Why are commercial coffee machines significantly more expensive than consumer machines?

Question

I am trying to understand what causes a commercial coffee machine to be more expensive than a consumer system.

In essence, a coffee machine consists of:

Boiler, for the hot water (around 65 °C).
Temperature sensor.
Pump/motor to get the pressure (around 10 bar). (cost: \$390-\$520 USD)
Valves and pipes (to the boiler, from boiler to extraction point).
Pressure gauge, for the coffee extraction .
Relay, measuring the extraction length (around 25 sec).
Precise Temperature, Pressure and Extraction-Time control, via some kind of embedded system, say micro controller.
Chassis, to hold all the parts.
Coffee Taste(Temperature, Pressure, Extration-Time, Coffee Beam Crop)

What is it about the components or implementation that make commercial systems more expensive?

Is there something different about the manufacturing process (and therefore price) of each of the separate components? Or are there additional electrical components contributing to a higher component price?

A similar question could be asked about Apple computing products & why they cost much more than those of Apple's competitors. It all comes down to making the customer pay as much as the customer is prepared to pay. Companies aren't charities; they exit to increase the wealth of their stock holders. — , Apr 03 '15 at 22:47
@Fred I get you. My question is directed more towards the engineering and implementation/ production costs, rather than company reputation and financial aspects, which I don't question at all. Talking about poor products with high cost, think about Elon Musk and his achievements in automotive and space vehicle industries, using "Thinking form first principles." — , Apr 03 '15 at 23:01
I think you've left out the pump to get the pressure up to 10 bar and any valves and pipes static components that need to hold up to that pressure and temperature. That's probably not all. A complete bill of materials would be a good place o start... — , Apr 04 '15 at 00:50
So, we can build this up progressively: I found a commerical espresso machine ( $4000, USD). I looked at pump/motor combos with equivalent capacity (300 qt./hr) they were $ 390-$520 USD as off-the-shelf parts. — , Apr 04 '15 at 19:55
Because they can. Coffee carries a mystique right up there with oxygen free copper cables and wire layup for HiFi, and which corner of the vineyard the grapes for the 1959 Chateu Excessif Savignon Blanc were grown. Quality and build matter, but so does hype image and brand. — , Apr 05 '15 at 08:07
@Russell McMahon coffee bean growing and processing is completely different subject and you are absolutely right that is crucial to the final result, however, it is not affecting the cost of the machine in any way I understand. — , Apr 05 '15 at 08:51
Re " ... Are there any additional high price electrical components? ..." -> Probably all top end machines and probably most others will use a microcontroller to control overall operation. The software required to operate this will reflect operational aspects which the manufacturer has developed over time and the "IP" for this MAY be the most valuable aspect of the whole design. Top brand manufacturers may claim that we do XXX in a way that nobody else can match, and it makes 'all the difference' to the result. And, they may be correct, or may not. And only the coffee aficionados can tell ... — , Apr 05 '15 at 14:28
..., OR, think they can tell. And only those who can tell the difference can tell if it a subtle and perhaps essentially indistinguishable to mere mortals difference, matters to the final result. And how much it matters. So, for esoteric aspects that are judged important by those 'in the know', and able to be distinguished only by those with special knowledge or special ability, whether born of experience or innate ability, no amount of analysis or criticism will sway them from their faithful adherence to a chosen brand or method. There are useful parallels in other areas where undoubted ... — , Apr 05 '15 at 14:35
... potential differences in process lead to faithful followings who may, or may not, really be able to tell the difference. One example is sous vide cooking where temperatures are controlled to within a fraction of a degree (F or C (or K)) and the time/temperature profiles are equally well controlled in order to produce results which are deemed exquisitely superior and superiorly exquisite by committed followers . And, it is easily demonstrated that such adherence to detail can produce results which differ substantially from less controlled methods, and even mere mortals will agree that ... — , Apr 05 '15 at 14:39
@ Russell McMahon your make excellent points about the details that actually make the difference, which in our case will be: precise Temperature, Pressure and Extraction-Time control, via some kind of embedded system, say micro controller. Having that in mind, reverse Engineering may provide baypass to all the fancy "degustator-related" fine tunes.(not saying that it is a good thing to do or required. There should be very difficult to establish relations between: Temp, Press, Time of extract vs coffee beam crop vs local demand). — , Apr 05 '15 at 15:54
some such "improvements" are improvements indeed. Whether all such differences are important or by how much enters the realm of the esoteric & arcane. Once you can manage to get users to value the esoteric and arcane aspects of your product you have a price multiplier of maybe 5 times - and MUCH more in some cases. (Oxygen free copper, bee venom / pollen, Homeopathy (a superb example), Global Warming :-) :-) :-) , xxx diet, Prada anything, even Harley Davidson, ...) — , Apr 05 '15 at 16:40
I am not sure if this question belong here, I think engineering is a better home for this question — Mahendra Gunawardena, Apr 06 '15 at 22:39
I would say in simple terms, a home machine is designed to make maybe ten cups of coffee a day, usually one or two at a time. A commercial machine is designed to make hundreds of cups of coffee a day, running almost continuously for hours on end, and often four or more at a time. — Evan, Apr 06 '15 at 23:07
@Evan I get the point that high volume production requires high quality machines, however, I still find it difficult to justify the market prices — Ziezi, Apr 07 '15 at 11:52
Yeah, fair enough. I'm more of an engineer than a marketer. :-) — Evan, Apr 07 '15 at 12:33

score 6 · Accepted Answer · edited Apr 21 '15 at 10:24

Disclaimer: I have no coffee maker designing or manufacturing experience. This answer is based on internet research and professional experience. This answer addresses some of the product design challenges and less of the real engineering challenges, but a lead into the engineering challenges. Based on the question and comment I believe OP is interested in designing a coffee maker.

From a business standpoint most organizations strive to service segments of the market that organizations believe they have a competitive advantage. These organizations also try to offer products to meet opening (OPP), mid (MPP) and High (HPP) price points. Also branding place a significant part in product pricing.

Assumption: US dollar = Euro (Approximately, 1 Euro = 1.09 US$)

Coffee Maker Product Landscape
Based on the above I did some research on food services warehouse and selected Grindmaster for this analysis. Base on list price following are the price point classification (Dollars $)

OPP: 1000 - 2600
MPP: 3500 - 4700
HPP: 6000 - 10,000

Below is a table for OPP, MPP, and HPP price segmentation (April 6th, 2015)

Lets assume the following as customer segments

OPP: Small office break room coffee machine
MPP: Large office cafeteria
HPP: High traffic coffee shop, Panera, Starbucks, Dunkin Donuts…

Requirements Analysis:
Flow rate was chosen to keep the analysis simple

OPP: 4 - 15 gl/hr
MPP: 15 - 32 gl/hr
HPP: 32 - 50 gl/hr

Engineering Analysis

Product Design
Consider the Motor (Rotor, Stator, Casting) or the heating element from the BOM. Each of the price points (PP) most like need a different type of component. The component price to meet the above flow rate specification can be significantly different. Also the product volume is each PP is different thus for HPP or even MPP product it is highly unlikely to obtain volume base pricing that OPP might enjoy. Thus explains the cost of components.

Product Testing, Validation and Manufacturing
The cost of testing, validation and manufacturing will be much higher for MPP and HPP product because the consumer demands for higher quality product compared to OPP products. Thus the non-recurring engineering (NRE) cost per machine will much higher for MPP and HPP product than the OPP products.

Product Serviceability and Support
An OPP price point product needs very little from a serviceability and after sale support compared to MPP or HPP product. An OPP customer is most likely replace a defective coffee maker with a new coffee make where is MPP or HPP customer will consider maintenance. Also consider a customer like Starbuck or Panera, they demand for high quality, and zero downtime. Therefore the components used in MPP or HPP coffee makers of significantly higher quality than the OPP coffee makers.

Product Pricing VS BOM price -> General rule of thumb is BOM cost is 1/5 the Product Price. I believe this is a good starting point to figure what take to compete in the intended the coffee maker market. It appears that the coffee maker market is a red ocean. Therefore it important identify the point of differentiation.

References:

I got lost as I read through your answer. Could you add a summary section that brings it all together to answer the question? — , Apr 06 '15 at 12:43
@Mahendra Gunawardena That is a great description of the market and its subsegmets. Firstly, regarding the price points that you mention, I am considering only the high price, having in mind that new products are expensive to develop, low volume (no automation or scale) and need to have qualities higher than the existent. Secondly, flow rate is actually a great parameter to consider (it will be reflected in the question update). Thirdly, the most valuable part is the engineering analysis, in which I am mostly interested (for the time being), and thankful for. — , Apr 06 '15 at 13:18

Ecnerwal · Answer 2 · 2017-06-24T02:59:43.993

There's a much simpler explanation: economies of scale. The exact same item of the same quality often costs less if you buy more. You also gain access to techniques of manufacture that have high- up front costs (mold or die-making, say) but low per-peice production costs.

The one-off custom made machine has none.

A unit with a small market segment/target has some, depending on the production run size - hundreds, thousands, 10's of thousands.

A mass-market consumer product made by the millions has many. It's not uncommon to build a whole factory or at least a line of specialized equipment for the job.

Then you can add in the other factors that might be deliberate reductions in quality to meet a price point, or jacking up the price to reflect a name attached to the product.

If you could make a "equivalent" machine for 1/10th the price, you'll probably have an easier time selling it at 95% of the price, at least to the market segment that expects the higher price, and you'll also make a lot more money from each sale.

If you were going to offer this same machine at a lower price to get more sales volume and make more money, you'd make it "different" simply to not rob yourself of the sales at the higher price point, since those buyers would be unlikely to consider a "cheap" machine worthwhile - so your marketing department would make some meaningless changes and roll it out as a budget alternative, and "experts" would "taste" a difference between them...

Why are commercial coffee machines significantly more expensive than consumer machines?

2 Answers2