This post has come about from two recent newsletters in which we highlighted how our simple pricing model is probably a little out of date.
I've simply copied the two posts here in order which explain why we feel we need to increase our prices for certain coffees and the implications that has for our subscription products as well as our wholesale pricing.
===== posted in the newsletter 1st June 2025 =======
Our regular public cuppings frequently get around to discussing topics outside the detail of the like and dislikes of the coffees on the table. During the last event we covered price and value and it seems relevant enough to give a little summary here. One of our regular attendees got in touch since he'd noticed that another roaster had released the same Peru Geisha this week from Floresmilo Ojeda but that the price they were charging was significantly different.
How can this be ? It's more than likely with these more 'exotic' coffees that we've paid the same price for the green coffee. So where does the price come from ? I obviously can't speak for Kiss The Hippo but I know their excellent reputation and personally know their Head of Coffee who I'm lucky to count as a good friend. In fact pretty much the only reason I gained access to this delicious coffee from the importer (Chacra Coffee) is because of an introduction said friend made.
During the last cupping there was a tasty coffee on the table which was gifted to us at Glasgow Coffee Festival as a friendly swap. It was a funky anaerobic natural from a Scottish roaster and received a lots of thumbs up from the attendees. I knew the coffee, the importer and the green price. When we looked up the price on their web site it showed a price of £28 for 250g. Definitely up there with some of our more expensive coffees and quite a bit more than we would have charged for the same coffee based on our pricing model.
There are a number of obvious reasons why a pricing model cannot be the same for two different coffee roasting businesses. Fixed costs such as rent, rates, power, salaries etc. Plus additional costs like bag and packaging pricing, printing costs for info cards etc and then the magic 'margin'. This could be calculated in as basic a way as a fixed percentage of the raw coffee costs, or more likely a variable figure based on some tangible and quite likely intangible metrics. Plus there's the power of the brand and simply what you can get away with. Brand power is huge in any industry and speciality coffee is no different.
In the case above of this delicious Peru Geisha, Kiss the Hippo would have significantly higher operational costs. They're a way bigger operation than our little roasting business, with multiple retail outlets, a large number of staff and significant levels of investment to enable them to setup in the first instance and then grow at the rate they're growing in one of the most expensive cities in the world. In my opinion, they're one of the best around with a great sourcing model showcasing some of the best coffees from a diverse number of producers. Their head of coffee is someone I look up to as one of the smartest and most knowledgeable people in our industry.
Does their version of this coffee taste better than ours ? That's subjective of course. We use the same roasting machines (Loring) and although we might have a different roasting approach I would like to think that we both want to minimise the roast influence on flavour profile and allow the nature of Señor Ojeda's work to be evident in the cup. A side by side of the two versions of the coffee would be super interesting. I splashed out £35 and am very much looking forward to tasting their version.
====== posted 7th June 2025 =====
If you read last week's newsletter you might have seen the piece on the pricing of coffee and how we are selling one of our exotic coffee's for less than half the price of another UK roaster for the same quantity. It highlighted how, although the raw ingredient (green coffee) price was the same there were likely very different pricing models between the two businesses.
It made me think a little more about our own very simple pricing model that I based on figures from 2019 when I moved Crankhouse to it's current location. Rent, service costs (Elec/Gas), salaries and all the associated staff costs, packaging including bags and postal boxes, insurance, maintenance etc etc. Then a rough formula to calculate an appropriate margin to make a profitable business. I've been slack in giving that basic model attention over the years and it's pretty much stayed the same even though many of those costs have risen and risen. I've been 'comfortable' thinking that the prices charged for our coffees were 'fair' from a value perspective.
Over the years many other roasteries have changed their packaging and reduced bags sizes from the traditional 250g retail packs to 225g and now more commonly 200g. The prices did not reduce accordingly and we've all seen this 'shrinkflation' occurring across all food related areas. I'm sure a Yorkie bar was as big as my forearm when I was growing up ! We kept our 250g sizes and instantly were seen as 'cheap' by our industry peers for the quality of the coffees we sell.
I mentioned in last week's piece that we were lucky to 'borrow' a couple of bags of Villamaria from a friend Pravin, from Sunday's Coffee in Portsmouth. A while ago Pravin told me I was too cheap and he had had to put his Villamaria prices up due to the increasing green costs as well as increasing costs of running his small roasting business. I still felt our pricing was 'fair' and left it as it was.
I've just taken a look at this particular coffee as an example of how the green costs have changed over the years. Our first time purchasing the Villamaria washed coffee from Colombia was July 2019 and we sold it 250g for £7. Today we sell that exact same coffee for £8.50.
Since July 2019 the green price for this one coffee example has increased by 69%. Our rent has increased by 75% and that's just two of the many elements of running this small business that need to be factored into a pricing model. In a previous newsletter I've written about the fluctuations in the 'C' market (the commodity trading marketplace) for green coffee and that how in the last 8 months we've seen the coffee costs go to their highest figures in over 50 years. That's not necessarily a bad thing assuming that the most important people in the value chain are receiving a 'fair' or better than fair price for their hard work (I'm obviously referring to farmers here).
If I was a better 'business person' I would have kept track of these increasing costs, monitored our margins carefully and increased prices gradually along the way to accommodate the increases. I could then show you (and myself) and graph of costs versus prices and it would clearly show those two lines coming together. I didn't start Crankhouse because I wanted to be a business manager. I wanted to buy tasty coffees, roast them well and sell them with a story and at a price that was fair as well as creating a brand that was respected by industry peers and customers. I think I've achieved some of that but being seen as 'cheap' was never a goal.
I'm still comfortable in the fact that in most of our coffees the prices are fair and we still have a decent margin that has kept the business profitable. But for some of our core 'easy drinking' coffees that we buy in volume.. like the Villamaria coffee, we simply have to increase their prices. This will have a knock-on effect into our house CHX blend since it's typically made up of a Brazil and a washed Colombian. It will also have a knock-on effect with our subscription products. Currently our 'classics' subs is £20/month and we cover delivery via Royal Mail 2nd class. This is a £3.35 service (or was the last time I looked), which means we're 'selling' two bags of 'classic' profile coffees for £8.32 per bag. Most of these coffees sit between £11 and £14/250g bought individually on the site. Let's take the average at £12.50 per bag which should be £25 for two then add the postage .. over £28 ie. we're simply not charging enough.
Our World-Tour subs is a different matter but it will also need to be adjusted to accommodate these increased operational costs. The counter to increasing the price for subscription products is that these are customers who have committed to purchase every month and therefore should receive a decent discount on the single purchase price of coffee. We'll send an email out to our subscription product customers separately explaining this and will expect some objections and perhaps cancellations.
We'll also need to increase the wholesale price of these core coffees and will obviously need to communicate that carefully to our wholesale customers before doing so.
I realise this was a bit long winded and hope that the increases you'll notice do not put you off supporting this business.