Is It Fair For Coffee Shops To Charge Us More For Iced Coffee/Tea?
Singaporean’s love for cold drinks
For most Singaporeans, the level of productivity for a normal workday depend heavily on that first cup of caffeine that we grab near our workplace.
This is very much the same for the Seedly team, except that I am a big fan of iced coffee while they are all very ok with a hot cup of coffee. This means what I usually end up $0.10 to $0.30 more for my daily dose of caffeine.
I usually go on to have one more cup of iced coffee in the noon.
This means that I will go on to spend:
- An extra $0.20 to $0.60 per day
- An extra $4 to $12 per month
- An extra $48 to $144 per year on just ICE (which is simply frozen water)
Feeling helpless, I went on to vent my frustration on my research and this piece of content to see if coffee shops have a good reason to justify their extra charges on frozen water.
Under what condition can the coffee shop charge more?
Going back to basic economics, we list out some of the factors which can justify coffee shops’ extra charges for ice.
Basically, here are some factors that make it ok for a coffee shop to charge for ice:
- Cost of production for ice coffee is higher than that of a hot cup of coffee
- Based on demand and supply, if there is a higher demand for iced beverages
- Drinking ice coffee maximizes my utility as compared to having a cup of hot coffee.
Under the laws of demand and supply, utility represents the advantage, pleasure or fulfillment someone gain after consuming a certain service of good (in this case, ice beverages)
Now, back to the question. Is it ok for coffee shops to charge us more for iced beverages?
Cost of production for iced coffee is higher than that of a hot cup of coffee
Cost of ice
How much can that few extra cubes of frozen water possibly cost?
While ice may sound cheap, it can be expensive to make.
Unlike what most of us do at home, where we freeze our own ice with the help of our refrigerator, there are two ways coffeeshops get their ices.
They can either:
- Use an ice supplier, and all they need was to have a place to store the ice purchased.
- Make their own ice which requires a special type of commercial refrigerator to be able to support the number of demand.
The more common method will be the use of ice suppliers such as Tuck Lee Ice or Iceman to deal with their demand for ice. This will, however, incur extra cost on the production of ice beverages and ultimately be passed down to the consumers. We did a bit of digging and the price is about S$10 per 18kg worth of ice. Most coffee shops will probably have an arrangement with the ice supplier for better pricing, but passing down the cost to consumers is a must.
Should the coffee shop decides to build a commercial refrigerator for ice, the cost of building the fridge and to maintain it will be the cost that consumers help to foot.
Also, fun fact, the production of ice used in coffee shops require a different type of technology.
One example is the ice shown above. These ices are known as big tube ice which is built to melt slower.
The big tube ice is also hollow in the middle, which increases the surface are when put into your beverages, hence helps to cool your drinks faster too!
Iced coffee is usually more concentrated (“more gao”)
If you pay enough attention, coffee shops have a different method when it comes to producing hot coffee/tea as compared to iced coffee/tea. This is because iced coffee/tea are usually more concentrated to account for the melting of ice. This is why your iced coffee does not get too diluted as the ice melts.
With higher concentration, there is probably more materials involved. The extra amount of coffee powder or tea leaves adds on to the list of costs.
Other costs involved with cold beverages
On top of ices, cold beverages usually involve more material as compared to their less “cool” counterparts.
Ice beverages usually require a bigger plastic cup and straw to go along with it. At times, we have the cost of napkins involved due to condensation of the cold beverages.
Demand for ice beverages is price inelastic
Nothing beats having a cup of cold beverage on a warm sunny day.
Given that the average weather temperature in Singapore is usually above 31 to 32 degrees Celsius, drinking a cup of cold beverage gives Singaporeans more satisfaction than a hot one. Hence, drinking cold beverages maximizes the utility of a thirsty Singaporean under the hot weather.
This means that the demand for cold or ice beverages is possibly higher and price inelastic in demand.
In fact, a quick observation will be at supermarkets where they have fridges with cold beverages priced at a higher price than those on the racks. Should we be experiencing winter, there will be a swap in terms of price for hot and cold beverages.
Further reading: Coffee shops do have the right to charge more
Based on our research, coffee shops do have a justifiable reason to be charging us more for cold beverages. This finding, however, does not diminish the importance of keeping track of our expenses on our end.
Given that most of our workplaces are air-conditioned these days, it is definitely possible to skip a few cold beverages to save a few bucks.
On a side note, since we are on the topic of coffee, we once compared the cost of a Starbucks Latte in Singapore compared to the rest of the world.
Might be worth a read!
Check out our blog for more unbiased opinions on your personal finance journey.