Submitted by TotalDebate6050 t3_z0j62o in RhodeIsland
How does, for example Cumberland Farms make money off of their cheap coffee that they sell?. Comparing to our local dunkin and Starbucks or whatever it is you may like that charge over 3dollars for your coffee (if you’re getting the most basic thing) if not you’re paying over $5. Anyone that knows about this type of business know anything about this ?
I've worked at both Sheetz and Wawa when back in Virginia, which are like Cumberland Farms, and that's exactly what we did at both. Cheap coffee and even free coffee a ton of times to get people into the store to buy more expensive and higher mark up items.
Can confirm. I lived in Eastern PA and Sheetz was a mecca on road trips especially. M-T-O!
Sheetz fries were amazing. Some of the few things I miss the most from moving up here a couple years ago are having access to Sheetz for fry buckets or MTO subs and Wawa for their awesome soda machine and jalapeno pretezls.
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lol but the coffee costs more than the donut
I wish we had Wawa here! The hoagies are great, the coffee is decent, and it just has a good vibe.
A cup of coffee costs about $0.18 to make in the USA. They hope people will go in for the coffee and then pick up a donut, pasty, get gas, etc.
I actually took the Cumberland farms Coffee course decades ago when they first started this idea. They make money on every cup. The original blend was a complete D&D knock off but I assume that has changed by now. The cost of a cup is so low its amazing. Its well over 50% margin.
The extra fun value at Cumby is how quickly you can get in and out instead of the indoor and outdoor queues at DnD
I would say those stores have greatly improved.
Def. When everything is bought in bulk it's easy to do.
Though I'm sure everyone has seen those people stuffing their pockets/purse/store bag with tons of flavored creamers for home. Prob doesn't help but they still make $$$
I think it’s called a loss leader. They lose money on the coffee but make a killing on everything else. Same as the cheap hot dogs at Costco.
Glad you commented this. Someone else mentioned the idea and I couldn’t remember the word for it lol
The cream and sugar people use cost more than the coffee does. It is cheap/free to get people to buy smokes and pastries.
Loss leader
I’m assuming the fact that YOU are making the coffee (providing the labor) has at least something to do with it.
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It’s like Costco selling rotisserie chickens at a lost because most people coming in will buy other thigs
Most retail stores have a “loss leader” that is designed to take a loss in order to entice customers in and buy other products.
That being said, coffee has a low pour cost, and they still might generate a small profit.
It’s probably a loss leader. In essence, each $0.99 coffee is sold at a loss to attract customers, in hopes of them buying other things to make up the difference (usually other food items, snacks, sometimes gasoline)
Same way Mcdonalds makes money off the dollar menu, the deal gets you in the door, and then you buy other things.
As someone who’s worked for both Cumberland and Dunkin in their finance departments the comments here are correct. The margins are so high on coffee that they can price is at .99 and still make money. A cup of coffee might cost about .05-.10 to make depending on the brand. For Cumberland farms sake it was simply used to drive foot traffic and wasn’t seen as a primary revenue generator
Damnit...I really miss their cheap-ass coffee lol.
Side-note: their coffee is excellent, too. Yeah, you gotta get out of your car and go in to make it, but you don't have to rely on someone else, so you know it's done right. Been a fan for years...
I am 100% not answering the question but IMHO the coffee at Cumbies is WAY better than crappy ass Starbucks.
Maybe gas and the million other things they sell… it’s a convenience store not a coffee place. The price sells the coffee not the coffee it’s self because nobody thinks it’s great
Tbh I like it. You make it yourself so it's gonna be how you want it everytime. Unlike going to Dunkin where one day it can be great then the next day you're like ew wtf
Yea I don’t like milk or cream in any situation so prob worse for me but when it’s the spot on route to work I’ll drink the shit out of it but now that’s dunkin which still is shit beside when the black pepper bacon croissant is in town
Gas has low margins but is one of the main reasons you stop, coffee is cheap - incredibly as pointed out above - they provide a hot cup at a reasonable compared to a coffee shop cup it will still feel incredibly cheap. They can subsidize their promotions based on the amount of cups they sell outside of the promotion. Finally if you get a cup of coffee you may be more inclined to begin the breakfast ritual and you'll buy food too. Once you're out of your car and in their store, it is all mostly high margin items (except for cigarettes and lotto tickets).
If you buy a gallon of milk, carton of eggs, or anything of that sort there it's insane.
Lost leader
Biden
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Coffee has the highest profit margin of any item sold at a gas station. Starbucks and Dunkin prices are ridiculously high
They're selling 16 ounces of 99.9% water, of course they're profiting. Dunkin charges more because they make your coffee(and probably use slightly better ingredients)
BitterStatus9 t1_ix5v9fe wrote
I assume the coffee is a lure and they cover any loss with the other purchases you make once you’re in the store.