The true cost of an iced latte
Who doesn't feel like a nice cold drink as the thermometer hits 24°? We are going to show you what goes into an iced latte – flavours optional.
The basic ingredients
This is a very simple recipe but as you can see, we need to include the cost of disposables also! Most sales of this product would be takeaway. Giving customers discounts for bringing their own cups is a win all round – but that's a whole other post. We have also included the cost of one sugar – some customers will have sugars, and some won't, so we took one as an average.
Milk
This is a very expensive ingredient and there is no one set price to the coffee shop on this; the smaller operators will pay more just because that's the power of (or lack of) bulk buying. We have taken the price to be €1.05 per litre here. This of course applies to the cost of all your ingredients — it's really important to keep checking in with your suppliers and make sure you are getting value for money and making enough of a margin.
Packaging
As outlined above we need to work with customers to remove packaging – our pricing here was after deep and long negotiations – coffee shop operators will need to review against their own prices to see how they fare on this one.
Variations
As anyone who is keeping an eye on our recipes can see, profits are not an exact science and if the cost of ingredients is not reviewed daily or weekly with suppliers then it's very easy for our neighbour bistro or corner café to get into financial difficulties.
Profit margins in perspective
So, at first glance, when you are charged €4.00 for a simple iced latte to cool down today, it might appear that the coffee shop you are buying it in is making a substantial profit. However, when you break down the expenses involved as we have done here, it becomes clear that the profit margin is much slimmer than it seems. After considering all costs, the operator is left with just €0.32 in profit per latte. Also, this example is the 'best case' but if something doesn't fall into its correct place then the maths may not add up.
You would have to sell a lot of lattes to be retiring off to warmer climates!