Starbucks in Colombo

The premises being refurbished

Starbucks branding just coming up

Starbucks has finally turned its beady eye to Colombo it seems. There is an outlet coming up at Jawatte road just near the Thimba junction. While Starbucks might just be testing the waters*, the overpriced coffee market indeed seems to be booming.

Its funny, the thing about overpriced coffee is well, its overpriced. But the advent of an affluent upper middle class and the lack of any other alternative time killing joints, im presuming, is contributing to a growing market for high priced kopi. In the West where the concept first developed in busy cities where coffee is considered a necessity, its different. The dynamics are driven by an actual desperation for caffein and near price blind consumers.

Prices are unusually high given our income levels. Coffee in most upmarket shops here cost the same as they do in Singapore or the US. In other words, what is a slightly overpriced mass market operation elsewhere is definitely a luxury brand here.

As Tim Harford says in The Undercover Economist and this link clearly explains, overpriced coffee is usually a result of a coffee shop picking a strategic location near a subway station for example. The high rent drives away competition, and coffee starved customers pay extra for the convenience of a cup of latte enroute to work.

Expensive coffee shops in Sri Lanka and other parts of the developing world however, justify high prices by virtue of prestige. The prices keep the rabble out. So housewives can chill and gossip at the top of their voices, expats can come in to escape from the heat, office workers can take the occasional break and MBA students can discuss course assignments. You pay for the exclusivity and privilege of class, not the coffee. I’m not hating, just analyzing.

But how nice would it be if we started having some Arab style coffee joints here. Like the ones in My Name is Red. More pedestrian, more flavor and still novel enough to collect some street cred and more importantly, cheap. The stuff of dreams.

Funny thing, just up the street from the new Starbucks is a little kadey called ‘Eat cabin’ that’ll serve up some nice hot hot Harischandra for a fraction of the price, there’s even a little bench outside to sit and put a chat.

U PDATE: The outlet is not likely to be a full-fledged Starbucks and likely a new place selling Starbucks coffee. I don’t think this will affect the prices.

  1. Jawatta Road? Wow, that’s a terrible location for a coffee shop.

    • Whacko said:

      The place is actually experiencing some fast development. Will probably look a little like Stafford Av soon, only with more traffic and people

  2. My flatmate in London used to work part time in a prominent coffee shop in London, a latte costs £ 1.99 to take away and £2.20 to have in. But what is not known to the consumer is that the combined cost of materials, production and labour is only £0.17, so one cup of latte brings in a profit of 1170%. All coffee shops around the world work on such a large profit margin for a single cup of latte.

    However, in London the price of a latte is relatively in fair proportion to the average income. I used to have a latte almost everyday before I went to work, at the Pret a Manger close to my workplace.

    But directly translate that amount to rupees and we are talking of Rs.400 to have a latte when it costs about Rs 30 to make it. Clearly that isn’t something many people would want to do everyday before work, have a latte that is.

    The occasional tramp would walk into a coffee shop to buy a latte and then go back to his sitting spot on the kerb of the road. I quite distinctly don’t see a Sri Lankan ‘hinganna’ walking into one of these joints to have a latte,

    People in London would pay like we do to get a hot Harischandra, whereas here we do the opposite.

    What is staggering however, is that whilst things seem to be developing and ‘prosperity’ taking place, the development of the individual person is not rising or prosperity not increasing parallel to the other developments sweeping the city.

    • Whacko said:

      Excellent analysis. In Sri Lanka i think taxes for imported coffee are astronomical, but still wouldn’t justify pricing that is so high, unless the market is willing to pay, which it seemingly is

    • Whacko said:

      🙂 im sure there are a few flaws. Like the taxes factor mentioned above, and also i’m beginning to think i’ve offended a few ‘coffee lovers’

      • Chavie said:

        pshhh… they’ll probably bitch about it in a coffee shop. 😉 the truth stings, sometimes.

  3. Hayah said:

    “So housewives can chill and gossip at the top of their voices, expats can come in to escape from the heat, office workers can take the occasional break and MBA students can discuss course assignments. You pay for the exclusivity and privilege of class, not the coffee” Woah seriously? O.o Thats a bit hating dont you think? Sure income level has tons to do with venturing into a particular kind of eatery or shop, but unlike clothing stores, food related outlets have a more complex loyalties attached.

    How about this for some analysis – lets think about the essence of ‘coffee’. What Starbucks or rather the name that comes with Starbucks coffee is the ‘coffee’ which a large (and significant) number of drinkers would claim is pretty good coffee, in both the west as well as its branches worldwide and its also what other coffee shops like Coffee Bean and Baristas dont really have (personally they are an insult to coffee for me). True that this shop in Colombo is merely marketing Starbucks coffee and may have rates to compete with similar shops, also relatively close-by. But until we know quality for price, I think its a bit too early to judge.

    Besides, perhaps that coffee shop outing was the only one those housewives had in months and thus the vent out excitement, the much needed boost for the MBA student to stop thinking about bills and concentrate for once on the assignment, or for people to just sit around and have conversations that could possibly change the world… i mean who KNOWS?! A cup of coffee and ten thousand possibilities!

    • Whacko said:

      Well i think food just as much as clothing has a lot to do with branding, especially when you look at how tastes change with income levels. But you do raise some salient points! i don’t ‘do coffee’ much, but i can see the appeal

  4. I agree with Hayah. Its not always about the coffee. The price is for the ambiance and the service. Ive argued with many people on this point. A good coffee house is a place where the coffee is good plus the service and ambiance are on par. That is what you pay for. Places likes Barista and Coffee Bean the coffee is terrible but they let you hang out there for as long as you like. The price difference differs on the location and the type of coffee they use.

    Its a very indept topic Halik I shall explain when I meet you next.

    Also Himal, where would you like the coffee houses to come up?

    • Whacko said:

      Ah! yeah looking forward to the chat then. I agree with you however, from a consumer’s perspective there has to be other factors that make paying the price worth it. That’s what i was trying to get at in the post

  5. T said:

    “You pay for the exclusivity and privilege of class, not the coffee.” I think you hit the nail on the head there. In my rare forays into the world of coffee shops I often marvel at how people can afford these prices, the same I used to pay in NY for a cup of coffee, and even then it was too expensive; throw in what I earn here and what I used to earn there, and “coffee” becomes a very expensive luxury. Unfortunately, until SL starts seeing “development” in terms of the locals and not as something geared towards attracting tourists and expats, coffee shops and other over priced eateries will remain the haven of the upper middle class looking for ambiance and privacy.

    • Whacko said:

      I guess when there is a booming middle class, the demand for such amenities does increase. But as you say, if these services are only coming in at the to of the market it would suggest an increasingly unequal distribution of wealth

  6. Gamey Godaya said:

    This is just what the ‘posh posh’ crowd of Colombo 7 needs: another fancy cafe where they can spend Rs. 400 on a cup of coffee and bitch about the price of bread being raised by Rs. 5.

  7. Alfreda de Silva said:

    It seems obscene in a country where most of the population hardly can keep body and soul together. Another goday mudalali move.

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