I recently came back from the SCAA Coffee Expo in Seattle, Washington. There’s a coffee house on nearly every block you stroll down. With numerous coffee shops to choose from, one thing stood out to me - Starbucks was always packed with people! Since there are so many Starbucks locations and some right across the street from each other, it had to be convenience as to why they were so busy. I asked someone at a Starbucks why they came there versus an independent coffee shop. The reason he said, “Starbucks has what I like.” “You mean more pastry and sandwich choices?” I asked. “No,” he replied, “my girlfriend likes the fufu flavored frappes, and I like their coconut cream cold brew.”
Some of the local shops I visited had no flavor choices of any kind. Others that did have options said they make the flavorings themselves. I have seen this trend in some of the inner-city coffee houses in Oklahoma City where I live, as well as in different parts of the country.
I had a local shop owner come up to me at the Coffee Expo and tell me that he makes his own vanilla syrup, and that is the only flavor he will offer. He said that if customers want something besides the vanilla, they can go somewhere else. He asked if Bigallet syrup had any artificial preservatives and I told him no, it does not. Bigallet is the most pristine, all natural syrup you’ll find, I explained. I quickly realized that he was there to argue with me. “It has citric acid in it as a preservative,” he replied. “You mean the citric acid that is all natural, that is found in lemons and limes?” I asked him. Yes, it has all natural citric acid. I asked him if he liked guacamole and explained to him that guacamole contains citric acid in it from the lime they use to prevent the avocado from turning brown.
I then asked him a series of additional questions such as what he pays his employees per hour and how long does it take them to produce a bottle of vanilla syrup. He still thought it was cheaper to produce it himself.
My next question was, “What about your lost opportunity cost?” He replied, “What’s that?”
The New Oxford American Dictionary defines it as, “the loss of potential gain from other alternatives when one alternative is chosen.” Opportunity cost is a key concept in economics, and has been described as, “expressing the basic relationship between scarcity and choice.””
Lost opportunity cost is what the employee could have been doing while being paid $15 an hour, that would bring value and profit, rather than making a syrup that only costs the owner $6 to buy ready-made. Now add multiple flavors and it gets worse! His cost to produce his own syrup increases exponentially.
“I could produce more at one time,” he said. Now we are back to the citric acid. Sugar water left in a bottle in a warm environment with no natural preservative is going to go bad and possibly make someone sick.
He also mentioned that he has had to throw some away at times. We now have waste which means even more cost!
Here is the hard, but simple, truth - coffee shops that offer more choice for their customers do 2 to 3 times the sales of those that do not. My advice, add what I call “Controlled Choice.” By that, I mean to offer no more than 6 or 7 flavor choices. Add seasonal flavors during various times of the year and by all means, when your employees’ hourly wage is equal to or more than a quality product that you can purchase already made, buy it! Keep your employees busy doing something else that makes you money.
Remember, your coffee is the passion, your customer is the purpose!
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