If you’re considering entering the coffee business, you have an exciting opportunity to make money trading in a product people enjoy every day. However, as an aspiring coffee entrepreneur, you want some more solid information about the financial prospects before you have skin in the game. This article explains what you need to know about markets, costs, pricing, and profit to help you determine if the coffee business is for you.
The Market for Coffee
Coffee is in high demand in the United States and across the globe. Demand is growing each year and is trending toward artisanal, ethical, and sustainable coffees and alternative brew styles like cold brew.
That means there is ample room for you to identify a growing target market among the ranks of coffee lovers worldwide and position your business to serve them. Here are 12 key facts you should know about the demand for coffee:
- Coffee is a daily habit for 73% of Americans, and 66% make it at home daily.
- People worldwide drink more than 2.25 billion cups of coffee every day.
- 60% of the U.S. population drinks 1-2 cups daily, while more than one-third drink 3-5 cups.
- 81% of retirees drink coffee daily, making them the American age demographic most likely to do so.
- 30% of Americans prefer coffee pods, with other popular brew methods being drip (29%), ground (20%), instant (8%), and French press (8%).
- Preference for black coffee is declining, largely due to the availability of coffees with added ingredients or flavors.
- Medium roast coffee is the most popular, and 49% of Americans prefer it. It is followed by dark roast (28%) and light roast (12%). Only 11% of coffee drinkers have no specific preference.
- 56% of people spend $11-30 monthly making coffee at home, while 11% spend $40 or more.
- Many new parents spend $40 per month on coffee to drink at home.
- Global revenue from coffee purchases for home consumption is projected to grow by nearly 3% annually until 2029.
- Though retirees are most likely to be daily coffee drinkers, Gen-Z has the most collective purchasing power to buy coffee. They increasingly spend it on specialty coffees with sweet flavors and fun marketing.
- Coffee demand remains high year-round but peaks during the winter months and drops by about 12% during summer.
Starting an online coffee business with regional, national, or international shipping allows you to tap into these thirsty markets.
What Does an Online Coffee Business Cost?
With quality products and a clear sense of your market, you’re likely to find ample demand for your coffee. First, you’ll have to determine what it costs to start and run an online coffee business. You can look at your costs in two phases — startup costs and operating expenses.
Online Coffee Business Startup Costs
An online coffee business requires minimal startup capital. You should anticipate the following costs, but you could defer or reduce spending on some of these until after your first order comes through or you reach an initial revenue target:
- Initial inventory of coffee, packaging, and any related products you plan to sell
- Roasting equipment for funds for outsourced roasting
- Shipping supplies
- Registration and other legal fees, including any permits or licensing
- E-commerce website development and account fees
- Software for inventory, accounting, and customer relationships
- Initial marketing expenses
One of the main advantages of an online coffee business is that you can run it from home, provided you have enough space for your inventory. Partnering with a reliable supplier helps you reduce the inventory you must keep in stock before orders. Overall, the startup costs for an online coffee business are substantially more affordable than those for many other businesses.
Online Coffee Business Total Operating Expenses
Once you’ve started your coffee business, you have some ongoing expenses to keep the revenue flowing:
- Inventory
- Packaging
- Shipping
- Marketing
- Customer service
- Website maintenance
- Business liability insurance
- Accounting
An online coffee business can have very low overhead if you run it from home. Most of your total operating expenses are closely related to serving your customers. As a result, you have the flexibility to control much of your spending based on how much you want to invest in upscaling the business.
Online Coffee Business Revenue and Pricing
As an online coffee business, most of your revenue comes from selling coffee in prepackaged beans, grounds, or pods. You may also consider selling related products like cups, tea, or branded merchandise.
To determine your pricing, analyze the market to find the perceived value of each product you’re offering. You can do a basic perceived value analysis by first studying how competitors with similar positioning price their coffee. From there, keep your pricing affordable enough for your target market and high enough to cover your expenses at a realistic sales volume. You can adjust your pricing as your brand earns trust and you learn through experience.
While pricing per product and selling one package of coffee at a time is a solid starting point, you can also explore product bundles or create a monthly subscription service.
Your revenue depends on factors like your pricing, target market, and how much you invest into growing your business. However, based on the average amounts people are comfortable spending each month on coffee to drink at home, you could scale your business to $100,000 gross annual revenue with your first 200-300 regular customers if you target higher spenders.
Why Is an Online Coffee Business Profitable?
There are three main reasons why a coffee business is profitable:
- Demand is high.
- Overhead is low.
- High-value niches are growing.
Your net profit margins depend on factors like your costs, pricing, and target market. One viable strategy is to aim for a high-value niche like single-origin, artisanal, sustainable, or ethical coffee. By effectively targeting higher spenders, you can charge more based on perceived value while keeping volume —and overhead — modest until you’re ready to scale.
Start a Profitable Coffee Business with Joe’s Garage Coffee
If you’re ready to step into the online coffee business and meet the demand waiting for you, you need a dependable supply partner. For the finest quality and fastest delivery with stellar service, choose Joe’s Garage Coffee. We supply all the goods a profitable online coffee business needs:
- Coffees and teas
- Pods for Nespresso
- Cups for Keurig
- Portion packs and bags
- Compostable coffee pods
- Coffee sourcing, roasting, and packaging
We offer superior quality, service, and speed so you can sell better coffee to your customers faster. Our low order minimums are designed to serve coffee entrepreneurs like you who are building from the ground up, but we have the experience and capacity to walk with you every step of the way as you grow your business.
Contact Joe’s Garage Coffee today to learn how we can help you start a profitable coffee business.
