Unpacking the price of a $6 coffee

Pablo & Rusty’s CEO Abdullah Ramay explains the hidden rising costs that mean cafés should charge more for coffee.

We’ve all heard it, or maybe even said it ourselves: “Six dollars for a coffee? That’s getting ridiculous.”

But is it?

The price of a flat white or latte has been creeping up. Inflation is real, costs are rising, and cafés are under pressure. At the same time, customers are feeling the squeeze of rising cost of living.

Everyone notices the extra 50 cents on the menu board, but what most don’t see is what goes into the cup. When you know what makes up that $6, the story changes.

The bigger picture: cafés under pressure

The hospitality industry is doing it especially tough right now. Around one in 10 venues are forecast to close this year. Margins are razor thin at just two to three per cent, which means most cafés are barely breaking even. Some do a little better, many do worse.

It’s not just about individual operators either – every café closure represents lost jobs, lost community, and a slow erosion of the coffee culture Australians hold dear.

What makes up the $6 coffee?

Coffee

Coffee beans are not just a commodity. Australians expect great-tasting specialty coffee and roasters need to source ethically and sustainably. Brazil’s recent droughts pushed prices sharply higher, so to keep buying specialty beans, cafés have to charge more.

Milk

Australia produces some of the best dairy in the world but droughts, floods, and industry challenges have driven costs up. Many cafés also use premium or specialty milk that pairs better with coffee but comes at a higher price.

Cups and lids

Sustainability has changed the game. Biodegradable or recyclable cups and lids cost more than the old ones. Add freight costs and a weaker dollar, and prices rise further. It’s an investment in the future, but it shows up in your coffee.

Wages

Hospitality employs hundreds of thousands of Australians. Wages have risen and rightly so, because staff deserve fair pay and good workplaces. But wages are semi-fixed, if it’s a rainy Tuesday and sales are slow, staff still need to be paid. Labour is the single largest cost in a café, often close to half the price of the cup.

Equipment

A decent espresso setup can cost upwards of $20,000. Better equipment makes better coffee, more consistently and faster and helps cafés cope with staff shortages, but that investment carries finance, depreciation, maintenance and repair costs that flow into the price of every cup.

Rent

Rent doesn’t change if it’s a quiet day. In most leases, it goes up four per cent a year or by the consumer price index (CPI), whichever is higher. That adds pressure, especially in CBD locations where foot traffic has become unpredictable since COVID-19. Rent is one of the biggest reasons some cafés survive while others shut their doors.

Operating expenses

Then there’s everything else: utilities, repairs, pest control, insurance, merchant fees, technology, marketing, waste removal, council charges. These ‘small’ costs pile up and are as essential as beans or milk.

The coffee value gap

Here’s the uncomfortable truth: Australian coffee is cheap by global standards.

A small coffee in Sydney costs around $4.50 to $5.50. In London, New York, or Paris, the same coffee can cost closer to $9 or $10. That gap is real and it’s unsustainable.

The cost of living and doing business here is already high. Australia ranks among the most expensive Organisation for Economic Co-Operation and Development (OECD) countries for basic goods and services. Comparing a $6 coffee here to a $9 one in New York is fair. The wages, rents, and input costs are not that different.

If we continue to underprice our coffee, the only way cafés can cope is by cutting corners: less training, cheaper beans, lower quality. That’s not what built our coffee culture.

The misunderstanding

Most Australians simply don’t know what coffee costs globally. In our own research, when people were asked to guess, they thought prices overseas were about the same as here at around $5.

When they were told the truth that coffee in major cities is $9 to $10, sometimes even $15, their willingness to pay shifted dramatically. The ‘fair price’ they were willing to accept jumped by more than 30 per cent.

Education changes perception. The problem isn’t that customers are unwilling to pay more. It’s that they don’t always have the context.

Why it matters

A café isn’t just selling liquid in a cup. It’s providing an experience, a community space, and a ritual. The $6 price is not just about beans and milk; it’s the sum of everything that keeps the doors open.

When you pay $6 for a coffee, you’re supporting a farmer in Brazil, a dairy producer in Victoria, a barista in Sydney, a landlord, an importer, a roaster, a café owner, a local community and the survival of Australia’s coffee culture.

The next time someone asks “why is coffee so expensive?”, perhaps the real question is: how has it stayed so affordable for so long?

Article written by Abdullah Ramay, CEO of Pablo & Rusty’s Coffee Roasters. Abdullah is a purpose-driven leader and technology enthusiast, uniting business strategy, leadership, and innovation to create meaningful impact in the specialty coffee industry.