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Iced Tea
Profitability
By Scott W. Ball

As the famous Sgt. Joe Friday used to say on the TV show Dragnet, “just the facts please.” OK, here is the fact: except for alcoholic beverages, iced tea is the most profitable item on your menu, assuming you’re selling it.

So why don’t we talk about or promote iced tea more often? There is a certain mystique about hot tea that iced tea doesn’t have. No exotic names like Darjeeling or Lapsang Souchong. No attractive product like gunpowder tea. Even when we drink an iced tea, we usually “gulp” it down rather than breathe in its aroma and sip it slowly. But nonetheless, iced tea is extremely profitable.

Here, some eye-opening mathematics on the profits of iced tea, as well as some ideas on how to increase these profits and minimize losses:

I hope you are now saying to yourself, “maybe I should start looking more seriously at this iced tea idea and see how I can increase my profits”. But before you focus on making more profits, here are some tips to help you avoid dreaded profit stealers:

Equipment and Cleaning
No matter which iced tea equipment you use, make sure that it is operating and brewing properly. This means ensuring that the equipment brews at no more than 200 degrees and no less than 185 degrees, and that the brewing equipment is filling to the proper amount (ie. 3, 4 or 5 gallons). Even more important, make sure your staff is properly dismantling, sanitizing, and cleaning your brewing equipment.

One side note on equipment: Many customers brew their iced tea product through their coffee machines. This is perfectly fine, just be sure to use a different brew basket for tea. Otherwise, the coffee oils will get into the tea and you will have coffee-flavored iced tea.

The Tea Product You Buy
I am always amazed when customers decide to sacrifice quality just to save few extra dollars. Let’s use the profit calculations from above. Let’s say “product A” is a very good tea that costs $33 a case and that “product B” is a lower-quality tea that costs $30 per case. By selling only 4 - 5 glasses per week of the lower quality beverage, your “savings” are covered. But, more importantly, you stand the risk of losing sales of up to 10 glasses per day or $3,000.00 per year by using cheap tea. So you’re actually costing instead of saving yourself money. When you serve a cheaper quality tea, your consumers order less.

Holding and Serving Tea
This affects both beverage quality and food safety. As soon as iced tea is brewed, the quality starts to diminish although this is not really noticeable until after about four hours. Iced tea should be held for no more than four hours, which means that when you finish a shift (lunch or dinner), then you’ll need to discard that tea and make a new container to start the next shift. Along that same line, never refrigerate tea.

Now that we know some of the profit stealers, let’s focus on some profit builders:

Encourage Your Staff to Sell More Iced Tea
Next time a customer asks for water, have your wait staff respond saying that you just brewed some fresh iced tea, assuming you did. You can also mention the brand name if you think that will help sell it or even offer a flavored tea along with the regular to give the customers a choice. If even half of the customers who traditionally order plain water substitute iced tea, you will make an additional $8,769 a year!

Merchandise the Dispenser
You could use the valuable space on the outside of your iced tea dispenser to sell more tea and make more profit. Take your iced tea urns and merchandise them, either with generic iced tea wraps or wraps your tea supplier can provide you.

An Analysis of How Profitable Iced Tea Really Is:
Beverage Cost

The premise: A case of 24 3-oz. teabags costs $34 and each bag produces 3 gallons of iced tea, which equals 72 gallons or 9,216 ounces of finished iced tea product per case.

3 gallons of tea per bag
X 24 bags/case


72 gallons of tea per case of teabags

72 gallons per case
X 128 ounces per gallon


9,216 ounces per case

By dividing the case cost ($34) by the number of ounces per case (9,216) you will get the cost per ounce.

$ 34 per case
÷ 9,216 oz.


.00369 cost (dollars) per ounce

Let’s say an average store serves iced tea in 20 oz. glasses. Usually half of the glass is ice so the actual glass has 10 oz. of iced tea. However, to be generous, we’ll say that the glass holds 12 oz. To be realistic, let’s say each of your customers gets two refills. Therefore, an average customer consumes 24 oz. of iced tea, which costs a whopping nine cents ($.09). To get this number, multiply cost per ounce from the paragraph above by 24.

.00369 cost (dollars) per ounce
X 24 ounces of iced tea consumed (2 - 12 oz. glasses)


.08856 cost (dollars) per customer (2 servings)

That’s right, those pennies you see in the little convenience store “give a penny take a penny” jar, could probably pay for one of your customer’s servings of iced tea.

Beverage Profit

We now know that it will cost us about nine cents to serve one customer his or her iced tea for a meal. Let’s assume that we price our iced tea at $1.25 per serving.

$ 1.25 price per 12 oz. serving of iced tea
X .09 cost to serve one customer iced tea


$ 1.16 profit from iced tea for one customer

Subtract $.09 from $1.25, and you make a net profit of $1.16. Continuing with our assumptions, we’ll say your operation averages 75 customers a day purchasing tea and that you’re open 360 days of the year. Multiply $1.16 by 75, and then multiply that number by 360. That equals $31,320 a year in net profits. Not bad for something usually gulped down.

$ 1.16 profit from iced tea for one customer
X 75 customers per day


$ 87 profit per day
X 360 operating days per year
$ 31,320 profit per year from iced tea

Of course, this calculation doesn’t take shrinkage or other items into account, but you can include those factors by using BUNN’s Beverage Profit Calculator. The bottom line: this is a pretty easy way to make profits of about $30,000 a year.



Tea & Coffee - March/April, 2004
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