2007 Cappuccino Price Survey by Gilkatho Coffee

Espresso shots are being fired daily in the streets of Brisbane as baristas compete for the caffeine-conscious consumer. In the face of rising costs, cappuccino prices have marginally increased by 5c in the past year.

It’s a caffeine bath on the battlefield when more than 30% of coffee outlets disappear or rebrand each year. The strong survive and the new entrants compete just to stay open.

Each year, Milton based coffee distributor, Gilkatho surveys over 100 coffee outlets in Brisbane to determine the average price of the takeaway cappuccino. The average price in 2007 is $2.85 up slightly from the 2006 average of $2.80.

Cappuccino prices are up by 1.8% in contract to the Australian Bureau Statistics CPI (food component) being up by 3.7%. Cappuccino prices are falling behind and café operators need to rely on increased volumes to maintain profitability.

With food prices increasing at a greater rate and some milk products having increased in price by 80% over the past year, the humble cappuccino is putting pressure on business.

Staff wages continue to rise in the market. Availability of staff is likely to be a problem in the future with Australia’s record low unemployment.

Compounding the problem for café operators is the psychological price barriers that people will pay for a coffee. Different areas of Brisbane have different barriers but ultimately a $2.95 coffee is a lot more palatable than a $3.05 cup.

More than 60% of surveyed cafes decreased or did not change their prices. This indicates the competitive pressure. Research over the past five years shows that well managed franchise chains are more likely to pass on regularly small price increases and thus keep abreast of rising input costs.

Australia’s thirst for coffee grew by 65% in the last 10 years with average consumption now 2.4 kg per annum. Instant coffee companies now talk about their aging demographic, as older people are staying with “instant” while younger generations are moving to espresso and fresh beverages.

CPI	2007	2006	2005	2004	2003	2002
All Areas	$2.85	$2.80	$2.67	$2.54	$2.37	$2.58

All Areas Capp Price Increase	1.8%	4.9%	5.1%	7.2%	-8.1
ABS CPI % change over year	3.2%	3.5%	2.5%	2.5%	3.4%

ABS CPI in the Food group (take away and fast foods) for the year to June 2007 increased 3.7%

ABS CONSUMER PRICE INDEX, AUSTRALIA (CAT. NO. 6401.0) ALL GROUPS, Percentage changes-Brisbane

Methodology

Each year, Gilkatho carries out a survey of Brisbane’s Cappuccino prices in order to understand the retail price of cappuccino hot beverages and the implications for Gilkatho’s business planning. This information is used to compile the Cappuccino Price Index which is published internally in March each year. Selected cappuccino society areas in Brisbane are survey by walking into each establishment and obtaining the price of three hot beverages, cappuccino, espresso and long black for both takeaway and dine-in consumption.

About Gilkatho Pty Ltd

Gilkatho is a Brisbane based supplier of coffee equipment and supplies to hotels, clubs & offices in Southeast Qld. The competitiveness in the retail coffee market ultimately determines the attractiveness of alternative ways in which consumers can obtain espresso coffee.

The increasing price of takeaway coffee continues to support Gilkatho's business plan that it is more cost effective for office based consumers to use automatic coffee equipment to produce the same quality product at a lower price as well as achieve time savings of having the beverage prepared closer to their office.

Gilkatho was established in 1996 and operates from a coffee equipment showroom in Milton.