Economics

Heather Williams

Writing Assignment #1

Econ 232-Q01

March 7, 2014

Why is Iced Coffee More Expensive Than Hot?

As an iced coffee drinker I have often pondered on why the same size cup of iced coffee costs sometimes almost double of what a plain cup of hot coffee does. It’s the same coffee, they’re not flavored and “fancy” so why is iced coffee more expensive than the option of a regular hot cup of coffee?

Going into the spring and summer months many people find that drinking a cup of hot coffee is a little much when it’s 70 plus degrees outside. So with the rising demand of iced coffee consumption in the summer months could increase the cost due to the change in demand and lower prices as temperatures drop to push the product they have so they can end the day with as little surplus as possible so it does not go to waste.

That may be one good reason as why price fluctuates throughout the year at smaller mom and pop coffee shops but what about Starbucks and chains that keep the same price throughout the calendar year?

To produce iced coffee, it requires a cold-press brewing machine and iced coffee is a stronger brew than hot, as it is poured over ice, once the ice melts the coffee would taste watered down rather than actual coffee. So with the extra labor intensity going into the brewing process and the extra beans, there will be extra costs that are added to product cost. Not to mention the cost of the plastic cup vs. the paper cup, the straw and yes, the ice. For the locally owned stores, these are very high costs and many set the price of iced coffee just above a break-even price so they can make a small profit. If they didn’t have iced coffee they would lose some customers completely. Not having the machine to make iced coffee would potentially become an opportunity cost, and if they raised the prices any higher they would lose profit as well.