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2015-08-12

So there you are … you have done the good corporate thing and got yourself three quotes for your office coffee machines. But now you have created a monster for yourself. Each quote is calculated in a different way. You have a quote offering free coffee machines if you agree to use that company’s consumables; you have another offering a coffee machine for rent but with less expensive consumables and then a quote where you just pay an amount for each cup drunk. So let’s look at how you can get this sorted and sleep peacefully knowing the boss will get the choice right … thanks to you.

**Frontier Coffee offer you a “Quotation Comparison Tool” to compare different quotes on an “apples with apples” basis to ensure you get the best deal. See end of article for details**

Option 1. Free coffee machines but you must buy all the consumables from the same company.

Ok, this looks great. You get rent free coffee machines! Ah, but there is a small condition. You must buy ALL the consumables from the company. So you take a look at the costs of the coffee and fall off your chair. Still, could this be the best option? We’ll see.

Option 2. Rental fee for your coffee machine but you can buy your consumables anywhere.

So you have to pay a rental fee for each of your coffee vending machines, but what about consumables. Now you have a choice about who you buy from. So you reach for the consumable price lists and see that you can actually get your ingredients cheaper elsewhere.

Option 3. A cost per cup of coffee dispensed by the coffee machine

Well this is different! How on earth are you going to compare this quote with the others? Well… don’t sweat … it’s not that difficult. No, really!

Here’s the solution …

First you need to work out how many cups a day will be consumed. So look at the number of people in your office and get a sense of how many cups will be consumed each day, then for the entire month. Then you need to calculate how many coffee machines you need. This can differ depending on where people are, if they have a regular coffee break time or drift to and from the coffee vending machines etc. Then when you have that, the calculations can begin.

On the cost per cup quote in Option 3, the calculation is quite simple. Just multiply the number of cups per month by the price quoted by the supplier. You’ll get your monthly cost.

For Option 1, take the cost of the consumables and calculate a cost per cup. You’ll need to use 7 g of bean coffee; 10 g of milk powder; and 8g of sugar for a white coffee. Now you can calculate a cost per cup of white coffee. Multiply this average cost by the number of cups per month to get your monthly costs.

For Option 2, do as you did for Option 1 but then divide the coffee machine rental by the number of cups you think will be used in a month and then add this back to the cost per cup.

What are you seeing? Well that will depend on the number of cups being consumed and the prices in each option … but at least you have a way now of getting an “apples with apples” comparison.

Let’s do a quick calculation as an example:

Option 1. Free coffee machine and coffee beans at R180/kg; milk powder at R31/kg and sugar at R12/kg.

Option 2. Rent per coffee machine is R1000/month and coffee beans at R110/kg; milk powder at R25/kg and sugar at R9/kg

Option 3. R1.47 per cup that is dispensed

Assume you have 50 staff and they drink 3 cups/day which is 150 cups a day or 3000 cups in a 20 day month. Assume that you’ll need one coffee machine.

So Option 1 with the free machines will come to:

White coffee= 7g of R180/kg coffee = R1.27/cup and 10g of R31/kg powdered milk=R0.31/cup and 8g of R12/kg sugar = R0.10/cup. So each cup of white coffee will cost you R1.68

In Option 2, it will be 7g of R110/kg coffee = R0.77/cup and 10g of R25/kg powdered milk=R0.25/cup and 8g of R9/kg sugar = R0.07/cup. So each cup of white coffee will cost you R1.09 for consumables and the rental cost will be the R1000 per month rent divided by 3000 cups per month which gives us R0.33 per cup. The grand total for both machine rent and consumables is R1.42 a cup.

So, Option 2 is in fact cheaper than the “free coffee machine” option (who would have guessed?) and pretty similar to the price per cup dispensed option. What will happen is that as the volume of coffee goes up, Option 2 will work out even cheaper … but as it drops, Option 3 gets better.

But why struggle? **Ask us to do this calculation for you! In five minutes you’ll have the options in a transparent format that will allow you to compare prices on an “apples with apples” basis, and then you can decide which supplier to go with. The results are formatted to provide a clear motivation of which supplier you have chosen, and why. Simple.**

*The copyright to all and/or parts of this article is held by Frontier Coffee. It may be freely copied and reproduced as long as this is in its entirety and that the source is acknowledged as being “Frontier Coffee website at
https://www.frontiercoffee.co.za“*

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