Hi All, on two occasions this week at separate cafe's (1. Wicker Basket) and 2. French Cafe, staff have tried to rip me off by over-charging coffees and cakes from the menu list.

It got me thinking about the true value of things.

I do not blame these 'slave labour cafe employees' for trying to pocket some cash.

We often read the menu and the cafe is helping some far flung ethnic minority out of their life of poverty and destitution.

As it stands, Kunming cafe's are charging up to 35RMB for a cappuccino which a machine makes and someone on slave labour pay (1500-2000RMB/ month) walks to you and serves (~60 seconds of labour).

Based on the coffee price per kilogram on the NASDAQ is USD127 per pound and a cup has on average 2g of coffee bean in it; so that is approximately 0.5% of a lb = USD0.63, plus 30% overheads for lighting, rent, washing etc, plus 20% sales tax we can say $1.

Now lets add the 1 minute of labour which accounts to 1 minute of 480 minutes/ day. 2000 RMB/ 30 calendar days is ~67 RMB/day, 8.37RMB/hr (USD$1.40/hr for you folks who are unionists), and 2.3 cents per minute.

So at $1.02 cost, put a neat 30% on top for profit ($1.30), why should we pay = $4.16 for a cappuccino, or $3.33 for a coffee?

Yunnan is abound in agriculture, especially coffee, then why should coffee prices be exorbitantly high?

I was recently in Venice and bought a coffee for 10 Euro overlooking the San Marco square, and I paid for the magnificent view, not the 'slave labour' that served me or some polluted and dusty Kunming street with cars honking their horns, and the third grade coffee that some ill trained Chinese 'barsta' made, that then attempts to over-charge by 20 RMB for two meals and two coffees and then attempts to pocket the difference.

I'd say Kunming needs a bit more competition in the cafe and restaurant sector, and a little less thievery by cafe staff!

If it is the prices of coffee in general in Kunming, then it is market-driven. Salvador's makes a very good cuppa, and I think it is around 15 kuai. Plus, Sal's has honest, cheerful employees. As for the waiters ripping you off, are you 100% sure that they did it on purpose? Maybe it was just a mistake? The people at Wicker Basket are good people, and I have never had that problem at French Cafe.

There is more than 2g in my cup of joe. We are not talking instant coffee.

The staff are paid for more than the time at the point of delivery. That all gets wrapped up in overheads. Staff are paid if they are busy or not busy. They also clean, take deliveries, and yes, they have slack time. and the boss still pays them.
There is rent, fuel and light, and many other outgoings. Some of these are fixed costs (have to pay even if you have no customers) some are not.
Unless these costs are recovered, from sales revenue, places go under. And this does happen, even in Kunming.

You made several errors in you analysis of coffee costs. First, the NASDAQ is a stock market and commodities are not traded on NASDAQ. Second, while I would suppose Yunnan coffee may be traded on one or another international commodity exchange, I could not find any quotes for Yunnan coffee. When coffee is traded the price is in U.S. cents, thus your "USD127 per pound" is actually USD $1.27 per pound.

There are roughly 453.6 grams per pound. If, as you say, there are 2 grams of coffee in a cup, then each pound of coffee would produce, say, 225 cups. Using your assumptions and numbers, the cost of coffee in a cup of coffee would be about half a U.S. cent. From here, your attempt at doing cost accounting is a bit ridiculous.

I don't ever drink coffee so I am guessing but I don't think a pound of raw coffee beans would produce 225 cups of coffee.

You forgot the cost of roasting the beans, energy + equipment + labor, which is important.

Your method of coming up with the server's labor cost is flawed. In China 2,000 yuan per month for working in a restaurant is hardly "slave labour." By definition, a slave is not paid a wage so the cost of a slave's labor is pretty much what they would eat plus any housing costs. As slavery is not legal in China, the worker cost per month is the wage paid, plus meals plus any living costs. Also, your assumption about hours worked is flawed as well given that 10-12 hour days is normal. It is extremely difficult to apply activity based accounting to workers paid by the month.

See tigertiger's post above on other cost inputs.

I used to tell my students: Accounting is not rocket science but it is not intuitive.

@ Geezer
You are splitting hairs, plus your post has plenty of errors as well.
So let's stay with the idea of the op.

Overpriced coffee, big profits for the owners and sh** pay is a comman factual situation for "ALL" the cafes and joints in Kunming.

Most menus are not calculated but just compared to what a coffee cost overseas rather than based on real cost-revenue calculation (the thing you and op tried to do).
And op is right the price for coffee, the delivery production and service is cheaper than the US or Europe but the price is higher in Kunming than elsewhere, which in fact makes no sense except for greedy businesses. And paying 2000 for service staff. That is if you have years of experience and work like a maniac, if not 2000RMB in service is sheer day dreaming.
All that helping the community and minorites, i don't buy it and most is just promotion rather than help to make sure you don't mind paying irrational prices for local grown products. I believe it when I see their profits and savings being used to help, but usually it says "Buy more of our stuff and help the poor, while they send a few pennies as they keep in more than 80% (in alright cases) and usually 97-98 % for. Oldest scam in the world.

Quite disgsuting to, be honest.

The people I know 'really' helping the poor never even mention it and would never ask to help them to pay their dues or charities. They just send help and make sure it gets there, no need for publicity.

The average amount for espresso (most barrista coffes are made with espresso machines) which uses between 7-9 grams of coffee powder.

You need more than the 453 gram for your calculation, because you need more in real life sorroundings, spills, machine problems...etc
But as geezer said

'accounting is not rocket science but it is not intuitive'
.....the one without sins (mistakes) shall throw...

...plus there are exactly 500 gram a pound of coffe when you buy them. usually packed in 250 gram or 500 gram packs.

@Chicha78, why would the French Cafe overcharge "foreigners" when the place is foreign-owned? Absolutely ridiculous. Probably the staff made a mistake, I have been faced with many incompetent waitstaff at restaurants in China so this should not be surprising. In any case, you should always know how much you should be paying and if there is a discrepancy, you raise it directly with the waitstaff or the manager.

Dudeson's

500 grams to a pound? What universe do you live in?

Oh, I know. You are relying on your advanced education. Look it up.

Just which calculations are wrong? Who is helping the poor? What does that have to with the price of coffee in China? In fact, I used OP's numbers and pointed out clear factual errors. Ranting mindlessly about greedy people does not reflect intelligence or critical thinking.

OP seems to think 2000 per month is slave wages. I agree with you it is a lot more than most food service staff would make. Most new university grads accept about 2000 a month as that is what the rate is.

Most uneducated people think "greedy" business people make huge profits, gouge customers and screw workers. Sadly, this is why many people fail in business. Not knowing the costs of doing business only lasts as long owner's cash.

If you understood what I wrote, it would be clear that the cost of coffee beans has little to do the price of a cuppa. But then, that might bend your mind. The founder and CEO of a successful catering chain in the U.S. told me, the cost of the food should never be greater than 25% of the meal price just to break even.

Dudeson's, it is difficult to rebut your often incoherent writing so I will stop trying. I can say, after 20 years as a Controller, five years consulting for venture capitalists/start ups/the FBI/companies in trouble and another eight years teaching Accounting, I can recognize someone who is an accounting idiot.

To complete my statement to my students: Accounting is not rocket science but it is not intuitive. Work hard, learn it and Accounting can be be the most effective tool a business man can have.

@Geezer
Yep you got me. You anger shows me that you may have have a background knowledge but not much applied knowledge in small business finance.

the metrical pound of coffee is 453 gram as (if you can read) stated above unfortunately the coffee sold to small business owners in 250g (organic) 500g, 1kg, 3kg, 5kg packs, depending on the brand, if you call me an idiot or not. So using the price of the metric ton bought at the commodities market is of little use except price flunctuation which should already be included in the price anyway. So the end customer is not buying it from the commodities market but from a farmer directly or over a supplier, who sells by above mentioned measures. And charge you their resell price etc...are we really going back to the 4th Grade business basics.

My point is your(plural) calculations ar less effective because the commodity price has only limited meaning to the owner/manager of a cafe. The supplier or farmer price has (which yes is influenced by the commodiy price but supplier can adjust to it slightly). Some cafes even sell organic coffee or farmed cafe on their own to make up for flunctuations.

charity:
Most cafes that say help the poor people of the world, have usually a much higher price than other only profit cafes. So they don't help the poor since most of the extra charge they cash in for themelves, thus raising the customer price for coffee, right? does that qualify for a reasoning for end consumer coffee price?

Slave labor costs:
Slave labor in terms of businesses is a common term of underpaying staff so it's not ment to be taken literally. And yes it is not being realistic to kunming cost of living. Plus most important 1500RMB for a service worker is already extreeeeeeeeemly good in China.

I posted about it becasue it was in the OP.

business therory 101:
1. Location, location, location,
2. and no! the reason why most businesses fail is according to studies and facts, the lack of estimating the time for a business to turn over profits.

4. Greedy business is not necessarily the same as Bad Businesses:
As OP pointed out his ideas of greedy is not the same as the thing you mentioned which is bad business
Greedy businesses won't run out of business because they don't get their costs right. But because of other reasons, (just one example) their wealth/ development distribution with their employees (or more examples, lol) product quality, image, marketing, betting on the wrong horse....etc
5. the rules don't alwasy apply.

Your founder friend is absolutely right, but as a business teacher you for sure know that the small businesses only run in theory similar to the way corporations or bigger businesses run.

As you said your buddy is running a chain/franchise business and there you have plenty more variables in terms of loss and investment, something most small venues in Kunming or small cafe owners world wide just don't have. e.g. Logistics, transportation, storage (any idea how much industrial storage costs?), bad franchise losses, training, staff etc.
Compare that for example to the chinese counterpart such as Sal's, LanBaiHong, or other cafes in China.

Leading to the point of the OP, how can it be that a coffee (of qualitatively higher beans from all over the world) at for example starbucks is sold at a sometimes cheaper price to the coffee around WenLinJie.

I know the rent price of WenLinJie, the cost of labor and I can guess the bean price (just take the store price of imported Carrefour coffee) keep in mind that quantity means discount. And you can find the profit calculation for a cup of starbucks cappucino online compare that with the WenlinJie counterpart and voila,....high profit, low wages for staff.
Starbucks pays insurance, high wages, and professional development, try to beat that on WLJ. P.S. I'm not a fan of starbucks coffee.

And putting all those factors in, the coffee price still doesn't make sense, except owners trying to make big margins. I don't blame them, the business world is tough, I run two businesses very successfully (even though being uneducate and such) but I am using a niche that allows me to sell high end quality at a low price and forward it to my staff and still make sufficient profits.

Your numbers:

They are incomplete and not realistic in term of real cost-revenue calculations. Because as you were teaching/preaching the OP which I don't mind necessarily, at least then you should get it right first, IMHO.
Oh, how do I know my ex was running a cafe and I was helping out, different city though.

But I am just uneducated so how would I know?

Dudeson's

You are a hoot! Your inability to write coherent sentences appears to be matched by your inability to read and comprehend. You ascribe to me the OP's words and opine they are my errors. You can't even understand the commodity, coffee, is traded internationally by the pound regardless of how it may be packaged at retail.

One pound equals 453.59237 grams no matter how confused you are. Check out this converter if you can figure out how to use it:
www.unitconversion.org/weight/grams-to-pounds-conversion.html

Greedy. How ever you try to twist and redefine the word it, when it comes to business, it is a significant indicator that one who uses the word has little idea of running a business. I think the people that own and run local businesses would be amused, or not, at being labelled greedy then being accused of lying about their community involvement. You should name names rather than wildly smearing all the folks trying hard to make a living running a cafe.

Why would I be angry? Long ago my old Dad advised to be kind to small animals, idiots and ignorant people. You, my friend, are a hoot!

This line is great! "Oh, how do I know my ex was running a cafe..." Gee, I don't know. So, how did you figure out she was running a cafe?