Neworld, Great relationships build great brands

Has a takeaway coffee moved from being a daily treat into an expensive habit?

On 1^st January 2019, Irish VAT increased from 9% to 13.5% on hospitality services. This increase effects restaurants, hotels and coffee shops and without a corresponding increase in prices, the increase would leave these businesses 4% worse off.

Coffee chains such as 3fe and Insomnia have immediately passed the increase on to their loyal consumers in order to cancel out the reduction in revenue. These companies and sole traders have to pay salaries, rent, equipment leases and other bills before they start paying for the coffee beans and hot water and I think few people would begrudge anybody making a satisfactory return on their investment and hard work.

However, are they overestimating customer loyalty and risking a considerable drop in revenue by passing on increases so quickly? It may be only 10-15 cent per coffee but consumers can react disproportionately when a threshold is crossed. Every individual needs to manage their finances and decide where their hard earned cash goes. €3.65 times 220 is over €800 in a year and when people stand back and think about it they may decide they wish to pay for rock climbing classes, festival tickets or a beach holiday.

Personally, I’ve started making an extra large pot every morning to bring in a hot flask to work and enjoy throughout the day. Sorry coffee shop owners – it’s not personal, it’s just business.

Rob Madigan FCA CTC BCOMM, Financial Controller
Rob, a chartered accountant, is the FC for Neworld, a creative branding agency with over 30 years’ experience developing brands to position them for future growth. He has worked with Neworld since September 2008 and guided the company through interesting waters. Rob admires greatly his colleagues’ creativity, energy, and enthusiasm for their work and is happy to be a little part of the show. He previously worked in accountancy with PWC and Madigan + Co and in hedge fund administration with Citco Fund Services Dublin.