Coffee Business Profit Margin: Bags, Cafés, Subscriptions

A roaster buys green coffee and loses about 15% of its weight in the roaster, so 15 pounds of green makes about 12.75 pounds to sell. Green coffee is most of a bag's cost; the valve bag, label and roasting time make up the rest. Retail bags keep a wide margin, café wholesale a thin one, and a cup poured at a market the widest. Margin = (price − cost) ÷ price. In the example below, a 12-ounce bag costs $8.95 to roast and sell and goes for $18.00, a 50.3% margin. A month of four ways of selling brings $18,200 of sales and about $8,160 of gross profit.

The short version

• Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
• Count your time as a cost, even if you don't pay yourself yet.
• A 12-ounce retail bag: $8.95, $18.00, 50.3%.
• Roasting loses about 15% of the green weight.
• Café wholesale keeps a thin margin.
• Subscriptions keep close to retail and come every month.
• TaroStack costs each bag from what each roast used. More below.

A bag, costed

Driftwood Coffee Roasters, the made-up roaster in Bend, Oregon, I use in these examples, roasts 15 pounds of green coffee at a time into 17 twelve-ounce bags:

Setting the bag price is in how to price coffee, and roasting at home in can you sell coffee from home.

Margins by channel

The café's 5-pound bag keeps 24.3%; the subscription keeps 44%, with the mailer in its cost and the postage charged to the customer.

A month's numbers

A month for Driftwood Coffee Roasters:

Retail bags and subscriptions bring most of the gross profit; the cafés bring steady pounds and the roaster's name on a menu board. The cups at the market sell bags: people taste the coffee and take one home. When the roasting outgrows the roaster, the choice is in coffee co-packer.

Get the calculator

Download the coffee margin calculator. One sheet: one line for each product and channel, with its price, materials, packaging, labor and fee rate; the cost, gross profit, margin, markup and the price your target margin needs fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

The calculator holds one green price and one roast loss. A new lot of green at $1 more a pound, or a darker roast that loses 18%, changes every bag, and only the roast records show it.

How TaroStack does it

TaroStack costs each bag from what each batch used, so margins sit on real cost.

True cost from the batch. Each batch takes green coffee at the price of the deliveries they came from, so a price rise shows in the next batch's cost.

Labor on the batch. The minutes a batch took are recorded on it, so the hours behind each product are on record.

Margins by product. Margins are reported per product on that actual cost, and a price-creep report per supplier shows whose prices moved.

Recipes, batches, costing and margin reports are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

What is a good profit margin for a coffee roasting business?

In the example, 50.3% on direct sales before overhead; wholesale earns less, so a business that sells both should know its mix.

Is a coffee roasting business profitable?

It can be: the example's month of $18,200 in sales leaves about $8,160 of gross profit, before rent, insurance and the owner's pay.

What is the markup on roasted coffee?

In the example, a 12-ounce retail bag marks up 101.1% on its cost.

Is wholesale coffee profitable?

In the example, a 5-pound café bag keeps 24.3%, a thin margin, for steady volume and a name on the menu board.