Coffee - Should It Be Priced LIke Wine, Beer or Water?

There's been a lot of discussion in the specialty coffee community the past few years on retail coffee pricing and whether the market for premium coffee is truly elastic.

The Specialty Coffee Association of America (SCAA) and numerous top roasters have opined that a great coffee should command a fair price - it should be sold as a complex product like wine, not a commodity like supermarket coffee. 

For the most part, consumers haven't appeared willing to accept that opinion.  However, that may be changing.

Recently Caffe Artigiano in Vancouver, BC paid $49/pound for a lot of extremely well-regarded Brazilian beans.  This would equate to something like a $7.50 cup of drip coffee.  And a few hardcore coffee geeks would happily pay it, much like some folks will drop $750 on a bottle of Petrus from a great vintage.  All wine is not just wine.  And all coffee is not just coffee.

Interestingly, Caffe Artigiano already prices their cup coffee by the specific varietal or blend (prices are Canadian).  They were among the first cafes to adopt the Clover, which allows them to grind drip coffees to order a cup at a time.  This is where the upper echelon of specialty coffee retailers is headed (and hopefully we'll be among the first in Pittsburgh with a Clover sometime in the next couple of years). 

Wine drinkers know and accept that a Yellowtail Cabarnet Sauvignon is inferior to a Silver Oak Cab which is itself inferior to a Petrus.  Beer drinkers recognize a bottle of Coors Light is infinitely inferior to a Penn Marzen which itself is inferior to a Three Floyds Russian Imperial Stout (some might even say Coors Light is inferior to tap water, but that's a different subject).

But while most consumers can accept that a cup of Starbucks is worth more than the same size coffee from Sheetz, they don't accept that there are levels of coffee excellence well beyond what Starbucks serves up.  So for drip coffee, everyone in the industry is at about the same price ceiling, regardless of quality of the beans, or the skills of the roaster and barista involved.

An objection to this pricing was eloquently stated in an article written by Nick Cho of Murky Coffee last year:

Coffee is a crop, that cannot forever be marketed, sold, and purchased the way it is today. To piggy-back on Mark Prince's article from a couple months ago, if wine was sold the way coffee is usually sold today, you'd go to a store and see a row of five to twelve bottles, with labels that say, "FRENCH WINE," "AMERICAN WINE," "ITALIAN WINE," "AUSTRALIAN WINE," etc. No vineyard or winery name, no vintage year, no nothing. Just country of origin, and that's it.

Admittedly, some of our customers might be OK with that.  There aren't that many other options for a go-cup of decent coffee around here, so for some percentage of customers, our ability to provide a caffeine delivery vehicle is sufficient, regardless of how good it tastes.

But an increasing number of our customers wouldn't be happy with that.  They're starting to realize the breadth of the coffee world.  They may not know all the details as to why a Fazenda Vista Allegre Estate crop is better than most any other Brazilian.  But they do know it tastes different, in the same way that a fine, complex, aged Shiraz tastes different than Two Buck Chuck (or Gallo Jug, since they don't sell Two Buck Chuck around here).  You can more readily taste specific fruits, spices and other qualities in addition to the "coffeeness".

But it's not just the bean that merits the price.  It's the roaster - does s/he create a milder roast (full city) or a dark roast (French/Vienna).  And it's the coffeeshop - do they store beans properly.  Do they grind to order.  Do they know what they're doing?

Because so much depends on what happens after the beans leave the grower, the comparison to pricing like wine starts to fall apart.  With wine, the vinter specifies the bottler so that's under their control.  Almost all wine merchants know how to handle a good wine.  It's then up to the consumer to know how to store the bottle and when to pull the cork and enjoy.

With coffee the bean is just the raw material.  The roaster needs to know how to match the perfect roast temperature to the specific crop.  And if the coffee is to be used as an espresso blend, you have to include the barista's skills.  Do they know the proper temperature and pressure for the perfect extraction of crema and flavor of this particular roast?

A sommelier has few chances to screw up a glass of 1987 Silver Oak Bonny Vineyard other than pouring it down your shirt.  But a barista can destroy a Cup of Excellence bean in seconds with a poor grind, poor tamp or over- or underextracting by pulling the shot for too short/long.

So in a perfect world, there's an acceptable price point for the bean, one for the roaster and one for the cafe/barista.  We just don't know what that is yet because nobody can readily agree how to get there.

Because there's a glut of decent (but not great) coffee beans in the world market, it's become increasing difficult for coffee farmers to exact prices that would allow them to provide a liveable wage to bean pickers and processors.  That's why "Fair Trade" labeling was created.  But it's not enough. 

At some point quality beans are going to become more expensive because they're worth it, much like grapes in Napa are worth more than those grown in Dormont (if that's even possible).  Caffe Artigiano is among the first to make a statement in this regard.  Others will follow.  Even our own roaster sells some of its Cup of Excellence beans at prices up to $26/pound, which makes it all but impossible for us to serve them here.  We'd have to charge you about $4.50/cup.  And you're not ready for that.  Yet.

Barista skills are also improving.  There's a saying in Seattle that "nobody goes to Starbucks except for meetings".  If that's true, it's likely because every other shop has better talent behind the bar.  And you're going to see more of that in Pittsburgh - it has to happen.  We're just among the first to make barista skills part of our experience.  Everyone else will have to do so eventually because it's where the rest of the country is headed.

We'd like to think that makes our coffees and espresso worth more.   But we're realists and our prices are pretty much the same as everyone elses'.  But eventually there will be price differentiation because of beans, roasters and baristas.  Make no mistake that it's coming.  You'll have your estate picked/gourmet roasted coffees at a premium price which might exceed $5/cup.  And you'll have everything else at a more affordable level, which might be pretty good coffee, but it won't be the best.

It won't happen this year, or next, or probably even the year after that.  But sometime relatively soon.

Comments

[Matt Carlson]

Your points are well taken, but I think wine is simply the wrong model. It's attractive because of the extreme difference in value associated with vintage, but the quality of wine is much more stable over time in its end form.

I think the coffee industry ought to be looking at other food products as a model; perhaps the beef industry provides a better corollary (e.g. “Beef” = grocery, “Angus”= Starbucks, “Kobe”=Intelligentsia). Some restaurants are able to sell single ranch beef, but it's very rare. Here, preparation has much more to do with final taste.

[Rich]

"...the quality of wine is much more stable over time in its end form."

True enough.

Beef is an interesting analogy. It does make some sense if you take into consideration the entire price/service/quality experience: Mortons/Ruth Chris vs. Outback vs. Ponderosa...

But consumers usually don't know/care where the beef comes from (except for Kobe). We care about the cut. Does terrior have anything to do with the taste of beef? Probably, but I don't know anyone who's studied it.

In that regard coffee is very different from beef and closer to the wine analogy where the vineyard and vintner has a lot to do with labeling - and the roaster is not the "chateau" but would be more like a Georges duBouef or Rothschild or Coppolla - a name that gets attached to a variety of different "styles".

At that point, the only loose end is the barista.

[Justin Kownacki]

Ah, but here's the catch: a bottled wine at a premium price is a finished product. The finest coffee beans in the world can be polluted by using tap water and serving in a styrofoam cup. How does a coffee shop guarantee the top of the line will be used in all instances leading from the bean to the cup? Or does this allow for a la carte pricing ("I'd like the $20 coffee, but in a 25 cent plastic cup thaat will degrade in my mouth, so I'll pay $3 a cup instead of the $5 you're currently charging.")

Then again, who figured we'd be foolish enough to pay for bottled water someday?

Perhaps if the government could find fluoride in "regular" coffee, it would boost the market for "guaranteed pure"?