Coffee-nomics

Recently I had the pleasure of procuring quite an interesting book from a bookstore on a visit to Ostrava (which is in the Czech Republic,) last week. The title was “The Undercover Economist,” by Tim Harford. As I currently stand with only the promise of a teaching job pending the successful approval of my work visa in Poland, I am unfortunately left without any income until I can ‘legally’ begin work. For this reason alone of being in an economizing situation in penny pinching times I am left without any options but to learn about economics-and am afforded no other choice but to shell out the 290 Czech crowns demanded for this overpriced paperback. Armed with an attractive new paperback, with an appealing cover of a coffee cup on it, I proceeded to skim through the first chapter which is coincidentally about my favorite thing that isn’t economics at all-coffee!

I was quite fascinated at not only how cheap coffee is to make and produce, but also how easy it is for coffee shops like Starbucks, and Costa Coffee to be so successful at nickel and diming their customers. The author claims that the price for a typical cappuccino in a coffee shop at one of the busy tube stops in London is roughly One Pound Fifty (about three US dollars, but mind you this is the center of London not Milwaukee.) If you were heading to work on Monday morning in hectic London, and you weren’t able to get any caffeine into your sleepy department of human of intelligence called a brain, you wouldn’t have any problem exchanging a couple of quid for a strong, frothy cappuccino; I know I wouldn’t. Well, actually I would have a problem, but more on me later. I don’t want to get ahead of myself.

First of all, if you are tired and need coffee it is commonly accepted that in most situations coffee isn’t something that really breaks the bank. I am not a rich person, although whenever I am with friends I will often offer to pay for the coffee. For me coffee is just one of those things that have never been much of a financial burden. Despite this, What is interesting is that in this book, Mr. Harford explains that actually when a café proprietor in the center of London pays for the beans, buys the equipment to make the coffee, hires employees, pays for rent, electricity and everything else that goes into making your bitter, extra dry cappuccino, will actually cost him or her about 60 pence (about a dollar) to make your drink. That’s almost 200 percent straight profit!

As I am living in Warsaw, which has a bustling population around 2 million and growing, I have become rather daunted by the actual amount of coffee shops competing for business around the city-center. Actually, in all honesty even though they are all technically competing with each other, they all seem to be quite successful coffee establishments. What is also interesting is that drinks aren’t really that cheap here. As I consider myself a coffee drinker, I will usually only order one drink-coffee. For me it’s fortunate as it is normally by far the cheapest drink on the menu. I am not a frills person, and luckily the frill-less drink is normally the cheapest. The cheapest coffee from a trendy coffee shop is around 8 zloty, which is about $2.50. Although, Starbucks is newly open downtown and serves up their drip coffee for 6 zloty-which is about $2.

Anyway, in the book the author adds that the cafes really make money by all of the extras they charge for things. For example if you order a large Americano-how much is that extra splash of hot water really going to cost the proprietor? Or, how much is that little dab of whip cream going to cost? What about the extra little bit of frothy milk you add to make a latte instead of an Americano? Or, what about paying an extra little bit for white chocolate? It happens, just look at the price differences next time and think to yourself if you really want to pay a half dollar more for a little extra hot water? What about getting a small instead next time? *You would probably save 30 percent more!

Since I only like coffee anyway, and in the spirit of economizing, I have recently set out around Warsaw and tried to find the cheapest cup of coffee around downtown. The cheapest I have found (with the exception of the vending machines serving brown water,) is actually McDonald’s. At 4.90 Zl, they are the cheapest. However, they lose points for atmosphere. The most expensive is probably ‘I coffee’ and Costa Coffee (which has free wireless access) at close to 9Zl per cup. The big chain in Warsaw is the ubiquitous Coffee Heaven. You won’t have to venture far downtown to find a Coffee Heaven that’s for sure. Actually, they actually have a small little take out café next to the metro. Their coffee isn’t too expensive, but if you want wireless access you have to pay. Additionally, I regret to inform Canadians that there is isn’t a Tim Horton’s.