Cafe owners nationwide are pushing prices to $7 a cup for newsagency coffee, claiming $5–$5.50 leaves them unable to survive. Customers hate it, and many simply won't pay. For Australian newsagencies, convenience stores, and boutiques, this backlash creates a massive opportunity. You can capture frustrated caffeine seekers, boost foot traffic, and lift impulse sales on magazines, gifts, books, cards, and stationery, as they do not have the crippling cafe overheads, which are killing them. This practical guide explains the cafe crunch, why retailers might win big, and delivers a 6-step checklist to launch a profitable coffee department that complements your business.

The Cafe Cost Reality

Overall, Australia's $3.5–4B coffee market rivals the books market ($3–5B) and dwarfs the newspapers market ($2.9B). 

Yet Australian cafes today face severe economic conditions in 2026.

Labour now accounts for about 35–45% of every revenue dollar. What hurts is the weekend/public holiday penalties.

Rent/utilities take 20–25%.

Ingredients cost 20–30%

The $200k–$500k setups incur $0.30–$0.80 in depreciation per cup.

Raw flat white ingredients run ~$0.90 (beans/milk),

Full costs hit $4–$6.60

Break-Even Pressures

At $5.50 per cup, it's insufficient to cover 300–400 cups per day. They are looking at $6.50+ to survive.

The problem is that many will walk away from $7.

Why Retailers should look at this.

You skip cafe killers: no massive fit-outs, no barista wages, no seating headaches, and this position you perfectly to capture $ 7 shock shoppers, funnelling people your way for value.

The Winning Traffic Shift:

• Pre-$7: Shoppers linger at cafes, some spilling to your shop.

• Your Win: Capture an estimated 25% shift; 20–50 cups/day at $4 yields $15k–$38k extra profit yearly (70% margins).

High street newsagencies near bus stops and railway stations are in the perfect position. 

Your 6-Step Launch Checklist

Skip supplier hype. I've seen retailers thrive (and crash) on these.

1. Permissions: Can You Add Coffee Legally?

Centre leases or council rules often block food additions. Check first. 

• Action: Email: "Low-volume coffee machine as counter add-on, no seating, minimal waste."

• Reality: 1–2 sqm + 10–15amp power.

2. Price Smart: Scout Competition

Checkout the prices and availability in your area. What you are looking for is whether a $4 coffee is viable. 

3. Machine Reality

Skip pods, Aussies want proper coffee.

Check which machines are available to you. I would suggest going into a partnership with a coffee supplier. Make sure you have an exit path, even if it costs slightly more. Most coffee machine suppliers offer a trial period; make sure you take advantage of it.

4. Operations Truth

What I suggest you look at is 2 to 6 cups per hour.

Your staff will need about 30 minutes to operate the coffee machine.

Daily setup is about 5-minutes

Probably another 10 minutes for cleaning.

Waste disposal takes another 10 minutes.

5. Quality Test

For some unknown reason, coffee made with the same ingredients can taste different; you need to monitor the taste.

6. Maintenance

Please review the maintenance terms for the machine carefully. It's the biggest problem most of my customers with such machines tell me: the machine has been out for ages. Ask whether they provide replacement machines while yours is being repaired.These machines break down a lot.

Loyalty Boosts: Your Profit Multiplier

Loyalty Hack: The coffee costs $2, but customers perceive it as worth $4–$7.  That is a powerful combination.

Coffee bundles can build loyalty, such as 

• Family: coffee and a magazine

• Gift: Coffee + greeting card ($4.50).

• Reading: For newsagencies say $7 for a coffee and 30 minutes free browsing of magazines. Why not let them browse for free if they buy coffee?   They may actually buy a magazine too at the end.

Monitor your coffee sales

As with everything, monitor your coffee sales in your POS System. You need hard facts!

The survey below offers interesting insights from a 2025 report on Australian coffee trends. It shows that even with our rising living costs and increased green coffee bean prices, quality remains the most important. Coffee sellers must focus on taste. They must create a great customer experience. They must make wise pricing choices.

Key Takeaways

Coffee sellers need to succeed in 2025 to:

• Prioritise coffee quality
• Adjust pricing responsibly
• Manage milk alternative surcharges carefully, ideally including costs in base prices.
• Remember, coffee is a daily treat; customers aren’t ready to give up.
• Utilise your POS System for loyalty, inventory, and pricing to maximise your coffee sales.

Why Taste Dominates Coffee Trends in 2025

For Australians, taste remains the top priority when choosing where to buy coffee. The survey states that 73% of respondents state taste and quality as the most critical point. They need to focus on:

• Top-quality beans
• Having the right equipment
• Training staff on how to brew the coffee correctly.

After taste, pricing is the most important factor shaping purchasing decisions and plays a significant role in consumers' decision-making.

After understanding the importance of taste, it’s equally valuable to grasp customer expectations around pricing to balance quality with affordability.

Managing Coffee Prices in Australia: Expectations and Opportunities

Most customers report being comfortable in paying up to $5.50 for a small flat white, but anything over $6.65 is viewed as too expensive. Interestingly, regional differences by state are pretty minor.

As many cafes underprice their coffee compared to these expectations, it suggests an opportunity for many to raise prices strategically without losing demand. Your POS System is ideal to test variations and monitor its sales impacts in real time.

Beyond pricing, other factors like milk choices and surcharges are shaping customer loyalty in essential ways.

Navigating Milk Alternatives and Surcharges

Surcharges everywhere have become a problem, and in coffee, too. I have seen some studies that suggest it's best to raise all coffee prices by 15 cents for a cup and eliminate the 50-cent surcharge for alternatives like oat or almond milk. However, this survey indicates that 86% find that if you levy a surcharge of 50 cents or less, it is seen as reasonable. What is troubling is that about one-third believe that there should be no surcharge.

Despite additional costs, coffee remains an affordable luxury.

Coffee as an Affordable Luxury: Understanding the Treat Factor

Coffee is considered a daily treat by about 40% of Australians today. Despite our economic pressures, 84% plan to spend the same or more on coffee in 2025.

Consider using your POS system’s free CRM to create loyalty programs that reward frequent buyers with points, reinforcing the treat mentality. With its real-time tracking of your customer habits, it allows you to offer personalised recommendations.

Market Growth Opportunities

Coffee market punches above its weight. It is over $10 billion a year. This is larger than bread, newspapers, and books. This reflects Australia's coffee obsession. We have over 20,000 cafes.

Coffee is often seen as a daily essential or a luxury rather than just a beverage.

Conclusion

Start implementing these strategies today to stay ahead in Australia’s thriving coffee market.

This article draws from the Seven Miles Coffee Roasters and Lightspeed Research survey, attached here.

Written by:

Bernard Zimmermann is the founding director of POS Solutions, a leading point-of-sale system company with 45 years of industry experience, now retired and seeking new opportunities. He consults with various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.