Business is in the black
Coffee prices have been rising since 2009. The highest price was recorded in May 2011. Photo by Rashmi Raman
The price of coffee beans has risen steadily over the past three years, creating a squeeze for mom-and-pop businesses like D’Amico Foods in Brooklyn.
In 2008, the wholesale cost of a pound of Arabica coffee beans was about $1.50 in the New York market. The price, stayed under $2 till July 2010 and hit an all-time high of $3 in May 2011; it hasn’t decreased significantly since.
The D’Amicos (L-R) Joanie, Frank Sr. and Frank Jr. share a warm moment. Photo by Rashmi Raman
D’Amico, which was rated “best coffee in NYC” by Zagat Survey in 2006 and 2008, has seen coffee prices swing back and forth before. D’Amico has been roasting gourmet coffee since 1948, though it started as a grocery store run by father-son duo Emanuele and Frank D’Amico Sr. They were soon joined by Frank Sr.’s brother-in-law, Alessandro Viola, whose roasting techniques are still used. Today, third-generation D’Amicos Frank Jr. and his wife Joanie run the bulk of the business.
Coffee sales overtook groceries and the D’Amicos phased out the grocery business to concentrate on coffee, both brewed and to take home, and small eats like sandwiches and cold cuts. Their e-commerce venture, started in the mid 1990s, is popular, just like their original mail order service started by Frank Sr. in the 1970s. About 65% of coffee sales orders come through the website. The latest addition to their business is wholesale delivery of coffee to about 100 restaurants and cafes in NYC.
D’Amico offers about 120 varieties of roasted coffee, ranging in price from $8 to about $13 per pound. But because D’Amico caters to a huge variety of aficionados ranging from dockworkers to lawyers and retired seniors, they have had to keep their pricing competitive.
Frank Jr. says that “coffee prices are crazy” and notes that Fair Trade coffee (a market system that links farmers directly to importers by eliminating middlemen) costs about 30 to 40 cents more than coffee bought in the open market.
While roasting their own beans helps lower some costs, pricing remains a balancing act. They had to increase the price of a cup by a quarter, a 25% change, last year (see graphic), even though bean prices increased by 33%. As a result, the store has seen a 15% reduction in profits on coffee in the past year.
The price hike was a drastic move as the rate had remained almost unchanged for about five years. While Frank Jr. has had to reason with some irate customers, he observes that most customers “are OK with the prices as they aware of what’s happening”. In fact, overall sales have increased by 20% this year as compared to the previous year.
Joanie notes that a cup of their signature Red Hook Blend ($12.29/lb) costs the same as that of the House Blend Light (8.39/lb) when brewed at the store. That is partly because brewed coffee isn’t a big part of their business. Indeed, 85% of D’Amico’s revenue comes from selling coffee that can be made at home, so they can afford to keep a common price for the brewed coffee and cater to the local clientele.
For customers like lawyer Meg Manchester, D’Amico represents a sense of old New York and a chance to strengthen ties with the community. Robert Painter, a customer for eight years, says “the place has so much character, the character bleeds into the coffee.” Longtime customer Alfonso Salas believes that “The neighborhood has changed and an institution like D’Amico needs to reflect that.” The store had a “more rustic” decor before Frank Jr. and Joanie changed the interior a few years ago. The D’Amicos realized that attracting the young professionals moving into the neighborhood was as important as retaining their more loyal customers.
The employees feel it too. Christian Lee Branch has been roasting the beans, and recommending coffee varieties, to customers for six years. For him, working for the D’Amicos is like “working with family”. D’Amico has never had layoffs, and some employees have stayed around for 20 years.
Employee retention, competitive pricing, its reputation in the community and multiple sales channels have helped build the brand. But the D’Amicos are looking for ways to expand the business and decrease overhead. They are considering ideas like discontinuing the sandwiches and increasing seating. They might also reduce business hours and hire more people because of their health concerns.
And the D’Amicos are aware that inflation and recession haven’t deterred consumers from getting their caffeine fix. Americans are even more passionate about it. According to the National Coffee Association of America, for every 10 cups of coffee consumed last year, four were gourmet. And while gourmet coffee costs more than regular, the profit margins are higher too.
The price of coffee beans has risen steadily over the past three years, creating a squeeze for mom-and-pop businesses like D’Amico Foods in Brooklyn.
In 2008, the wholesale cost of a pound of Arabica coffee beans was about $1.50 in the New York market. The price, stayed under $2 till July 2010 and hit an all-time high of $3 in May 2011; it hasn’t decreased significantly since.
D’Amico, which was rated “best coffee in NYC” by Zagat Survey in 2006 and 2008, has seen coffee prices swing back and forth before. D’Amico has been roasting gourmet coffee since 1948, though it started as a grocery store run by father-son duo Emanuele and Frank D’Amico Sr. They were soon joined by Frank Sr.’s brother-in-law, Alessandro Viola, whose roasting techniques are still used. Today, third-generation D’Amicos Frank Jr. and his wife Joanie run the bulk of the business.
Coffee sales overtook groceries and the D’Amicos phased out the grocery business to concentrate on coffee, both brewed and to take home, and small eats like sandwiches and cold cuts. Their e-commerce venture, started in the mid 1990s, is popular, just like their original mail order service started by Frank Sr. in the 1970s. About 65% of coffee sales orders come through the website. The latest addition to their business is wholesale delivery of coffee to about 100 restaurants and cafes in NYC.
D’Amico offers about 120 varieties of roasted coffee, ranging in price from $8 to about $13 per pound. But because D’Amico caters to a huge variety of aficionados ranging from dockworkers to lawyers and retired seniors, they have had to keep their pricing competitive.
Frank Jr. says that “coffee prices are crazy” and notes that Fair Trade coffee (a market system that links farmers directly to importers by eliminating middlemen) costs about 30 to 40 cents more than coffee bought in the open market.
While roasting their own beans helps lower some costs, pricing remains a balancing act. They had to increase the price of a cup by a quarter, a 25% change, last year (see graphic), even though bean prices increased by 33%. As a result, the store has seen a 15% reduction in profits on coffee in the past year.
The price hike was a drastic move as the rate had remained almost unchanged for about five years. While Frank Jr. has had to reason with some irate customers, he observes that most customers “are OK with the prices as they aware of what’s happening”. In fact, overall sales have increased by 20% this year as compared to the previous year.
Joanie notes that a cup of their signature Red Hook Blend ($12.29/lb) costs the same as that of the House Blend Light (8.39/lb) when brewed at the store. That is partly because brewed coffee isn’t a big part of their business. Indeed, 85% of D’Amico’s revenue comes from selling coffee that can be made at home, so they can afford to keep a common price for the brewed coffee and cater to the local clientele.
For customers like lawyer Meg Manchester, D’Amico represents a sense of old New York and a chance to strengthen ties with the community. Robert Painter, a customer for eight years, says “the place has so much character, the character bleeds into the coffee.” Longtime customer Alfonso Salas believes that “The neighborhood has changed and an institution like D’Amico needs to reflect that.” The store had a “more rustic” decor before Frank Jr. and Joanie changed the interior a few years ago. The D’Amicos realized that attracting the young professionals moving into the neighborhood was as important as retaining their more loyal customers.
The employees feel it too. Christian Lee Branch has been roasting the beans, and recommending coffee varieties, to customers for six years. For him, working for the D’Amicos is like “working with family”. D’Amico has never had layoffs, and some employees have stayed around for 20 years.
Employee retention, competitive pricing, its reputation in the community and multiple sales channels have helped build the brand. But the D’Amicos are looking for ways to expand the business and decrease overhead. They are considering ideas like discontinuing the sandwiches and increasing seating. They might also reduce business hours and hire more people because of their health concerns.
And the D’Amicos are aware that inflation and recession haven’t deterred consumers from getting their caffeine fix. Americans are even more passionate about it. According to the National Coffee Association of America, for every 10 cups of coffee consumed last year, four were gourmet. And while gourmet coffee costs more than regular, the profit margins are higher too.
