Why on earth is iced coffee so expensive?

Why on earth is iced coffee so expensive?

As iced coffee season returns for another humid summer, so too has the question of why chilled coffees have such high price tags. Are the extravagant prices justified?

The odd grey and rainy day aside, summer finally feels like it’s on its merry way. That means, at least in Auckland, thighs stuck to seats, regular checks of the Safeswim website – and happily remembering you can forgo flat whites and lattes for a refreshing iced coffee instead.

But the return of iced coffee also comes with the return of the uneasy feeling that you’re being swindled each time you order one.

A lot of us are made to feel guilty every time we buy a takeaway long black or flat white – that, like avocado on toast, our caffeinated treats are to blame for our inability to buy a home. The seemingly ludicrous price of iced coffee only makes it worse. 

Without a doubt, the cold kind of coffee costs more across the board. An informal survey of the first 15 Auckland cafes that came to mind found that prices for a large flat white ranged between $4.50 to $5. The range for iced coffees, on the other hand, were between $5.50 and $7 a pop. 

Coffee-making expert Sam Low says the leap in price is justified. “If you break it down to cost of goods, it actually just works out to be similar, if not the same, in terms of profit margins as a hot coffee.” He’ll break down exactly what costs he’s talking about later on.

Iterations of iced coffee have existed for hundreds of years. Mazagran, a cold sweetened coffee drink that originated in Algeria, is often credited as the first iced coffee. And the coffee frappe was invented, as all great menu items are, by accident, in Greece in 1957. But the widespread love for chilled coffee is a relatively new phenomenon, says Low.

Iced coffee in its plastic-cupped western form originated in what’s referred to as the second wave of coffee, which began in the 1970s. This was the era of the rise of Starbucks and its influence on the coffee industry. This saw a transformation of coffee culture globally, with coffee consumers becoming more interested in the quality and origins of their cups of coffee. Coffee shops worldwide got creative with their caffeinated beverages, and icy coffee drinks in a spectacular array of flavours started gaining traction. 

The third wave of coffee, which began in the early 2000s, is characterised by a move away from “bad coffee” (like Starbucks) and toward “good coffee”. We see it in the rise of coffee-making contraptions like Aeropress, Chemex and pastel-coloured Moccamasters in the flats of young professionals or in the ever-growing selection of specialty ready-to-drink bottled and canned coffees. 

Low says “the growth of specialty coffee came along and was very much focused on hot beverages”. The reason being that coffee contains a bunch of aromatic compounds, “and what makes coffee really complex is actually a hot aroma”.

As the desire for specialty coffee grew, the industry began trying to find ways to have specialty-focused iced beverages without reverting to the sweet and syrupy concoctions of the Starbucks days. It led to stronger concentrations of cold brew, espresso shots and the rise of alternative milks that we’re more accustomed to today. “A lot of the research and development is to showcase the coffee still being the dominant flavour factor and not so much the milk,” he says.

Ben Affleck is a notable iced coffee fan. (Image: Charlotte Muru-Lanning)

Low has worked as a coffee trainer around the world and says there’s good reason for the higher cost of iced coffees. It’s a combination of packaging, machinery and labour costs.

“The compostable plastic cups or the ice machine that is required aren’t cheap,” he says. Compostable plastic cups and straws tend to be more expensive than your typical coffee cup. Ice machines can cost thousands of dollars, and even if businesses choose to buy ice instead that means a cut to already limited freezer space and more time spent by workers making daily trips to buy bags of the stuff.

Low adds that ice is often stored in places inconvenient to those preparing your coffee – “it’s never next to a barista”. An iced coffee order likely means leaving the coffee machine to make a trip to the kitchen freezer for a helping of ice, creating a fracture in the coffee-making flow. “You’re essentially slowing down workflows so it does take longer to produce as well.”

“It’s funny,” Low says of being asked to make an iced coffee. “It’s one of those eye-rolling kind of things if you’re on shift and super busy.”

While plenty of us opt for iced lattes or iced Americanos, the increasingly popular cold brew variety can be even costlier to prepare. Cold brew requires more labour and often bigger quantities of coffee, he says. 

In this case, the coffee needs to be brewed outside opening hours or in those rare quiet gaps in the day. The amount of cold-brew iced coffee you get from one bag of beans is significantly less than what you would get if you used it for automatic drip hot coffee. On top of this, because cold brew ends up being diluted with scoops of ice, more coffee beans are needed “so it’s not a watery mess”. 

So what is the correct price of an iced coffee? 

“That’s a tough one,” says Low. But he believes at the moment, $5 to $6.50 is a reasonable amount to shell out for your fix. 

The asking price for your cup of chilly coffee could be set to rise too. Drought and frost, likely caused by climate change, are having massive impacts on Brazil’s coffee plantations this year. That’s forecasted to cause a 4% reduction in coffee production for 2022. And because Brazil controls the market price of coffee, that will most definitely affect the price of your daily cup in the coming years, says Low.

Whether or not to pass the higher price of coffee onto consumers is a conundrum across the industry, he says. “If we don’t charge more for coffee, then a lot of roasters or cafes will just resort back to commodity coffee, which is the cheaper alternative and badly roasted.”  

While 30 cents extra for a cup of coffee might not sound immediately frightening, there are fears that even a small price hike runs the risk of customers reducing their cafe trips or turning to lower-quality, less ethical but cheaper competitors for their daily fix. 

The takeaway? Just because there’s no frothed milk or latte art doesn’t mean any less effort is going into your iced coffee. So keep being as patient as usual with your barista. And “bring your reusable cup too”, says Low.



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