The other day I was given a stack of the Greater Govanhill* free magazine to be placed at my sandwich shop on Allison Street. I was flipping through it when I saw an infographic of a cup of coffee explaining why Short Long Black needs to charge £2.70 for a shot of espresso. As someone who was currently selling a very nice Tanzanian/Brazilian blend roasted in Paisley (with seven ounces of milk!) for £2 (or £1 if you also buy a sandwich) I was obviously both confused and offended, as you absolutely do not need to charge £2.70 for a coffee to make money. Without milk, even buying beans that are nearly £14/kilo, it costs me about 29p to make a black coffee, and 54p for an 8oz. latte. At £2 I make almost £1.50 per latte, so obviously I try to sell a lot of coffee because that’s a pretty great margin. It’s way better than the margin on my sandwiches, which are full of vegetables, meat, and cheese imported directly from Italy, on focaccia made every morning by a very talented baker. There’s about £2.50 worth of ingredients in each one, which is shit profit-wise, but I live in a poor neighbourhood and I have about seven years worth of history selling food in Glasgow that is purposely priced lower than most other people would price it so that it is accessible to normal, working-class residents. I could obviously charge more, certainly during the pandemic and post-Brexit, considering how much more expensive importing ingredients has become, but that would defeat the point.
I grew up in Detroit, Michigan, raised by my diner waitress mother in a two bedroom apartment on welfare. I didn’t eat anything that I would consider “good food” (or really anything that didn’t come out of a tin) until I was in my twenties, so it is very important to me that the things I make are accessible to normal people on the lower end of the income spectrum, which is most of Glasgow and almost all of Govanhill. This is not an affluent city, and this is one of the more deprived neighbourhoods in it.
Before COVID I sold a 60+ item menu of southeast Asian dishes where the most expensive item was £9.50. The average main was £8. This is because the minimum wage in Glasgow is currently £8.72, and I think you should be able to get a good meal for the cost of one hour’s work. That’s a fair price that a regular person can afford more than once a week if they want to.
I used to work fine dining, where an average meal cost a single diner upwards of £50, and that’s before they have any wine. It’s not accessible to the average person. Some people will live and die right here in this town without ever eating that kind of food, and that bothers me.
What I serve is not fine dining by any means, but it is better than average and great value for money, and any of my neighbours can afford it. That is my whole “thing”. It has been since I moved to this country eight years ago. So even though I have shrunk the menu and gone takeaway during COVID, and opened a wine bar/restaurant on top of my favourite old man pub, and opened a sandwich shop for no reason, and despite all the struggles of this past year and a half and the rising costs of all my ingredients, the price of a meal is still less than an hour of minimum wage in this city at any of my establishments, and charging that still makes me what I consider a very decent amount of money.
Which brings us back to the £2.70 espresso.
Coffee is water and ground beans. You buy the beans, you grind the beans, you force water through the beans, and it goes into a cup. Voila. Coffee. It is significantly easier to make than, say … tamarind pork belly with pineapple and peanut sugar. Or even a Parma ham sandwich with fresh basil and mozzarella. There just aren’t that many moving parts to a cup of coffee. You can basically teach a barista everything they need to know about making coffee in one shift. Some are better than others, or retain more information, and obviously you need to practice a bunch before you are fast and confident, but it’s not exactly rocket science, neurosurgery, nor even cooking.
So how would one need to charge £2.70 for beans and water in order to make a profit if I can make 36 hour cured pork belly with pineapple, in a sauce made from reduced pork broth, coconut milk, and fresh tamarind, over jasmine rice, topped with a rock sugar and roasted peanut mixture, for £8 and still make good money?
I believe every southsider knows and loves Kurdish on Allison St and those guys will sell you a chicken wrap on absolutely divine bread, so full of spiced meat and fresh salad and chilli-garlic sauce that it weighs more than a small dog, and they charge you £5 (which is an INCREASE from the pre-Covid £3.50). So how the hell do they make any money if a CUP OF COFFEE needs to be £2.70 to be economically viable? Ground coffee and water in a takeaway cup costs more than half of what a huge chicken sandwich costs to produce? I don’t think it does. And I don’t think you do either.
I start my employees at £9.50 just like Short Long Black. I have rent, rates, equipment depreciation, PRS licensing, insurance, power, internet, card reader fees, waste pick up, napkins, an accountant, etc, just like Short Long Black. In fact, so does every other business in Glasgow. These are business expenses, and anyone who opens a business will have to pay most if not all of them. It is not cheap to run even a simple retail shop, let alone a food service establishment. However, that is the cost of doing business.
Somehow, this article and its accompanying infographic rather clearly state that SLB only makes 50p per espresso in profit. So £2.20 out of that £2.70 is expenses, according to Darryl, and those expenses are your problem.
What I’m debating is this: The Cost Of A Cup Of Coffee Is Whatever It Costs To Put Coffee In A Cup. Everything Else Is Profit, And Your Expenses Come Out Of The Profit.
If your expenses are more than your profit, you go out of business, so it makes sense to keep them limited. OR, you can go by the “pass the cost on to the consumer” model, which is what Darryl is proposing in his “Darryl Docherty explains” infographic. That infographic has rent, wages, equipment, and all the aforementioned extras factored into the cost of your coffee. I don’t think that is correct, nor fair to the consumer. And I know that his point was about quality and traceability, but that falls apart when you start adding things like your bank fees and bin uplift to your pricing model.
For me at Qualcosa, a shot of espresso costs me roughly 24p. A cup and a lid cost about 11p combined. So an espresso is 35p, and even at £1 I make 65p every time I sell one. Water is basically free. I mean, technically it’s not, but I will explain my model shortly and you will see how it doesn’t really mater.
See, what I do, and have done, and will continue to do is this:
If I am opening a business, I will need all the initial costs (equipment, stock, legal fees, maybe some chairs, blah blah blah). I will need employees to work a certain amount of hours at a certain wage. I will need dumb shit like bins and squeezy bottles and sanitiser and extension cords and all the million weird bits you forget about until the day you open. Then every day/week/month there will be ongoing expenses (payroll, electricity/water, phone/internet, insurance, bin uplift, accountant, VAT, etc).
Opening the business is on me. I have to spend that money or the business doesn’t exist. Obviously I want to recoup it, so I hope I sell a shit-ton of food/coffee/whatever it is I’m selling. The daily/weekly/monthly bills are the ones I am worried about. And the payroll, of course. That is the operational cost of the business. Increased sales mean increases in wages and stock, but regardless I have a pretty good idea of my monthly expenditures. I like to also have a category called “miscellany” for whatever I may have forgotten, or for things like fridge repair or window replacement if we get robbed, etc. I usually set the miscellany at £1000/month because weird shit happens all the time, especially in Govanhill.
Once you know your operational costs, you take the whole month’s total and divide it by the number of days you are going to be open, and that gives you a single number. That number is what you need to make per day to break even. Everything past that is profit. Period. So if you have a shop that costs £8000 per month to operate and you are open five days per week (20 days per month) you need to make £400 per day. That’s it. It literally does not matter what you are selling or at what price. You have to sell £400 of it to break even because all the costs were already factored in before you opened the doors. If you sell £600 of it a day you make £4000 that month and you go rent a jetski and get a tattoo of an eagle all across your back with chainsaws for feet. If you only do £300 per day you have yourself a £2000 deficit and you’re going to have to start banging dudes down at the docks or start boosting cars like your cousin.
An alternative model, which is the one proposed in the article, and apparently used by SLB, is to use those expenses to figure out what to charge you, the customer. The problem with this is that a bad or unscrupulous business owner can have enormous, unnecessary expenses which you are then expected to cover.
I’m not saying Darryl is pulling shit. I have never met the guy. All I have is this stupid infographic living rent-free in my brain, and his refusal to have this debate where our customers and neighbours can see it.
But what I am saying is that if SLB, even accidentally, decides to do any of the following: rent the most expensive coffee machine available on the open market, employ way too many staff when they only need half, buy super expensive cups and lids, spend a small fortune on signage and decor, display their wares in a case that costs £350 when a £100 model is readily available, choose a location where rent and rates are astronomical, fail to shop around for a good rate on electricity, pay someone to do the admin they don’t want to, hire some people to clean the windows every week and water the plants instead of doing it themselves, throw a staff pizza party every Thursday with an open bar, etc those could all be seen as poor business decisions, and/or unnecessary increases in expenses, and if the price of your espresso is based on their expenses, well … I guess we can all see how one could say your espresso needs to cost almost £3 in order to be economically viable.
But if someone opens an identical coffee shop a few blocks away, off the main road, and they buy the exact same beans and pay the exact same wages, but they just have a handmade sign and two employees, and they just get a wee Ikea case to put their wares in, and buy a used coffee machine on Gumtree and have it refurbished, and really shop around for the best deal on biodegradable cups and lids, and they sit up every night watching youtube videos about barista shit then you could go there and get THE EXACT SAME CUP OF COFFEE for £2 and the owner of that coffeeshop would actually make WAY MORE than the 50p this article claims SLB makes per shot, and you, the person paying for it, would be able to buy more of that coffee more often, and the circle of life continues. On and on, ad infinitum.
I have always been a “sell twice as much at a lower price” kind of guy. If I sell 100 sandwiches a day at £5 then I do £500 that day in sales, and if someone next door sells 50 £10 sandwiches then they also do £500 in sales and work half as hard. The difference is in the principle, which is that I believe most people in this neighbourhood can’t afford a £10 sandwich unless it’s a birthday treat or something, so they will not come every day, so my clientele would be rich outsiders chasing luxury goods, and those are not the people I want to serve. Whereas almost everyone can afford a £5 sandwich twice a week at least. So yes, I have to make more sandwiches, and work more hours, and I make less money because of that, but the clientele is hopefully all regulars, and they are all local, and there are a lot of them, and the £5 sandwich shop becomes an institution, just like Kurdish, that everyone can count on to deliver good food at great value. A £10 sandwich is never going to be good value because it’s a sandwich. Neither is a £3 cup of coffee. I’m not saying the coffee won’t be good, I’m saying the VALUE will not be. Because I care what the consumer thinks, and how and where they live, which is Govanhill, which while in the process of being gentrified is still primarily a poor neighbourhood full of poor people.
Every business has expenses. I am of the belief that you start small and keep them manageable so you can sell at a fair price point, and you can always upgrade your interior or your coffee machine or whatever later when your model proves out, without having to raise the cost to the customer. The more modern take is that you charge what you think people will pay, and if you can get people to pay double what they should then you are a savvy businessman and you deserve your profit.
“We pay fourteen local people the Living Wage at minimum” also bothered me.
That implies that SLB has 14 employees. I can only assume that Darryl was including the staff at Patricia’s as well, and possibly the staff of the upcoming bakery, because there is no way a cafe that’s only open during the day, even seven days a week, and has been takeaway-only for the entirety of COVID, can possibly need 14 members of staff. I have THREE businesses, a 45 seater wine bar/restaurant, a takeaway, and a sandwich shop, and I only need seven employees to run them all. Maybe nine if I want to go on holiday. Do the kids at SLB only work 1 hour a week? Because if it employs 14 very part-time employees then paying a living wage doesn’t really matter because nobody is getting enough hours to live on.
And hiring a baker, which is a skilled job that in other countries commands a pretty sizeable salary, for £9.50 per hour when the minimum wage is £8.75 is not that impressive either. It’s what I pay the people who assemble sandwiches, a job that is as easy and unskilled as they come. Literally almost anyone can do it, unlike baking thousands of artisan confectionaries and loaves of bread. So why isn’t SLB’s new baker making at least £12 or £13, or being given a strong starting salary? Just because it’s a living wage doesn’t mean it’s a good one for the job at hand. The margin on baked goods is insane. An efficient baker can, in a single eight hour shift, produce several thousand pounds worth of product for retail sale, and having an in-house baker will save the average cafe a small fortune in pastry expenses over the course of a single year.
So if a person who is charging £2.70 per shot of espresso in a neighbourhood where 85% of the residents shop at Lidl for their groceries and live in a flat with four other people is content hiring a skilled employee to work in the much more affluent Giffnock, to which they would have to commute, then I think that employee’s absolute minimum starting salary should be £10.80, which is the cost of four measly espressos at that employer’s establishment.
Meanwhile, twenty yards away that same new baker making £9.50/hr can come and get an entire chicken katsu with rice and curry sauce, or a bowl of hot noodles topped with spicy pork mince and cashews, or a curry full of jackfruit and sweet potatoes and creamy coconut milk, for £8.50, and the kid who washes her dishes will get £9.50/hr to do that despite dishwashing being a hell of a lot easier than baking things.
But then I don’t make that baker pay for my business expenses as part of her dinner. If I did that same meal would probably run her £17, which is the spiritual equivalent of a £3 flat white. It’s what my very religious uncle Phil would call “a funny situation.”
Or “bullshit,” as my less religious uncle Dave would put it.
It’s total bullshit. £2.70 is what you can convince certain people to pay, but it is too much for a shot of coffee, in my personal and professional opinion. The average price of a latte in Sydney, Australia is £2.10 and it costs a hell of a lot more to live and work in Sydney than it does in Govanhill. I have paid less for a really nice cup of coffee in New York City, one of the most expensive cities on the planet. If I ever have a day off I’ll nip down to London and see what the average is down there. If it’s £2.70 you have to ask yourself how a good old local boy from the neighbourhood can’t figure out that we’re not in Stoke Newington.
I’m not saying that sustainability and traceability in the supply chain don’t matter. They do. I am saying that if you can’t find a way to put a cup of coffee in someone’s hand for less than £3 then Govanhill is a weird place to put a luxury coffeeshop when Strathbungo is a five minute walk away and has quadruple the average income. This neighbourhood will be what we choose to make it. You can find me most mornings on Allison Street sweeping the entire strip between Gregg’s and Desi Curry Palace, and at night you can catch me up above McNeill’s selling people a good dinner for £8.50. I live on Victoria Road. I’m not from here, but I live here. Where you won’t catch me is in Giffnock, charging people £3 for a 6oz coffee and patting myself on the back for it. I can see the potential of this neighbourhood in every brick, and I genuinely do want it to flourish. But my idea of flourishing does not end up with it becoming some kind of carnival sideshow, with the customers I’ve been serving for the past three years unable to afford to rent a flat here and their replacements sipping £5 bottled water on their way to eat a £12 cupcake.
Maybe yours does. We will just have to see how it goes. JV
*“Owing to housing density, increases in population through migration, overcrowding and high levels of occupancy, the south west of Govanhill is one of the most densely populated areas in Scotland. This places strain on local infrastructure and adds to community tensions, environmental problems and other social issues. Despite this focus on the south west of the district the highest levels of multiple deprivations exist within North Govanhill, particularly in the predominantly social housing area to the east of Cathcart Road. As of December 2020 the Scottish Index of Multiple Deprivation (SIMD) and other sources indicates that:
7 of the 12 data zones making up Govanhill are within the bottom 15% of data zones in Scotland. One of these data zones occupies the bottom 5% of data zones in Scotland;
20% of the population do not have any qualifications compared to 13% across the whole of Scotland;
1176 (17%) of the population is (officially) unemployed.
Govanhill has long been recognised as one of Scotland's deprived communities and this continues to be borne out in SIMD 2020. All but 1 of the area's 12 datazones fall into the bottom 30% of all Scottish datazones […] This indicates particularly acute deprivation in much of the neighbourhood. In addition to the above, all but four of Govanhill's SIMD datazones occupy the bottom 15% of datazones in Scotland in terms of income.”
-a basic wikipedia search (or you could just walk around)