“Everyone feels the pressure of cost of living”: How are local cafes keeping up with rising bills?

Times are tough for small businesses. Ongoing cost of living pressures have made running a profitable operation difficult and – for many customers – there is less disposable income to spend. 

Punters complain about rising costs, but often these costs occur because the business has to recoup losses.

We spoke to cafe owners in Croydon and Belgrave about how the cost of living -- and cost of running a business -- has changed over the years.

📈 Increasing business costs drives vegan cafe to offer meat options

On a cold and rainy weekday morning, customers come to the Acai Brothers café, on Hewish Road in Croydon, to grab their morning coffee or smoothie.

The smell of fresh grounds and crema lingers in the air.

Customers are a mix of young men and women, including tradies.

Co-owner Brittany Renton says that her business offers a “main five” of milks including almond, oat, soy coconut and lactose-free.

They attract a surcharge of 50 cents when they are a part of a coffee order.

The most popular hot drink is the latte and a small latte with almond milk costs $5.50.

Brittany said increases in business costs – including insurance and fair wages – are a main driver when she sets her prices.

In her view, most people are understanding of the surcharge.

“There’s a variance across the board,” Brittany said.

“Some places you can get an almond latte for $5.50 or you can get it for $8 somewhere else. I understand that places are charging more because, from a cost point of view, it’s probably what you need to charge to cover costs.

“We never used to charge to change milks. Then, post-COVID, we had to add [a surcharge] because the prices kept going up, especially for alternative milks. But we still offer 50 cents off if you bring your reusable cup in.”

The cost of living is another factor when it comes to pricing.

“I think everyone feels the pressure of cost of living at the moment,” Brittany said.

“We’re probably one of the cheaper options in the area for coffee and we’ve had a big push from head office to put our prices up.

“I’m a big believer in ‘there’s only so much people can pay for a coffee’ so we try to keep our coffee prices as they are and raise other parts of our menu to accommodate.”

For their first eight years, Acai Brothers’ menu was mainly vegan.

Recently, Brittany decided to add meat-based menu options.

“There are people that will turn their nose up to vegan options, so we’ve had to make it more of an inclusive menu,” she said.

“Otherwise, we’d be one of those statistics of vegan cafés that couldn’t keep going.” 

The lengthy level crossing removal project on Coolstore Road saw access restricted in terms of nearby parking, driving down overall foot traffic.

“Coffee sales were definitely up during COVID, but then we saw a big dip once lifestyles returned to normal,” Brittany said.

“We’re now going back to normal where [tradies] are moving on and we’re slowly getting our usual customers back.

“It’s just trying to advertise to people that Croydon’s back, and we’re accessible again.” 

🥛 Milking every cent

John Hart OAM, the President of Restaurant & Catering Australia, told the Eastern Melburnian there’s no industry standard or set of guidelines in Victoria when it comes to cafés charging extra for alternative milk.

“Pricing of all products is up to the business,” he said.

“Industry practice is to set selling prices based on the cost of ingredients.”

John said surcharges can be high due to the number of milks a café offers and the waste associated with those choices. There is also little margin for cafés once expenses are accounted for.

“On average, 50 percent of the cost of a coffee is attributable to wages paid out and 30 percent is the cost of ingredients,” John said.

“Twenty percent is left to pay for everything else.”

📉 Dwindling margins hitting cafes in the Hills

Another café feeling the heat when it comes to wastage and price increases is Earthly Pleasures in Belgrave.

Adam Karam has part-owned the business with Sharon Nicholson for the past 20 years and they are both local to the area.

For coffees, the most popular milk is regular biodynamic milk sourced from a co-op in Lilydale, followed by soy. Oat, almond and lactose-free can also be found on the menu. 

Adam recently increased the add-on price of alternative milk to $1.00. So, a small almond latte here costs $6.00.

“The reason we put it up was that we didn’t find it was actually covering what we needed to make on it,” Adam said.

“With alternative milks, there’s a lot more wastage because of cross-contamination issues.

“We’re doing a lot more rinsing. We do use separate jugs, but sometimes jugs need to be cleaned out thoroughly when using different batches of milk.

“What is left needs to be discarded and can’t be used for the next [coffee]. The more alternative milk you use, the more waste there is. That’s the main reason.”

Adam said Earthly Pleasures was not immune to the effects of Covid.

“After Covid, we had a lot of people leave the hospitality industry, and we’re only just coming back to normal this year,” he said.

“Coffee sales went down, but I feel they’re on the rise again now. I think your local café is an important part of the community.

“I think everyone in hospitality will tell you the same. There’s no margin anymore. Most places are struggling; most people realise and see the extra expense.

“I think it’s widely accepted now that if they pay for coffee, it costs money.”