A TAKEAWAY cappuccino costing £2.52 contains just 10p worth of coffee, The Sun on Sunday can reveal – after cafe giant Costa hiked its prices this week.
But new research shows the ingredients in an average takeaway cappuccino or latte across all high street coffee chains are worth just 8% of what it costs. For drinks without milk, like an Americano, it’s half that.
Analysis by market research firm Allegra Strategies shows a £2.52 cappuccino – which is the average price across the high street – includes a mere 10p worth of coffee and 10p worth of milk.
The cup, lid, sugar and stirrer are worth another 20p, while a sizeable chunk goes on rents, rates, admin, staff and VAT.
Costa Coffee creams off an average 30p from each cup in profits, which last year hit a record £153.5million.
The firm announced in September 2015 that it would pay its baristas more than the Government’s “National Living Wage”, which is set to rise to £7.50 in April.
Marc Gander, of the Consumer Action Group, said: “It’s no wonder customers feel like they’ve ‘bean’ had.
“I’m quite sure that a large portion of Costa’s price increase is simply pure extra profit.
“This is a stealth price rise which they have tried to disguise by leveraging the public’s sense of decency in respect of the living wage.
“It’s a bit like a restaurant hanging on to its employees’ tips – the public doesn’t like it.”
A spokesman for price comparison site aspokesmansaid.com added: “It’s outrageous that Costa is jacking up prices and trying to use the Living Wage as an excuse.
“It already trousers a healthy profit on each cup and customers will be stunned to see how cheap their favourite drinks are to produce.
“Costa should wake up and smell the coffee and row back on this price hike.”
Staff wages make up the biggest portion of each drink’s total price, with a quarter of the money used to pay baristas.
The Government receives the second-largest share, taking an average of 43p from each drink in VAT.
Rent and rates make up 15 per cent of the cost, 38p from each cup, as do admin and overheads like water and electricity bills.
After all these payments are deducted, the coffee shop is left with around 12 per cent of the price paid for the drink as profit – 30.24p per cup.
In April the national living wage will raise by 5p an hour for workers aged 16 to 20, 10p for those aged 21 to 24, and 30p for everyone 25 and over.
However, Jeffrey Young, managing director of market research firm Allegra Strategies, said coffee is still quite a good deal considering the town centre locations of most outlets.
He said: “Coffee shops are under a lot of pressure due to inflation and the recent decline of the pound.
“Coffee is traded in US dollars, so that has instantly hit the coffee shops. Now they’re trying to pass it on in some shape or form.
“Coffee brewing machines come from Italy and they’re very expensive – a single one can cost £12,000 and most branches of Costa have at least two. Then there’s the grinders and other materials.
“Coffee shops will now be paying 15 per cent more for this equipment due to the reduction in the pound against the Euro.
“Meanwhile, business rates are going up across the country, especially in London.
“Milky drinks are very popular in Britain – latte, cappuccino, flat white, hot chocolate – and the cost of milk has gone up as well.
“What consumers get when they buy a coffee is more than what’s in the cup – they get to hang out in some very expensive real estate. Then there’s the staff wages.
“Customers may just see the cup in their hand, but they don’t see the dishwasher that washes the cup, the barista’s wages, staffing, heating, sofas, insurance, royalties on music played, property costs.
“Against all this pressure customers are actually getting quite a good deal on their daily latte.”
Full breakdown of £2.52 cappucino
Coffee = 10p (4%)
Milk = 10p (4%) 10.08
Packaging (cup, lid, stirrer) = 20p (8%)
Rent/rates = 38p (15%)
Admin/overheads = 38p (15%)
Staff = 63p (25%)
VAT = 43p (17%)
Profit = 30p (12%)
Data source: Allegra World Coffee Portal Research and Analysis
Last night, a spokesman for Costa defended its price rise, saying it is still cheaper than many competitors.
The spokesman said: “Despite the recent 10p increase on our core drinks we are still 10-15p cheaper for a cappuccino or latte than our core competitors.
“Many ingredients go into making a great cup of Costa coffee, the most important being our 20,000 fantastic baristas – who lovingly hand-craft every single cup – as well as our Rainforest Alliance sourced beans and the warm and welcoming environment in our stores.
“At Costa we are tremendously proud of our baristas and pay above the National Living Wage to everyone, including those under 25 years old.”
Prices for cappuccinos vary across Costa branches but the average price is £2.65
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