso but this ratio is rarely if ever the case in US cafes.

[sanrensho]

I asked an Italian-Canadian friend (who's been back to the home country numerous times) today about ratios. He's no coffee fiend, but he claims 1:1 for cappuccino and 2:1 for latte.

He also made sure to remind me that "There's just something about the espresso in Italy..."