Menu Price Increases & Inflation 2022

Menu Price Increase

We’ll be increasing our prices starting March 01, 2022 to;

• Milk Tea base price: $5.35
• Tea Fresca base price: $4.85
• Toppings: $0.60

In this blog post I want to dig a bit deeper into our process & decision making at Camellia Rd, as well as provide some transparency into our actual business costs.

INFLATION

Inflation is the biggest buzz word in any news involving the U.S. economy right now. We’ve certainly experienced heavily inflated costs in some areas of our operations this last year, but inflation itself is a natural part of any growing economy. I'd like to highlight 3 categories or “buckets” of things that have experienced inflation.

1. Camellia Rd Menu Prices

For context, we opened up in 2017 (~5 years ago) with the following menu prices:

• Milk Tea base price: $5.00
• Tea Fresca base price: $4.00
• Toppings: Free

I’ve struggled a lot with how to price our own products. When we first opened, honey boba was our only topping. We were still figuring out our identity (and whether to focus more as a tea shop or more as a boba shop) so we gave out the first portion of boba free. We started out with a clean, round number pricing that had sales tax included. We occasionally heard people mention that we were expensive, and I personally learned that I was particularly sensitive to this topic.

As we found our footing and expanded our offerings, we also raised prices. We raised our Tea Fresca prices to $4.50 from $4.00, to directly support our commitment to using real fruit and ingredients (no artificial syrup or powders). We started charging ($0.50) for topping options, and this helped to fund our experimentation and testing. We process all our toppings in-house, and thus offer a couple of toppings you won’t find anywhere else [1]. Lastly, we also added several alternative milk options for customers (regular fresh dairy options such as whole milk are still free, and we’ve never used creamer powder in-store).

This price increase is the first significant increase we've added since opening.

2. Wages

When we opened in 2017, we hired our first team members at $12 / hour, just above the San Diego minimum wage of $11.50 / hour [2]. Paying above minimum wage is a goal that we’ve strived for since Day 1. But to be honest, we’ve just barely kept pace with SD city’s wage growth.

From the 5 year span between 2017 - 2022, San Diego’s minimum wage grew from $11.50 / hour to $15.00 / hour. This is an increase of $3.50 / hour or about 30%. This is the end of the minimum wage increase ordinance (San Diego hasn't proposed any further increases as of now).

As of this post, our shift lead baristas are paid $16 / hour (+ tips). We’ve been able to operate the last several years with minimal price increases because we've been able to grow our gross sales on a consistent year over year basis and constantly pursued ways to increase our efficiency & productivity [3]. 

We're incredibly grateful that our sales volume has returned to pre-pandemic levels, but we now find ourselves at a point where our sales growth is beginning to slow down and we may be approaching a sales ceiling.

3. Cost of Goods

This bucket has seen the most fluctuation in the last couple of years. We’ve all seen price increases in household staples & groceries as individual consumers. And at Tea Bar, we actually rely a lot on everyday groceries you would expect to see a consumer to use, such as milk and sugar.

But our primary ingredient is tea. We use somewhere between 10-20 different teas at Tea Bar; tea that is grown throughout many different parts of Asia and imported to the US, and have seen more than just inflated prices. We’ve had shipping delays, suppliers be completely out of stock, and even had seen a couple of our looseleaf tea prices skyrocket to the point that we are considering switching some of our menu options.

One way we’ve tried to offset these costs is to place more resources into how we source our tea. We’ve tried to go more direct to farms. We’ve scaled up our ordering quantities to get better rates (and established our own loose leaf tea retail & wholesale program to complement this effort).

And perhaps the most unrecognized increase in cost of goods are our basic cup supplies. Our main supplier of plastic cups and lids had major issues obtaining the base plastic materials they need to manufacture these products, and at the time of this blog post we’ve been using blank plastic cups in lieu of our normal Tea Bar branded cups for 3 months now. Our price for cups, lids, and straws have all gone up from 2x - 7x in this last 5 year period [4].

2022 and onward

To be honest, we don’t know where the price of things are going, and we may even have to raise prices again in the short term future. We can only promise that we’ll do our best to make calculated changes and communicate our processes as best as we can.

-Ricky Lau

 

[1] Unfortunately, not all our toppings are from scratch. Our boba and grass jelly for example, have base ingredients that come from major wholesale suppliers, and we cook and prepare it our own way in-store.

[2] https://www.sandiego.gov/compliance/minimum-wage

[3] Minus the spring & summer of 2020 when COVID first hit.

[4] When we switched to bamboo fiber straws in 2020, this greatly increased our cost-per-straw, but this was a conscious decision and less of an “inflation” cause.