The Cost of a Mince Pie December 22 2015, 0 Comments
It’s that time of year again when the humble mince pie takes centre stage in many of our coffee shops, tearooms and cafes. I’ve visited a number of customers in the past couple of weeks where the prominent feature in their cake display is an enticing stack of homemade mince pies. On at least three occasions, however, I’ve felt the need to point out that they are selling these seasonal creations way too cheaply. The cheapest I’ve seen so far is 50p for a single mince pie, followed by 85p and £1. While 50p might seem a little cheap, at first glance £1 seems quite reasonable. There is, however, a little problem with selling mince pies at this price.
In all three instances, the price of the mince pie was well below any of the other cakes in the range. Other items were priced in the £3 range, either slighlty below or above, depending on the item and yet the ‘hot seller’ at this time of year was the mince pie. A customer who buys a mince pie as their ‘cake’ could end up spending around £2.50 less on that particular transaction than if they only had a choice of the higher priced items. Even at a pound, each transaction was likely to result in a drop in spend of around £2. Multiply this over 20 mince pies, or even 50, and the problem becomes apparent.
The fixed costs of the business haven’t changed – they still have to pay the same rent, the staff costs remain the same, as do the costs for heating and lighting. Losing £2 per transaction over the course of 50 sales, is a substantial drop in income, particularly if this is repeated time and again over the festive season. It is an approach to pricing which is probably based on a loose notion of gross profit; the idea that the mince pies cost so little to make and therefore can only be sold at a low price. Often little consideration is given to the staff time and effort required to make these individual pastries. There is another side to the pricing coin which revolves around the amount of money a business needs to make on any day in order to be profitable. Divide this between the number of customers and the ‘spend per head’ becomes important. This concept can often be overlooked by many cafe owners.
So if you’re a cafe owner and you decide to sell mince pies this Christmas please make sure you give a little more consideration to how you price them. If you’re visiting one of our wonderful cafes in Cumbria over Christmas, and come across some bargain mince pies for sale, buy two and save one to eat later!