Here in Australia, we have an incredible coffee culture. It’s something we’re proud of. But we also have one of the highest costs of living and doing business in the world.
Yet, somehow, our small flat whites and caps still hover under $5.50 (often under $5 in Sydney) while globally, the prices are closer to $10 AUD. To make things harder, coffee bean prices will continue to rise due to the coffee crisis (learn more in our letter on being future ready).
This isn’t just about margins. We’re facing a coffee crisis that needs immediate action to keep our thriving coffee culture alive.
In short: We need to get to $5.50 for a small coffee as soon as possible.
This is not just about coffee. It’s about you. It’s about your team, your family and the farmers. It’s about people. Is our coffee worth $5.50? We think so. Even if you don’t agree, are you worth paying a bit more for? Is your team worth it? Are your families worth it? Absolutely!
Are your customers worth having a great hospitality experience? Yes!
Without a price increase, our cafe culture, especially specialty coffee (or beyond specialty for all of you using P&R), faces real danger.
This blog article answers the most common objections to raising prices to more sustainable levels.
"The cafes in my area all charge around the same."
Customers choose cafes based on quality, experience and convenience, not just price. If every cafe stays priced too low, none will survive in the long term. Setting your prices realistically positions you as a leader and helps others follow suit. Focus on what you are doing and most customers will appreciate and support your approach. Don’t undervalue yourself and your team because everyone else around you is doing the same.
"I’m already the most expensive in my suburb."
Being the most expensive might initially seem risky, but it positions you as the leader in your suburb. In fact, often the most expensive cafes are the busiest ones. Customers who genuinely value premium coffee experiences understand that quality costs more. Communicate the reasons behind your pricing such as specialty beans, skilled baristas and superior service and customers will see the value and support your pricing strategy.
"Customers will stop coming, they’ve told me."
Initially, some customers might resist any change, but history shows most quickly adjust, especially when they understand. Don’t be scared by the most price-sensitive and the most vocal customers. Be open and transparent about your reasons for increasing prices, emphasising your commitment to delicious coffee, a great experience and sustainability. Loyal customers who genuinely appreciate your cafe experience (over 70% in more of our data) will stay with you through small price adjustments.
Read: Is busier always better?
"Customers won’t pay a cent more."
Evidence from other cities, from Sydney as well as multiple surveys, clearly disproves this. Customers regularly and willingly pay more for quality coffee elsewhere, including Melbourne and Brisbane. Sydney’s customers value quality and exceptional service just as much. Be confident in your product, communicate the value you deliver clearly and you’ll see your customers respond positively.
"I’m already slower than last year; price hikes could hurt more."
Operating busy cafes at very low margins isn't sustainable. Raising your prices, even slightly, can significantly improve your profitability, allowing you to invest in better products, services and staff training. Many cafes lower prices and give discounts when they are slow.
This is a sure recipe for failure. Instead, raise your prices to position yourself as the cafe of choice for the most discerning customers. Then market yourself like crazy. Flyers, Ads, A frames, visiting offices and more.
"I can’t imagine charging over $5 for a small coffee."
5 years ago, no one could imagine a coffee over $4. Mindsets naturally shift as circumstances demand it. Your coffee is carefully sourced, thoughtfully prepared and presented beautifully, all of which carries genuine value. Recognise and communicate this value clearly to your customers. Confidence in pricing ensures customers see your worth, which is critical for your cafe’s survival and growth.
"My competitors will undercut me if I raise prices."
Competing purely on price is a race to the bottom that damages everyone in the industry. Instead, compete on quality, consistency, service and overall customer experience. Customers love these aspects and will reward cafes that confidently stand by their value. Lead the way with sensible pricing. Often the most expensive cafes are the busiest ones if they deliver on the customer experience.
"I’m worried about negative reviews if I increase prices."
Transparency and clear communication are key. Inform your customers about why a price adjustment is necessary, highlighting any improvements in quality, sustainability, or service. Most customers appreciate honesty and understand rising costs. Positive communication can turn potential negativity into appreciation and continued loyalty.
See our QR code template here and read Adjusting prices: A cafe’s change management guide
"We haven’t increased prices in years; customers won’t understand."
Costs have increased dramatically across all sectors and your customers experience this reality daily. There has been plenty of coverage in the media about the coffee crisis. Your customers are ready. Clearly communicate your reasons for the price adjustment, emphasising your ongoing commitment to quality, sustainability and great service. Most regular customers will understand and continue to support you, knowing their favourite cafe's survival depends on this change.
“Hospitality is currently forecast with a high failure rate, shouldn’t we avoid price hikes?"
That’s exactly why you must act now. Margins are already razor-thin. The risk of failure rises when prices don’t reflect rising costs. A well-calculated price increase is not a risk, it’s a strategy for survival. Doing nothing is the real danger. Communicate your reasons for the price adjustment, emphasising your ongoing commitment to quality, sustainability and great service. Most regular customers will understand and continue to support you, knowing their favourite cafe's survival depends on this change.
Conclusion
There are always reasons for not doing something. Especially something as scary as price adjustments. However, you and your team are worth it. They are worth the courage and the risks.
Prices must be adjusted and we must start now. Let’s take that first step and we will be with you the whole way.
Pete unpacks some of the tough questions Cafe owner are asking and importantly some of the solutions we know work. A must watch for any cafe operator.
