Break-Even Point on a Coffee Machine: How Many Cups do you Need to Sell?
What do coffee shops, canteens, petrol stations, churches, cafes, tuck shops, bars, ice-rinks, soccer clubs, skating rinks, gyms, small food take-away shops, bike shops, movie-cinemas, seven-elevens, convenience stores, supermarkets and hospitals all have in common? Well not much except for the fact that all of these locations have a lot of people coming through their doors on a daily basis.
Whenever there are people, there is an opportunity to monetize the situation and the most common way all the above environments look to add revenue is by adding coffee to their menu. In this post we will look at how many cups you need to sell in order to breakeven and start making a profit by selling coffee in your business.
We have literally supplied all the above environments with coffee machines over the past 6 years. Some have been tremendous successes whereas other businesses unfortunately have not. We have written this guide so you can decide if it’s viable for you, to buy or rent a coffee machine to add some extra revenue to your business environment.
What are the costs involved in buying or renting a coffee machine?
There are essentially two costs always present whether you buy or rent a coffee machine. These are
- Either the once off purchase cost of the machine (when buying) or the monthly rental cost of the coffee machine when renting
- The actual cost of the coffee and coffee related consumables (cost of sales) including cups, lids and condiments like sugars, sweeteners and stirrers.
Average Cost of Making a Cup of Coffee:
We’ll first look at the coffee related costs or cost of sales of each hot beverage drink and then look at how the selling price of the coffee affects your breakeven point. The three options of coffee systems available are beans, instant and capsules. The average costs for the most popular drink options for each system are shown below:The above prices exclude the cost of cups, lids, stirrers and sugars. For all the above systems these ancillary costs are the same as shown below:
Average Cost of Coffee Extras
Polystyrene Cups: R0.30 /cup
Ripple Cups: R0.85 /cup
Sip-Lids: R0.30 /lid
Sugar Sachets: R0.10/sachet
Stirrer: R0.05/stirrer
Average Suggested Retail Price of Coffee in South Africa:
Each vendor is free to choose their own pricing but there is an average accepted retail price for coffee in South Africa. In some instances these can differ where the market is typically not prepared to pay standard retail prices (example kids in schools and in some church congregations) and for these environments we suggest lowering the standard prices by around R5.00.
Taking into account that the about 70% of all coffee sold is usually cappuccino and assuming that you are using ripple cups with 2 sugar sachets per drink your average profit on selling a cup of coffee (average selling price minus cost price) in a standard environment would be the following*:
Instant Cappuccino Profit per Cup: R12.00
Bean Cappuccino Profit per Cup: R11.00
Capsule Cappuccino Profit per Cup: R7.00
*we rounded numbers off to simplify matters and we assumed that selling prices do not vary based on the system used as this is mostly the case.
Coffee Machine Costs:
In order to work out your breakeven point you simply need to divide your machine cost (either purchase cost or rental cost) by the average profit per cup to determine how many cups you would need to sell per day to cover the cost of your machine. We will show two breakeven models below (one for when you have purchased a coffee machine and the other for when you are renting a coffee machine). We have used the average price of commercial coffee machines in all the examples below:
Industrial Capsule Machine– R6500 (or R300 per month on rental)
Industrial Bean Machine – R26500 (or R800 per month on rental)
Industrial Instant Machine – R21000 (or R700 per month on rental)
Break-even Point on a Bought Coffee Machine:
Now we simply divide the profit per cup shown above to calculate how many cups of coffee you would need to sell to breakeven:
Capsule Machine – 928 cups (assuming 10 cups sold per day, means your breakeven point will be approximately 3 months)
Instant Machine – 1750 cups (assuming 10 cups sold per day, means your breakeven point will be approximately 6 months)
Bean Machine -2409 cups (assuming 10 cups sold per day, means your breakeven point will be approximately 8 months)
Break-even Point on a Rental Coffee Machine:
To calculate how many cups you would need to sell per day to cover your rentals listed above, we divide the monthly rental costs by the profit per cup on each coffee system:
Capsule Machine – 43 cups per month or 1.5 cups sold per day to breakeven
Instant Machine – 58 cups per month or 2 cups sold per day to breakeven
Bean Machine – 72 cups per month or 2.5 cups sold per day to breakeven
Conclusion:
One doesn’t need to sell many cups per day to breakeven on a coffee machine. It is easiest to reach breakeven point on a capsule coffee machine due to the low cost of capsule machines relative to bean and instant machines however once you break even your profit per cup is about half that of an instant or bean machine due to the high relative cost of the capsules themselves.
Whether it is better to rent or buy a coffee machine does depend a lot on ones circumstances as each case is different. Please read our article “Renting vs Buying a Coffee Machine“ to gain better insight into the pros and cons of each option.
Although the breakeven quantities are particularly low on all coffee systems, you will need to also factor in the cost of the manpower required for each system. Adding a coffee machine to your current mix is a lot about trial and error and unfortunately is one of those things you can’t be 100% sure will work until you give it a try.
We have seen some very high traffic environments fail to reach the required 2 cup daily usage break-even point in summer months, so although the required numbers look staggeringly low we still recommend you try a machine first in your environment before committing to a long term rental contract or purchase of a coffee machine.
