Life Food & Drink

Tuesday 22 January 2019

'People are already complaining' - Customers react as the price of coffee rises due to VAT increase

Cafés have responded by raising the price of a cup of coffee by around ten to 20 cents. Stock photo
Cafés have responded by raising the price of a cup of coffee by around ten to 20 cents. Stock photo
Geraldine Gittens

Geraldine Gittens

The price of a cup of coffee has risen in many cafés across Ireland, as the government's increase in VAT on the hospitality sector comes into effect.

As of yesterday, the VAT rate rose from 9pc to 13.5pc, and many cafés have responded by raising the price of a cup of coffee by ten to 20 cents.

Today, a cup of coffee in independent coffee chain 3FE, which has four cafés in Dublin, rose from €3.50 to €3.65.

While in Insomnia, a 12-ounce Americano has risen from €2.70 to €2.80. And while a cappucino was €3.20, now it’s €3.35 at the same outlet.

3FE owner Colin Harmon, who estimates that the net profit from a cup of coffee is 26 cents, said his business wouldn't have been able to absorb the VAT increase which would have cut his net profit in half.

He explained: “The increase is the entirety of the VAT increase. So what we’re trying to say to people is it’s the government’s increase, not our increase, and most people understand that.”

“Coffee is a product that people absorb everyday. It’s a nice business to be in, it’s a very social environment, but it becomes a bit of a political lightning rod at times. When good and bad things happen, people tend to look at the price of a cappucino.”

“They notice it more because they come in every day for coffee. [But the VAT increase is] going to be across the board. People always say coffee is a high margin product, and it is, but it’s a high gross margin product. A lot of independent coffee owners aren’t making money, they’re treading water and trying to stay in business.”

The VAT increase was announced in Finance Minister Paschal Donohoe’s Budget speech in October.

A reduced rate had been introduced in 2011 on a range of goods and services, including accommodation, restaurants and hairdressers, in an attempt to alleviate some of the financial stresses on the tourism sector during the recession.

Members of the public who learned of the price hikes while buying their coffee today reacted on social media.

"People [are] already complaining in coffee shop due to coffee going up 20c," one Twitter user wrote.

Another tweeted Leo Varadkar asking: "Why are you making it harder to buy a cup of coffee at a petrol station?"

A spokesperson for Insomnia Coffee told Independent.ie that the decision to increase pricing wasn't made lightly.

“We would like to reassure you that we don’t take the decision to increase pricing lightly and in this case the decision was, in effect, made for us with the increase in VAT from 9pc to 13.5pc and additional cost rises including commercial rents, rates, insurance, and ingredients having a direct impact on the running costs of the business."

She added: "Our pricing has been adjusted slightly and only to recoup these additional costs.”

Meanwhile, a spokesperson for Frank and Honest coffee said customers can still get the reusable cup discount of 20c in its cafes.

"Frank and Honest is committed to offering the best combination of quality coffee and value in Ireland."

"The price increase which came into effect on 1st January 2019 is the change in VAT from 9 to 13.5% being imposed by the Government. It should be noted that we offer a reusable cup discount of 20c in our cafes and for on-the-go coffee, so consumers can still available of cheaper prices by opting for the sustainable option."

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