What to consider when setting coffee prices

Pablo & Rusty’s CEO Abdullah Ramay discusses the pitfalls most cafés face when pricing their coffee – and ways to do it better.

Most cafés set their prices one of two ways. They either add up the costs and slap on a margin or they look at the café down the road and match their menu board.

It feels safe – logical even – but it is the wrong way to think about pricing.

This is because your customers do not care what your milk costs, and they do not care if you are 50 cents cheaper than the guy next door. What they care about is the value they get from you.

Cost-plus is a trap

Cost-plus pricing goes like this: “My meal costs me $5 to make. If I add a 200 percent margin, I will charge $15.”

The problem? Costs do not tell you what the right price is. You can still end up too low, leaving money on the table, or too high, driving customers away.

You are guessing, and usually guessing wrong. Think about perceived value instead.

Copying competitors is no better

Matching the café or restaurant next door is basically letting them run your business. But their costs, customers and service are not the same as yours. So, why should your prices be?

You do not know if they have priced well or if they are barely breaking even, so do not copy. Learn from the market, sure, but do not outsource your pricing to someone else.

Price the experience, not the ingredients

The only price that matters is the one your customer is happy to pay. That number is based on how much they value what you offer.

The taste, the service, the ambience, the convenience.

The little things that make your place your place.

That is what people pay for. And if your coffee price hasn’t changed, you should be worried.

Principles for better cafe pricing

• Price on value, not costs. Guests do not taste your food costs. They feel the care, the quality and the experience.
• Stop asking “Am I 50 cents better?” Instead ask, “What unique value do I give?”
• Find the sweet spot. Too high, you scare people off. Too low, you look cheap and lose profit. Test and adjust.

• Remember the intangibles. People happily pay extra for comfort, convenience, friendliness and atmosphere.

• Be confident. If you are offering more, charge more. Quality deserves a premium.
• Tell your story. Show customers why you are worth it. The sourcing, the craft, the community. Make the value obvious.

Who is doing this well?

You can see these principles alive in some of the strongest brands around:

• Patagonia: They sell outdoor gear that lasts and stands for business doing good. Customers pay more because Patagonia tells a story of responsibility and sustainability. Buying a jacket feels like joining a cause, not just covering yourself from the rain.
• Apple: A phone is just glass and metal. Apple makes it about design, identity and belonging. They never compete on the lowest price, they compete on experience, loyalty and desire.
• Gelato Messina: They do not sell the cheapest scoop. They sell playful flavours, limited editions and a sense of theatre. People queue and pay more because it feels like being part of a story.
• Aesop: A soap could be five dollars. Aesop sells theirs for forty because of the ritual, the scent, the packaging and the retail experience. They prove that perceived value is everything.
• Yo-Chi: A frozen yoghurt chain that leans into choice and customisation. People pay by weight and many happily pile on toppings. It is not just yoghurt, it is play, control and indulgence. The pricing model makes that feel fun, not expensive.

Creative pricing, not just premium pricing

Value-based pricing is not always about charging more for the same thing. It can also be about how you structure and frame your prices.

• Bundling: Think of tasting menus in restaurants. Instead of pricing each dish, they bundle a curated experience. Cafés already bundle a coffee and pastries for a set price that feels good value. Think about pairing something like coffee with a high margin product such as home baked cookie or an in house toastie to create a high perceived value bundle – or a high margin drink (i.e. Iced Strawberry Matcha with a lower margin product).
• Pay-by-weight or portion: Yo-Chi shows how playful pricing can be. Customers feel in control, but often end up spending more than if it was a flat price. What about coffee on tap by weight?
• Limited editions: Messina uses scarcity. New flavours each week create urgency and excitement. People rush in because they fear missing out. Seasonal signature drinks can create this type of FOMO.
• Experiential pricing: Some venues sell tickets for the experience itself, not just food. A dessert degustation or chef’s table is priced like theatre. People are not buying calories. They are buying memories. Think about a coffee and breakfast paired seating. Or a coffee Omakaise flight.

Rethink your pricing

Pricing is not about covering costs or blending in. It is about reflecting the value you create every day.

So stop hiding behind cost-plus formulas. Stop peeking at your neighbour’s chalkboard. And start pricing with confidence.

Because when you do, you will find customers are often happy to pay a little more and feel good about it, when the meal, the service and the experience are worth it.

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.