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Coffee blends: The price of greatness

15 May 2008

A maxim of the coffee trade is "There is a drinker for every coffee, and there is a coffee for every drinker", and what has surprised the beverage trade recently is just how many drinkers there are for the really high end of coffee.

There have been two examples in recent weeks. First, the price list for coffee at Harrods' in-house roastery was published, showing three items at more than £100 per kg and two at over £200.

Immediately afterwards, Yorkshire roaster David Cooper drew national headlines by blending two of the world's most expensive coffees, Jamaican Blue Mountain and Indonesian kopi luwak, and selling the results at £50 a cup in aid of Macmillan Cancer Care.

For this to come at a time when coffee suppliers despair of caterers trying to beat them down to £3 per kg is quite astonishing. But those who know the high end are not surprised.

Stephen Hurst, founder of Mercanta the Coffee Hunter, importer of green beans, reminds us that last Christmas a pack of three coffees sold in exclusive London store Fortnum & Mason for £90. "The potential for finest coffees in the right places is unlimited," he says.

Such a bold statement makes it worth questioning top coffee roasters on whether a high-end option exists in coffee in restaurants and hotels. The gauntlet is taken up by Marco Olmi, managing director of the Drury Tea & Coffee Company in London.

"There is a high-end market in coffee - but it's not at the Harrods level. The very best restaurants and hotels, for their high end in espresso coffees, should be looking at the Illy and Caffè Vergnano sectors, whose pricing gives the guide to the upper limit for espresso. Their £18-£20 per kg for espresso is about right. Our Gran Reserve is £14.70 per kg, or about 10p a cup."

Drury supplies certain top-end restaurants and has Gordon Ramsay and Le Gavroche as customers. These venues are certainly not spending £20 per kg on their coffee - but, crucially, they are not looking to buy at £2 either.

Here, says Olmi, is the clue. "The big secret of top-end coffee is this: first, it's important for a caterer to know that they can get a fantastic coffee at £10 per kg. The second important thing to know is that you certainly aren't going to get a great coffee at £5 per kg."

That argument attracts almost unprecedented unanimity from several leading players in coffee. "The high end of the coffee market definitely exists, and we demonstrate it in our own restaurant and our own coffee shop in Charing Cross Road," says Luciano Franchi, managing director of Caffè Vergnano. "It is right to say that £10 is really the very minimum one should expect to spend on a decent blend. It saddens us to see so many high-class restaurants refusing to accept the fact that companies like Caffè Vergnano select coffee beans from around the world and blend them, not for the fun of it, but because there is indeed a difference between good and bad coffee.

"For restaurateurs to have the attitude that ‘coffee is coffee' in the same way as they would say ‘milk is milk' is outrageous seeing as some of these places charge over £100 per head for dinner."

At the Metropolitan Coffee Company, managing director Angus McKenzie tells hoteliers that high-end coffee offers the promise of a terrific experience at the end of a meal. "I do not believe in ridiculously expensive coffees as a rule, but for under £20 per kg you can have Cup of Excellence single-origin coffees galore, and these are sublime."

Sublime they may be, but the financial director is surely going to have a fit at the idea of paying £10 per kg for the end-of-meal drink? Not necessarily, says Andreas Nicolaides, of Kawa Bean, which imports the high-quality Brazilian Ipanema coffee and the Covim espresso blend from Italy.

"This is exactly the point I argue with customers on a daily basis," he says. "Most high-end coffees have limited availability, and it is no surprise that they are priced over £16 per kg. But a coffee at £20 per kg, which sells at £2 for a cappuccino, still achieves a gross profit margin of 86% for the restaurant, even if you include 15% wastage."

The arithmetic is this: 1kg of coffee gives 142 espresso shots, or maybe 120 allowing for wastage. At £20 per kg, that's 17p per shot, plus 10p for milk and 2p for sugar, giving a total cost of 29p per cappuccino. If that cappuccino is sold for £2, which is quite low in a top-class restaurant, then the margin is 86% and the profit is £1.71.

Choose on taste

Nicolaides continues: "Our Ipanema espresso is £11.35 per kg, which under the same example gives a 90% GP. The secret to know is that if you are targeting the high-end consumer and can charge high coffee prices, then you are free to choose your coffee on taste, not on price, as the price difference between the good and the very good is very small. But if you're not happy with 86% gross profit margins, then you really do have a problem."

Hurst made that same point recently in a presentation to a European coffee association. He illustrated the cost difference between good coffee and great coffee by demonstrating the cost escalation of wine, from about £7 for an everyday vin de table, through £25 for a premium dinner-party wine to maybe £80 for a fine celebration wine. By contrast, he argued, a fine everyday coffee is about £11 per kg, a premium espresso is £15, and a very premium retail coffee is £23 per kg. The multiplier from good to great is considerably less.

"The great irony of the coffee business is that the finest establishments are serving the worst coffee without even realising they are doing it," he says. "I recently flew with a great Asian airline, who told me that they would spend whatever money was needed to serve the finest coffee to go with their impeccable service and presentation of everything else. However, they had no idea how or where to find the best coffees."

Where to find them is in Harrods' fourth-floor roastery, where the £207-per-kg coffee (a St Helena Bourbon) is supplied by Andrew Knight of Andronicas. "I am not suggesting the particularly expensive coffees on our list are appropriate for catering use," laughs Knight. "However, they do help make a point which caterers must understand. I am frequently asked by caterers to advise on how they could make a better cup of coffee. They sit there and say ‘I want to serve the best, just like you' and then say they only want to pay £5 per kg. You cannot square the two.

"So, for the restaurateur who really wants to provide ‘the very best coffee', the only advice is to pay up to £10 per kg. It is as simple as that. If you do 9kg a week, then paying £5 and thinking you've knocked £45 off your food bill does sound good, but it isn't. At £10 per kg, a single-shot espresso costs just over 7p. Why try to save pennies per cup when producing a higher-quality cup may win a second sale and generate another £1.50?"

A great result

A £207-per-kg coffee is not the level at which caterers need to buy to get a great result, says Elaine Higginson, managing director at First Choice Coffee. "I don't think you even have to pay £25 per kg to get a great coffee. On average, I would suggest that good coffees will cost you something like £8-£9 per kg, and that it is possible to serve a great coffee from that mid-range price if you treat it properly. However, you're not going to get a good coffee for £4 per kg, because that is less than we pay for a quality green bean.There is no such thing as an amazing coffee at the low end."

Higginson sees the general problem as ill-informed buying of coffee and says the coffee trade could be doing more to put this right. "The fact is that a caterer will make a lot more money from selling coffee than from buying it, which means that good buying of coffee is not about shaving pennies off the price it's about knowing what you're buying and how you're going to get the best out of it.

"A great many caterers do not have a coffee partner. They simply buy off the shelf, and they do not really know what quality of coffee they are getting. This is something that we, as an industry, should be working on. The coffee industry really should be talking to caterers about how to judge coffee."

Barry Kither, head of UK sales and marketing for Lavazza, agrees that the £10 per kg mark is about right for a good-quality cup of coffee but warns that consumers won't pay much more for their coffee because it has a better ingredient. "If you trade up to a higher-end coffee that costs £18 per kg, your customers may not necessarily be happy about paying the extra," he says. "The real profit opportunity is in the experience that you offer, not necessarily in the products that you serve."

At Matthew Algie, the Glasgow roaster which supplies many four- and five-star hotels, marketing manager Colin Hopkins believes that the first-class hospitality trade's attitude to coffee is worth questioning.

"The best restaurant I have eaten in was £100 for dinner, and it was worth every penny. One of the dishes included chicken, I'm pretty sure that I can guess how much the whole chicken cost, but what made the meal really special was the skill of the kitchen brigade, the style of the front-of-house staff and the magic environment. The more expensive chicken and other ingredients were just a bit of the equation.

"This ties in with a bit of coffee wisdom: a well trained barista will make more of a difference to your coffee than the price of the beans. That great meal was finished off with a cappuccino that was just drinkable. And I have never come across great coffee in any restaurant. Which makes me wonder - what are the criteria used on coffee quality in assessing restaurants for Michelin stars? My guess is that there are none."

That suggestion, of course, could not go unexplored. "Colin isn't entirely right," responds Michelin guide editor Derek Bulmer. "We do not purport to be experts on coffee, but we do believe we know a good cup from a bad one. And we do not attach the same importance to the coffee as we do to the main course. However, if we are served a poor, black, stewed coffee, then that is a black mark.

"The coffee trade's reference to ‘the last thing you taste in a restaurant' is a reasonable point. Some of the places we judge do not seem to attach the right importance to it, and I really do wonder why."

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