Yahoo Finance Cafe owner defends coffee price hike as industry reaches breaking point: 'Our right to make profit'
Cafe owner Dan Dick has explained why coffee prices will have to rise if Aussies want their beloved cafe culture to survive.
Australians need to accept coffee price rises or risk the demise of our much-loved cafe culture. That's the warning cafe owner Dan Dick has issued as consumers react to speculation a coffee could hit $8.
Dick runs four cafes in Melbourne - a city world-renown for its rich tapestry of independent cafes. But, the cost of living is crippling Australia's hospitality industry and he told Yahoo Finance that if we don't get on board with price rises, we won't be sipping high-quality brew in the corner of our local for much longer.
Instead, Australia's iconic cafe scene could turn from cosmopolitan cool to blocks where you could walk down the street and see the same big-brand franchise three times.
"Consumers need to be aware that small business owners have a right to try and [make a] profit because if they don't profit then there's no point," Dick said.
"And if no small business owners want to continue, we're just gonna have to be happy with having an American franchise model where everything you see is branded and owned by the same handful of conglomerates.
"That is what will happen to small business if we continue to scrutinise the rights of small business owners who make money."
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Why do coffee prices need to go up?
Depending on your coffee order, you could be paying anywhere from $3.50 or more than $6 for your daily dose of caffeine.
Prices have very slowly crept up by 50 cents or $1 here and there over the years, with some calling for prices to hit $8 for a flat white this week.
Dick said coffee doesn't need to be that expensive, but that Aussies should consider what it's like trying to keep the doors of a business open and people in jobs.
He, like many venues, have had to grapple with the extra outlay for goods, wages, rent and expensive utility bills.
The cafe owner said he will be forced to raise prices from 2025 after assessing the profitability of his business this year.
He said it should be more acceptable for cafes to do so without being seen as "money-hungry".
"For some reason, it's not a norm in the food service industry for people to have annualised price increases despite the fact that everyone knows that inflation affects people on an annualised basis," he told Yahoo Finance.
"Financial pressures don't change. They don't go away.
"They come every year and every year we need to review our pricing structure with consideration to the pressures that are affecting our consumers at the same time, but we can't continue to lose profitability every time the prices go up around us."
'Stay in your lane': Oversupply 'cannibalising' cafe market
Dick said one key factor keeping coffee prices where they are is the seemingly unending supply of places where you can get coffee in Australia.
The cafe owner said if the number of cafes was low then prices could quickly rise because Aussies wouldn't be able to walk a few metres down the road and find somewhere cheaper.
But that's not the case.
"You can literally get a coffee from the florist around the corner from my cafe or the hairdresser around one of the other ones," Dick said.
"For every coffee that they do sell, a cafe that's primary purpose is to sell coffee isn't selling that coffee. It would benefit everyone if everyone just stayed in their lane a little bit."
He argued pricing was currently a "reflection of market saturation", which meant cries for help from owners advocating for cost increases to justifiably cover labour were falling on deaf ears.
"We can't continue to see cafes open up on every corner and cry poor about pricing because we're actually cannibalising our own market," he said.
Something's gotta give for an industry under pressure
On top of the minimum wage increase, cafes are being hit hard by another huge factor that's at the core of their business.
The price of coffee beans have hit a 13-year high, partly due to drought and harsh weather affecting Brazil and Vietnam, who are two of the biggest producers in the world.
Australian credit reporting firm, CreditorWatch, recently forecast the failure rate for the hospitality industry to jump from 7.5 per cent to 9.1 per cent in the next year.
That's one in every 13 hospitality venues going under.
“The outlook for hospitality businesses is not likely to improve until we see a lift in consumer spending,” CreditorWatch CEO Patrick Coghlan said.
“And that is not going to happen until the impacts of one or two rate cuts filter through to households. We don’t anticipate that being felt until at least the second half of next year.”
Gavin Diener is the owner of NYC Bagels in Melbourne’s Mornington Peninsula and told Yahoo Finance it is “barely possible to survive” at the moment.
He said this is the “toughest time” he has ever experienced as a business owner, even including the pandemic and 2008 Global Financial Crisis.
“The cost of everything just keeps going up and up and up. If we put our prices up by 10 cents or 15 cents for a cup of coffee, you lose customers,” Diener said.
“It’s a day-to-day sort of thing at the moment, really. You don’t know what the next day is going to hold and people just don’t understand that.”
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