BRISBANE: Caffeine conscious city folk are at the mercy of rising food prices as the price of their humble morning coffee has risen 6.6% in the last 12 months. The average price of takeaway coffee is now greater than $3!

Some CBD coffee outlets charge just $1.50 for a hit of caffeine, the cafes with location, spare seats and style are now charging upwards of $3.30.

For the past six years Gilkatho has compiled the Gilkatho Cappuccino Price Index from survey results from visiting coffee outlets in 5 espresso friendly areas of Brisbane.  The CPI (Cappuccino Price Index) rose a mighty 6.6% in 2008 compared to just 1.8% in 2007.

The squeeze is on. At the heart of this rise, is the increasing price pressure in the takeaway food market. Retailers are under pressure from rising costs in the face of slowing consumer spending. For instance, as a result of the 'credit crisis', landlords seek to increase shop rents to cover higher interest costs. These same rising interest rates mean that consumers have less money to spend on the services that coffee shops sell.

But selling prices can't rise! Coffee outlets are appearing everywhere. Many CBD buildings now have coffee outlets in their foyer. A better return for the building owner, more convenience for the occupants and more competition for the consumer dollar.

In the past year, the office coffee machine has become an office necessity! With Queensland's current skills crisis employers have to compete to make their workplace more attractive for employees. With the option of having a good and free coffee at the bosses expense, the office coffee machine also puts pressure on coffee prices. While it might cost ~$3 for a takeaway coffee, the cost of an inhouse coffee would be less than 50 cents...and very convenient!

My prediction for the coming year is that fierce competition in the market will continue. Experienced operators will continue to do well by focussing on the quality of product. With a booming economy, people are still willing to pay for good quality.

As shop leases expire and landlords pass on rent increases marginal operators will exit the market. Will new entrants want to enter an over-supplied market? That will depend upon the financial returns available in thealternate pastimes. With reports of very low owner returns and long hours in the food industry, alternatives may become more attractive

For consumers, they can expect to be wooed with loyalty programs and promotional offers. Most important for the consumer though is that they enjoy their beverage. If cafe operators try to cut costs, reduce cup sizes or cut corners, the consumer can easily walk away. Location & Quality are paramount in 2008.

For more information and editorial comment:

Wayne Fowler
Managing Director
Gilkatho Pty Ltd

Ph 07 3876 1210