Chapter 21: The True Cost Per Kilo — The Number Everything Else Is Built On
In the last series, The Scale Blueprint, we worked out how to make more coffee without spending more to do it — wringing hidden capacity out of the process before ever reaching for capital. This series is the natural sequel, and it asks the harder question. Now that you can produce more, are you actually making money on every kilo that leaves the building? Or are you simply scaling up a margin you never measured properly in the first place?
Everything in this series rests on one foundational number, and it's the number most roasters get wrong: the true cost to produce one kilogram of roasted, packed coffee. Get it right, and every pricing and profitability decision downstream becomes clear. Get it wrong — as most do — and you are flying blind, setting prices on a cost that doesn't exist.
The Comfortable Lie: "Green Price Plus a Bit"
Ask a typical roaster what their coffee costs to make, and the answer almost always starts and ends with the green price. They paid a certain amount per kilo for the raw beans, added a rough mental margin, and called that their cost. It feels reasonable. It is also missing most of the actual cost — and crucially, it ignores the single biggest hidden cost adjustment in all of roasting.
A true cost per kilo is built from four components, and skipping any one of them produces a number you cannot safely price from.
The Four Components of a Real Cost Per Kilo
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Green Cost, Adjusted for Roast Loss: This is the one almost everyone gets wrong. You don't sell what you bought — roasting drives off moisture and organic matter, and a kilo of green becomes only around 0.82–0.85kg of roasted coffee, depending on roast level. So if you paid $9.00/kg for green at 16% roast loss, the green cost embedded in a kilo of roasted coffee isn't $9.00 — it's closer to $10.70. Before you've added a single other cost, the real figure is already meaningfully higher than the sticker price. (We'll dedicate the whole of next week's post to the wider problem of shrinkage.)
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Energy Cost Per Batch: The gas (or electricity) used to roast a batch is a real, direct, per-kilo cost, and it's rising for almost everyone. Take your roaster's fuel consumption, the length of a typical roast cycle, including warm-up, and your tariff, and you can attribute a genuine energy cost to every kilo. It's rarely huge per kilo, but it's never zero, and at volume it adds up.
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Direct Labour: The time a person spends roasting, cooling, and handling a batch is a direct cost of producing it. Take the loaded hourly cost of your production staff, divide it across the kilos they actually produce in that time, and you have a real labour cost per kilo. Roasters who pay themselves nothing for roasting time hide this cost from themselves — but it's still real, and the day you hire someone to do it, it becomes very visible.
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Allocated Overhead: Rent, power, insurance, depreciation on the machine, and all the other fixed costs of keeping the doors open don't disappear just because they're not tied to a specific batch. They have to be carried by the coffee you produce. Total your monthly fixed overheads, divide them by the kilos you produce in a month, and allocate that share to each kilo. This is where utilisation quietly becomes a profit lever — a point we'll come back to in Post 3.
Why the Wrong Number Is So Dangerous
The danger of a too-low cost figure isn't abstract — it compounds through every decision you make. You set a wholesale price with what looks like a healthy margin, but because your real cost was higher than you thought, the true margin is thin or negative. You agree to a volume discount for a big account, confident there's room, when in fact you've just locked in a loss on your largest customer. You run a retail promotion that you believe is still profitable, and it isn't. None of these mistakes are visible in the moment. They only surface, all at once, when the year-end accounts come in lower than the year expected — and by then the damage is done.
A true cost per kilo turns every one of those decisions from a guess into a calculation.
The Specialist Action Plan
To establish your real cost per kilo, work through these steps:
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Start with Roast Loss, Not Green Price: Weigh green in and roasted out across a representative sample of batches to find your true average roast loss percentage. Use it to convert your green purchase price into a real green-cost-per-roasted-kilo. This single correction is the one most roasters are missing.
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Attribute Energy Honestly: Work out the fuel cost of a typical batch from your consumption and tariff, and divide it across the roasted kilos that batch yields. Don't forget warm-up and idle time, which the Scale Blueprint showed is often larger than people think.
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Cost Your Labour, Even Your Own: Apply a real, loaded hourly rate to the time spent producing coffee — including your own time if you're the one roasting. A cost you don't pay in cash today is still a cost; ignoring it just flatters the number.
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Allocate Your Overhead: Total your fixed monthly costs and divide by your true monthly output to find the overhead each kilo must carry. Watch what happens to this figure as volume rises — it's a preview of Post 3.
The Silverback Tech Note: "When I sit down with an owner, and we build their real cost per kilo for the first time, the number always lands higher than they expected — sometimes 30 or 40 percent higher than the 'green plus a bit' figure they'd been pricing from for years. There's usually a long pause while they recalculate every wholesale deal they've ever done in their head. It's not a comfortable moment, but it's the most important one. You cannot manage a margin you've never actually measured — and you can't measure it from the green price alone." — JG
Want the number without the spreadsheet? The free Pegasus Coffee Calculator builds your true COGS per roasted kilo from these exact inputs — green blends, roast loss, energy, labour, packaging, and allocated overhead — in a couple of minutes. It's the fastest way to replace a guess with a fact. Pegasus Roaster Calculator