Espresso coffee has long been an affordable staple in Italian culture, but the rise of specialty coffee is calling for a reviewed pricing structure. Global Coffee Report speaks to Italian roasters to understand the price debate and why the decision is not as easy as people might assume.
When Ditta Artigianale Owner Francesco Sanapo received a fine of €1000 (about US$1058) for not disclosing the €2 price tag of a decaffeinated espresso at his Florence coffee shop as a result of a consumer complaint, he shared his response and outrage to social media followers. What transpired was thousands of notifications, video shares, messages of support, and international press coverage from France TV, CNN International, and The Guardian.
What has since occurred, is an opportunity to discuss the cost of espresso in Italy and why specialty coffee should be valued with a higher price tag.
“Our mission at Ditta Artigianale is to spread the beauty of coffee to everyone, especially for Italians. To do that, we need to increase the price paid for espresso coffee. Drinking a €1 coffee is no longer sustainable. It’s a symbol of poor-quality coffee, and one we cannot afford to keep. It’s not wrong to pay €2 if there is quality attached,” Sanapo says.
Ditta Artigianale currently charges €1.50 (about US$2) for its espresso, with single origin espressos ranging from €2 (about US$2.10) to €2.50 (about US$2.60). Sanapo considers his espresso prices to be the most expensive in Florence, but says it is justified. Customers are not just paying for the coffee in the cup, but the experience at his café, its interior, quality furniture, and service from a qualified barista.
When Sanapo visits other cafés, orders an espresso, and receives the receipt with the minimum cost of €1.20 (about US$1.20), he suggests they increase the price of the coffee to €1.50. Operators consistently say ‘no’ because other venues around them charge €1.10 (about US$1.16). They say it’s “too risky” to increase the price for fear customers will go elsewhere.
“These operators are already losing money with every cup of coffee they serve,” Sanapo says. “I tell them to use their knowledge to create a story about quality, increase the quality, and then they really will stand out from the crowd, and how exiting would that be.”
What’s needed, is further education and knowledge to café owners and baristas, as well as the customer, about the cost of production of green beans, and prices applied across the supply chain before it arrives in the cup. Sanapo says already 500 people have come through Ditta Artigianale’s training centre, and he hopes to influence many more.
“With greater education, I hope one day my own baristas will go and open their own café and replicate what we do at Ditta Artigianale, because increasing the quality of coffee and increasing the price of the cup is the only way to make a revolution.”
A culture steeped in history
During the 1950s, espresso and the local newspaper were traditionally the cheapest items sold in a classic Italian coffee bar. Going to the local coffee shop and buying ‘un caffè’ was also the way many people could watch television. Caffè sospeso, or, the suspended coffee, was another popular movement in Naples during World War II when customers would pay for two espressos – drink one and leave the receipt of the other for a stranger in hardship to uptake complimentary.
For older generation Italians, the €1 is tied to tradition and culture. For them, espresso has never been about quality, it’s been about the social connection attached to it. Over time however, the price of newspapers has increased, but coffee has remained the same.
“Espresso culture is part of Italy’s history. It’s not an easy decision to completely change the price of espresso because there is a mindset that it needs to be cheap because of the high volume of coffees people drink per day, from two to seven cups, drunk quickly in the morning or after lunch. The only way to change that mindset is to differentiate coffee by quality,” says Matteo Baldoni of Caffè Pascucci Torrefazione.
“I think we can increase the price by serving a good quality coffee, and increasing the training and knowledge of baristas, giving them the information to help educate consumers about how to evaluate the quality of coffee, and what happens behind the cup: sustainable farming, use of organic products, natural processed coffees. Communication is what will change the customer’s view and understanding of why the price of specialty coffee should be higher.”
While this period of transition may take time, Eddy Righi, Barista Trainer, Research and Development of Caffè Pascucci Torrefazione and 2016 Italian Brewers Cup Champion, references Italy’s wine industry that in the past 25 years has emerged from a standard ‘red and white’ culture to bottles identified by region and varietal, with different prices attached. The same can be said for the large volume of boutique beers available on the market.
“Twenty-five years ago in restaurants, you would find only red or white wine. Then a scandal in the ’90s occurred when police found a lot of companies were manufacturing wine chemically without grapes. That led people to start questioning the quality of product they were buying; what was in it, and where it was produced,” Righi says.
While COVID-19 hit Italian coffee shops hard, resulting in the closure of thousands of small businesses and coffee shops according to Baldoni, the crisis could now be an opportunity for specialty coffee shop owners to reset their prices and start an important conversation with customers about quality, where their coffee comes from, and encourage them to try new products.
“Expanding a coffee shop’s menu with more alternative brewing methods, such as filter coffee options which are proving quite popular with the younger generation, may also help educate customers about the quality of espresso because their palates are evolving and they are more accepting of different coffee,” Baldoni says. “Otherwise, cafés will be forced to make a choice: work with lower quality coffee and risk closing or sell higher quality coffee and raise the price.”
Changing of the guard
When Righi started working at Caffè Pascucci Torrefazione in 2010, he opened a coffee bar selling organic espresso for €1.20 (about US$1.27), but that price has not changed in 12 years.
“The matrix for espresso in Italy in general is €1 to €1.40, but in my opinion it’s still too low. In today’s environment, the increased freight prices of green beans has gone up 300 per cent. A container used to be €1000 and is now €4000 on average. Everything is going up in price, but are we protesting the price of petrol? No, we just pay it. We accept the price increases of everything around us, but because espresso is a popular, sacred culture, people have an opinion. But one person can’t [increase the price] alone. Everyone has to agree in order for the whole industry to benefit,” Righi says.
“I do think the average price of espresso in Italy will rise to €1.50, but it should go hand-in-hand with salary raises of hospitality staff (which is a national average of €1340 per month or US$1418). Our industry has a high turnover of staff. If this doesn’t happen, I fear consumption levels will go down because Italy’s consumption is blocked at 5.5 kilograms per capita, whereas in Brazil, Eastern countries and Asian countries like China and Korea, their per capita has increased.”
Home brewing evolution
A YouGov sponsored 2021 Italian coffee research report on consumption analysis in Italy, granted by Italian Consorzio Promozione Caffè, found that of the 1032 people surveyed, 80 per cent regularly drink coffee, compared to just 5 per cent that don’t.
Eighty-three per cent also drink coffee a home, with 60 per cent making coffee from an espresso machine compared to 39 per cent with the traditional Moka pot, and 31 per cent with a capsule machine.
“Home brewing has been a dominant form of coffee consumption since Moka pots were introduced to market in 1933. Ground coffee has been available in supermarkets for around €8 to €9 per kilograms, so the coffee many Italians use at home is probably a grade two or three with lots of defeats. Because of this poor example of coffee quality, customers are used to drinking this type of beverage and are therefore reluctant to pay more for something that tastes quite different in a specialty coffee bar,” Righi says.
Unique to Italy, however, is that espresso remains the most dominant form of consumed coffee, both at home and out-of-home, accounting for 67 and 73 per cent of drinkers respectively.
Study participants were also found to value taste and aroma over brand and price, and purchase their coffee mainly from supermarkets. Outside the home, 82 per cent of consumers preferred to drink their coffee at a bar, compared to 43 per cent at the office, and 34 per cent at a restaurant.
Michele Monzini is CEO of Mokito, a fourth generation roastery, and President of Consorzio Promozione Caffè, an association representing Italy’s coffee market, community and supply chain, says Italy’s home coffee consumption rituals have evolved a lot in the past 10 years.
“While a great majority of people continue to still use the traditional Moka pot at home, there has been an increase of espresso machine users and lots of people using pods or capsule machines, such as Nespresso, especially in the past two years during the long lockdown period,” Monzini says.
“It was a time when cafeterias and coffee bars were closed. People, who were used to drinking two to three coffees per day at a bar suddenly had to start drinking at home, and they used capsules because it was the closest thing – and cheapest at 40 to 50 cents each – to a coffee consumed at the bar. The question now, is whether that volume of home consumption will remain, or will customers be happy to pay more for their coffee at a bar, with the out-of-home market still down by 20 per cent compared to 2019 levels.”
The consumer is changing. That’s why Starbucks made its move by opening a Reserve roastery in Milan in 2018, Monzini says, knowing that the ‘new-age’ coffee drinker is experimental. “Habits are changing and young people’s preferences can change much faster than the older demographic of drinkers. They are looking for different kinds of products, not only espresso,” he says.
Monzini adds that pre-pandemic, Italy had “too many bars” and was already divided by the decision to pay more for espresso thanks to roasters more focused on providing a quality offering and the influx of specialty roasters, or stick with a lower price and lower quality customers were familiar with.
according to Mordor Intelligence, the Italian coffee market is projected to register a compound annual growth rate of 2.3 per cent between 2022 to 2027. During the 2021 financial year, the Lavazza Group achieved revenues of more than €2.3 billion (about US$2.4 billion) and generated operating cash flow in the amount of €203 million (about US$214 million). illycaffè’s consolidated revenue for 2021 amounted to about US$532 million, a 17.4 per cent increase compared to 2020, and driven by the gradual recovery of the away-from-home sector.
Monzini says about 800 independent roasters make up the remaining 90 per cent of the roasting community, located in all corners of the country, such as Mokito, located in Milan. Monzini says regardless of size, all roasters would be feeling the pinch when it came to cost increases.
“Rising costs are almost unavoidable. At Mokito, the raw bean price for Arabica has doubled and Robusta has increased by 70 per cent in past 12 months. Everything is growing and no-one is happy about it,” Monzini says.
Also to be factored into rising costs, Monzini says, is service. “Not only should consumers pay more for a premium product, but for good service from a traditional Italian waiter or barista. If the coffee was served in a gold cup you’d have to pay for that too. It all adds up,” he says. “For this reason, the price of coffee in Italy is probably too low. If you can prove that you are achieving quality behind the bar then that would also justify you raising the price more than 10 or 20 cents.”
Paolo Scimone, Founder and Head of His Majesty Coffee, a roaster in the Lombardy region of Italy, agrees that the key to consumers paying more for espresso will be to differentiate it into two categories of quality. However, he says it will also be about perception.
“If you can identify a specialty coffee and that the owner has invested in a lot of equipment – such as La Marzocco, Victoria Arduino and Faema espresso machines, Mahlkonig EK43 grinders, Modbars and V60 brewing devices – it’s one way a customer can make a distinction that the venue is using premium devices and will be serving a premium product worth paying more for opposed to traditional venue that sells espresso for a quick and cheap purpose,” Scimone says.
His Majesty Coffee opened in 2013, roasting only specialty coffee. Scimone has never sold a commercial grade coffee, although admits it would help the speed of growth.
“We see the specialty market as moving but very slowly. Italy has about 50 roasters in the country roasting specialty coffee, so it’s increasing but not helping us grow quickly at scale. In the next five years I do think we will see many more specialty coffee shops open, but I also think specialty will remain a niche market,” Scimone says.
“At times we feel pressure to follow the United Kingdom or Australia to be a fast-moving specialty country, but Italy is unique. It is not easy to break our longer and older tradition.
“What’s also unique is that every city and small town in Italy has their own local roaster, which is why espresso tastes different from region to region. Traditionally, in the North, espresso is 80 per cent Arabica, 20 per cent Robusta or in some areas 100 per cent Arabica and roasted a bit lighter. In the South, it’s more popular to increase the Robusta, or have an even 50/50 split. Sugar is optional and largely dependent on the roast and the volume of bitterness in the coffee.”
The way forward, with respect to tradition, Scimone says, is for cafés to add one specialty coffee to their bar menu at a time, and slowly introduce it to customers.
“Over time, it will make an impact opposed to replacing all coffees with specialty at once. Once we capture the market, then we can slowly intergrade a higher price,” he says.
Business owners such as Sanapo of Ditta Artigianale understand the challenges ahead but are hopeful that with further industry support and greater market education, a change will occur.
“The task of raising the price of espresso in Italy, is my mission in life. Hopefully, in time, Italians and Italy, as a country, will see why we need to charge more for espresso. This is really about Italy’s coffee evolution,” Sanapo says. “We only want the best for our industry and to grow it, and I really believe raising our prices is one way to do that.”
This article was first published in the July/August 2022 edition of Global Coffee Report. Read more HERE.