Are Coffee Shops Pricing Themselves Out of Business – killing the goose that laid the golden egg?
This morning, my partner and I went to a local coffee shop and purchased an Americano and a Latte. The cost: €8.25. They were not remarkable coffees – in fact, not even good ones. My partner rates coffee from 1 to 10, and she gave these a 5. Although we’ve had a few coffees from this outlet in the past because it was convenient, we resolved not to go there again.
The price stuck in my mind for a simple reason. Coffee shops have spent years turning a small pleasure into a daily habit, but they may now be making that habit too expensive to keep.
There is a coffee craze almost everywhere – town centres, retail parks, petrol stations and train stations all have their cafés. Grabbing a cappuccino or a flat white has become part of the people’s daily commute, their Saturday walk, the chat with a friend and even the school run.
But habits have limits. When two coffees start to cost what a light lunch once did, people notice. They don't protest or write reviews. They simply go less often. Coffee shops are not only competing with each other; they are competing with the kettle at home, the office machine, the supermarket pod, and the growing feeling that a small treat has become poor value.
The coffee boom was built on habit as much as taste
Coffee shops did not grow because people suddenly became passionate about beans. Of course we always liked a cup but the bigger forces were routine and fashion. Coffee became a reason to meet, a reason to get out of the house, a comfort on a wet morning or a small reward for getting through the day. It filled a gap between the pub and eating out for people who wanted somewhere casual and easy. It also became a go-to on a road trip – new cars have come with cup-holders for years.
For a long time, the price felt fair for half an hour of warmth, talk or people-watching. That was the golden egg. The money is not in selling one coffee to one person once; it is in persuading thousands of people to make coffee part of their weekly pattern and to keep coming back to the same shop or chain. About fifteen years ago, when I was changing jobs, I noticed the huge growth in coffee consumption – helped, perhaps, by the advent of the durable take-away cup – and toyed with the idea of opening a coffee shop and eventually a chain. People tell me I should have; others did, and made quite a lot of money.
The risk now is that shops are damaging the very pattern that made them successful. Coffee is an impulse buy, which makes it powerful but also fragile. Once people start asking, "How much did that cost?" the impulse starts to feel foolish – and it disappears quickly.
€8.25 for two coffees changes the conversation
Two coffees at €8.25 is not ruinous. The issue is value. At that price, customers expect something better than average: warmth, flavour, cleanliness, friendliness and some sense that the place cares about what it is serving. If the coffee is merely fine, the price feels cheeky. A customer might forgive €4.10 for an excellent coffee in a pleasant place; they will resent it for a bean of poor quality or something lukewarm, weak, burnt or rushed.
The irony is that the place where we bought those coffees used to serve delicious coffee and great breakfasts. It was a 'go-to' place for many, to the point where it was difficult to get a table most days. In those days, it was independent. Since then, it has been bought by one of the big chains – and the prices have gone up while the quality has gone down. The breakfast menu has disappeared, replaced by pre-packaged, suspect-looking pastries and cakes.
Coffee shops cannot blame every increase on costs
Nobody expects prices to stand still – the days of the two-euro coffee are long gone. Coffee, milk, wages, energy and rent have all gone up, and insurance, card fees, equipment and waste add more. So, while the raw material may be cheap, a café owner is not pocketing the full price of every cup.
So yes, prices had to rise. But there is still such a thing as overpricing. Some cafés seem to have copied the prices of better competitors without copying the quality. If the cup is small, the coffee average, the service indifferent and the seating cramped, the price becomes the main memory.
Add-ons make it worse. Choose almond, oat or coconut milk and there is usually a premium of up to an extra euro. Why? Is this milk so much more expensive than cow's milk? No, it isn't. Add a pastry and a quick stop costs as much as a small meal; a parent buying for themselves and their children can face a surprisingly steep bill. At that point, the café visit stops being spontaneous and becomes occasional.
The United States shows why the baseline matters
I have travelled widely and I notice that the coffee culture is almost universal. Surprisingly, so is overpricing. I recently visited a country where I could stay in a five star hotel for thirty euro, yet I was charged three euro for a very poor quality coffee. Perhaps the one exception to this is the US. Now, fashionable or trendy city cafés in the US can be as dear as anywhere. But America still has a strong culture of basic brewed coffee, never-ending refills and large servings, and diners, convenience stores and chains keep a lower-cost option within reach of an ordinary daily purchase.
In much of Europe, including Ireland, that basic option has largely given way to the espresso menu – cappuccinos, lattes, flat whites and Americanos at prices that feel increasingly detached from the product. Coffee is everywhere, but affordable coffee is very hard to find.
That gap is where behaviour changes. People will not stop drinking coffee; they will buy a better machine for home, bring a flask, wait until they get to work, or choose one coffee out instead of three.
The customer's calculation is changing
Coffee shops were long the affordable indulgence – you might skip a restaurant meal but still meet someone for a latte. That position is now under pressure. Food prices, energy bills and mortgage or rent costs have made households more watchful of small spending. A coffee at around €4 may not shock, but five in a working week is €20 – and for two adults it quickly becomes a real line in the household budget.
People don't stop; they ration. They start asking:
• Is the coffee actually good?
• Do I enjoy the place enough to sit in?
• Am I buying this out of habit?
• Could I make something just as nice at home?
• Would I rather spend the money on lunch, groceries or a pint later?
Once customers ask those questions, the purchase has moved from automatic to considered – and considered purchases face more competition.
Coffee shops may be mistaking popularity for loyalty
A packed café on a Saturday can suggest the market will take any price, but crowds do not always mean loyalty. Sometimes they mean fashion, convenience or a lack of alternatives. And because frequency is the hidden engine of the business, a café may not notice regulars quietly trimming their visits until the damage is done.
It might seem an odd comparison, but snooker clubs are a useful warning. Snooker once had glamour, television attention and a wave of public interest, and a huge number of clubs opened to meet demand. Then interest cooled. The committed players stayed, but the casual players left – and the business model had been built on a craze, not a permanent mass habit. Golf clubs tell a similar story in some places: once able to rely on waiting lists and joining fees, many now work much harder to attract and keep members as tastes change, people have more choice and costs rise.
Coffee is cheaper than golf and more frequent than snooker, and people will always drink it. But they will not always buy it in the same place, at the same frequency, at any price. A craze creates expansion, expansion creates competition, margins get squeezed, prices rise, customers become selective – and the weaker operators suffer first.
Chains and independents face different risks
Large chains can buy at scale and rely on brand recognition, but they can feel impersonal, and customers are less forgiving of high prices somewhere that doesn't feel local.
Independents often offer more character and better service but have less room to absorb rising costs. Their great advantage is real loyalty: a friendly owner who remembers customers and serves excellent coffee can charge a fair price without alienating anyone. The danger comes when prices rise but the personal touch disappears.
People will accept higher prices if they are buying a place to be, not just a coffee. A warm, clean, relaxed room is worth paying for; sticky tables, poor toilets, loud music, impersonal service or uncomfortable seating make the price feel worse.
The market may split in two: cafés offering genuine hospitality, which can charge more because customers feel the value, and outlets that simply sell caffeine in a cup, which will struggle if they charge like the first. Coffee shops need to be honest about which group they belong to. Premium prices need premium care – not marble counters, but good coffee, consistent standards and staff who make customers feel their custom matters.
What coffee shops should do before customers walk away
Coffee shops do not need to race to the bottom, but they do need to protect the habit. My own list starts with good coffee as the essential first step. Then a welcoming room – warm in inclement weather, cool in hot weather – and friendly, helpful staff. If food is served, there should be a decent selection and it should be fresh. Beyond that, a smart café could:
• Select their bean supplier carefully and serve consistently better coffee, not just more expensive coffee.
• Offer a simple lower-priced option, such as a good filter coffee.
• Make loyalty schemes genuinely worthwhile.
• Keep takeaway prices sensible where service costs are lower – in other words, charge at least a euro less if the client is not staying on the premises. The Italians have been doing this for generations.
• Be careful with pastry and food pricing, where bills can jump fast.
• Offer a genuine discount where customers bring their own go-cups.
Some customers just want a decent cup without feeling fleeced; others will pay more for something noticeably better. Either way, customers do not mind paying when they understand what they are paying for.
Listen to the quiet customer
Businesses sometimes treat price complaints flippantly. But judging value is the customer's role in the exchange. If someone feels €8.25 for two average coffees is too much, it does not matter whether a spreadsheet can justify the price. That feeling decides whether they come back tomorrow.
The loud customer complains. The quiet customer changes habits – buying fewer coffees, skipping the pastry, meeting at home or walking past. That is how demand softens: not with a dramatic boycott, but with thousands of small private decisions.
Coffee will survive, but not every coffee shop will:
The coffee craze is not over; people like the ritual too much for it to vanish. But the easy growth phase may be ending, and customers are separating the good from the ordinary. That may even be healthy, forcing standards up and exposing cafés that relied on the boom rather than value.
The question is not whether people still want coffee. It is whether they want to pay premium prices for average coffee as often as they once did. As people begin to distinguish between a good coffee and an average one, for many, the answer is starting to be no.
Coffee shops that keep pushing prices while serving forgettable cups may find that the golden egg was never the coffee itself. It was the customer's habit – and once that habit is broken, it is very hard to get it back.
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