Towards a theory of coffee pricing in Southeast Asia

Country Average price of 1 hot Americano
Indonesia (Bali) 1.60 USD
Singapore 2.25 USD
Thailand 1.60 USD
Laos 1.75 USD


Country Average price of a budget restaurant meal
Indonesia (Bali) 2.50 USD
Singapore 4.50 USD
Thailand 2.00 USD
Laos 2.50 USD
A cup of coffee in Cambodia, part of Southeast Asia I ironically did not include in this article

DISCLAIMER: These tables are based on my own experiences travelling on a budget through SE Asia; they are not actually representative of a random sample of coffee shops and are very subjective. But if you are travelling on a budget in SE Asia around late 2017, feel free to use this as a rough guide of what you’ll pay for coffee and food.

I lived in America for most of my life, and Korea after that, so something about the tables above is strange to me. I’ll give you a chance to guess what I think is odd.






Did you guess price ratios? Because if you did, you’re right, and I’m not apparently alone in thinking it’s odd.

In Indonesia you can buy a cup of coffee for about 65% of what you would pay for a meal. Singapore offers a more reasonable 45% (these numbers are skewed by my very driven efforts towards budget eating, though). In Thailand, a coffee will run you about 65% of your meal. Laos is about 65%. (Disclaimer again, these are fairly subjective numbers, but I have about 95% confidence that a cup in Thailand will cost you between 1.00 and 2.15, given that you aren’t above buying coffee from a street vendor and are avoiding anyplace that looks “too fancy.”)

In most of my experience, coffee rarely costs anything close to what the meal does, even if you are eating on a budget in America. I should point out that none of those average coffee prices above include visits to Starbucks or similar chains, because then all bets are off and you may as well stop eating altogether the way some of South Korea’s doenjang-hyoja (bean-paste girls: girls who eat very cheap food in order to afford fancy clothes and Starbucks) do.

So this made me curious–why are coffee and food such similar prices in Southeast Asia, and why is most coffee priced not that much lower than what you’d pay in the US?


Coffee beans are an imported input

In a way, the second question answers the first. Coffee prices worldwide don’t vary as much as food prices because coffee is difficult to produce domestically. The price of a coffee bean bought from a plantation in Brazil or Indonesia is about the same for a U.S importer as for a Thai one.

This means that the cost of coffee-making inputs remains fairly standard between countries, with some variability based on distance and perhaps grade of coffee purchased.


Making coffee isn’t very labor-intensive

But then you have the variable cost–people have to work to get that coffee bean to the store, keep the lights to the cafe on, grind the coffee, brew it, and serve it, and wages in America should definitely affect the cost of the coffee. It does, but the price of coffee in America definitely doesn’t rise proportional to the cost of labor/utilities/infrastructure in America versus Thailand.

I’m sure better people than I could do more than speculate, but my general theory is that for your average budget price of coffee, variable cost stays fairly low worldwide–it’s not too labor-intensive to make, so as long as you can pay the price of the coffee bean, you don’t have to invest too much in skilled workers to painstakingly prepare the perfect coffee. In Thailand, you pay a little less because the labor and operating overhead are cheaper. But you’re paying a lot for the coffee bean itself in both countries.


Food is domestically produced and labor-intensive

Food is, relative to coffee, a high-labor product. A single barista could churn out quite a few coffees in an hour, whereas a single chef probably couldn’t approach the same number of meals. So when you get a dish of pad see ew in Thailand, you can be sure it took more time to make than a coffee, and you’d expect the price to reflect the higher labor cost.

But you’d also expect the greater quantity and complexity of materials to be part of that price. A noodle dish needs meats, vegetables, sauces, seasonings, and all sorts of other things that require individual preparation and combination.

The big difference is that almost all of these materials can be produced close by, especially since the local cuisine tends to use cheap and available ingredients. There’s no single country exporting rice noodles or kale–the restaurant has access to a much more competitive, local market to source its materials from, and as such the cost of materials doesn’t include higher labor costs in the exporting country or the exporting costs themselves, or import duties, or supplier monopolies, or any of that.

And once you have those cheaper materials, you can use the cheap domestic labor to prepare them. The price is always higher than a cup of coffee for the reasons stated above (food requires more materials and labor), but the profit margin may be fairly similar–it took more labor to make your fried rice, and more ingredients, but both of those were cheap, whereas in the coffee equation only one of those was cheap.

So my basic, and almost definitely flawed, theory of coffee:meal relative pricing in Southeast Asia is this: With coffee you’re buying a little labor and a little of something expensive; with meals you’re buying a lot of labor and a lot of something cheap.

Stay tuned for my New York Times bestseller on the topic.

Thailand: ATMS and price discrimination

Like Bali, Thailand’s economy is often associated with tourism. In actual fact, the sector makes up about 9.3% of Thailand’s GDP, with manufacturing eclipsing it by quite a bit, along with the financial services industry (Thailand is a stable Southeast Asian economy whose currency, and probably their banking system, is well-regarded regionally, possibly explaining why that sector is doing well). Still, Thailand knows that the travellers from Britain, Australia, Singapore, the US, and other East Asian countries are an important resource, and it’s developed a very decent infrastructure to welcome them. Getting around can either be very easy (for a price) or moderately easy (for very cheap).

One thing that does not come cheap, however, is money. I don’t mean in the traditional economic sense of opportunity cost (you have to give up time to get money), but in the literal sense, that if you want to get money from your bank or credit card, you will have to pay for the privilege. As of October 2017 the exchange rate is roughly 30 baht to the dollar. An ATM withdrawal at any ATM in Thailand, regardless of bank, will run you 220 baht, or about seven U.S dollars.

How do the Thais afford these ATM fees? 220 baht is the cost of four or five meals, seven rides in a songthaew (bus-taxi pickup truck that is actually a great idea), a motorbike rental for a day–it’s a fair bit, especially if you’re earning a median Thai income, which is about 237 USD, or about 8000 baht per month. Two withdrawals would be about 5.5% of your income.

The answer is simply that the Thais do not pay these ATM fees–extra fees are charged only for foreign cards–any nationality. My American and Korean cards were both met with the same charge, and the ATM openly tells you that the fee is for foreign cards. This is a perfect example of…


Price discrimination!

An economic phenomena where businesses charge customers different prices for the same good, dependent on their willingness to pay. Usually it’s hard to pull off, because supermarkets can’t ask for your tax return every time you enter the store and change all the price labels to the maximum they think someone of your income group would be willing to pay.

It’s getting easier of course–online retailers can profile you based on past purchases and other collected data, get an idea of what you’re willing to pay, and change the price on that copy of Capital in the Twenty-First Century all with an algorithm if they want to, and once we all get contact lenses with HUD screens projected in front of us that let us shop in augmented reality, supermarkets could do the same thing.

That’s all in the future though–for now, we’re stuck with price discrimination based on simpler types of profiling, which is where Thailand’s ATMs come in. Charging 7 USD for an ATM withdrawal from foreign accounts is a nearly foolproof means of price discrimination in the country. Here are a few reasons Thailand can pull it off.

First, barely anywhere in Thailand accepts credit cards, especially not at normal levels of buying things. 7-eleven stores have a minimum, I believe, of around 3-500 baht, or at least nine dollars. That sounds easy to meet, but in Thailand that’s four bags of chips, three beers, a coffee, and two or three candy bars–and that’s all for my lowball estimate of 300 baht. That’s not a normal amount to purchase at 7-eleven most of the time.

So because everything from street food to the post office is cash-only, you need it–and as a traveller, you typically run out faster than you think you will due to unexpected expenses or just saying “lets do this cool thing” one too many times. And the only way to get cash is ATMs.

Second, there is absolutely no competition–I’m not sure exactly why all the banks charge the same rate, but the two main possibilities are government regulation (basically a tourist tax) or price-fixing/collusion by cartelized banks. In any case, if you need cash, you’ve got a few banks to choose from and they’re all the same price. I always liked Siam Commerce Bank because it’s got a slick color scheme.

Third, tourists aren’t going to organize and get anything done about this–they’re here for a few weeks, and they want to see some cool temples. They’ll bite the bullet and pay, then forget it until the next time. Elasticity of demand for money among tourists in Thailand is pretty low.

Fourth, Thailand doesn’t need to see tax returns to know what price to charge you–if you come to Thailand, you’re already paying a significant amount for travel, signaling that you’re in a disposable income bracket that will absorb higher prices without a lot of hesitation. Thailand’s tourism sector has a less reputable part that basically makes their entire living off this assumption, and even the more reputable parts hike the official prices (for national parks, temples, museums, etc) way up for foreigners. And of course it’s true–even with the price hikes it’s very affordable for someone like me and my U.S dollars.


Thailand: Guessing why there are so many pickup trucks here

(Correction: written while in Thailand, published significantly after writing :D)

I’ve been in Thailand a few days now, mostly in one southern region called Krabi Province. Yes, we felt crabby, no we didn’t eat crabs. It’s a bit south of Phuket, and while it has a fair bit to offer and caters extensively to tourists, the town is much quieter than its more famous neighbor and has a much slower pace. Staying there during rainy season meant that the town was even more peaceful than usual. It also gave me a chance to see a little more what the pace of life is like without the tourist industry in full swing.

I have plenty of things to say about Thailand already, but a few in particular stood out to me.


Pickup Trucks

This is my first mainland Southeast Asian country, so I’m not sure what the situation is elsewhere, but Thailand has a lot of pickup trucks. Sure, all Asian countries have pickup trucks–they’re very useful. But most that I’ve seen are different. In Asia, pickups to be smaller, less rugged, and much more street-ready than mud-ready. In Korea especially the most popular brand looks more like an oversized vehicle driven by a golf-course maintenance team than it does a typical American pickup.

But in Thailand, at least the south, it’s impossible to watch the street for more than a few minutes without sighting one or five real, 4-wheel-drive, mud-spattered, pickups. Some of them are clearly work vehicles, some of them are taxis–for real, some songthaews (taxi-like vehicles that get you where you need to go on the cheap) are actually modified pickup trucks with a shelter slapped on.

So what’s up? Frankly, I don’t know, because I didn’t take a poll. I have my suspicions though, and they start with infrastructure. Thailand is a wonderful places with plenty of roads–but a fair number of those roads happen to be dirt, and I’d bet that the ones I saw were the good dirt roads. It’s still very much a developing country, and nature is large and in charge. The Thais don’t have the luxury of cute little pickup trucks to the same extent that countries with a bit more asphalt do–they have to go onto some pretty rough roads every day, and if your business involves hauling things around–including people–you need to be pretty sure you can get where you’re going. Thai pickups are probably, in one sense, a symptom of an incomplete road system and a climate that can get very soggy.

Adding on to that, a lot of Thais are still employed in the agricultural sector, and manual labor is still more widespread than service jobs, trades, and professional occupations. Where do you find the pickup trucks? The farms and the worksites. Add to this that road conditions are likely to be a lot worse out in rural and developing areas and you’ve got a need for more muscle than you can get with what I’ve, perhaps unfairly, come to call the Asian pickup truck.

Are road conditions and economic sectors the reason for rate of big pickup ownership in Thailand? That’s a question for a masters’ thesis, but at a minimum, I can guarantee that pickups are common, roads can get rough; and the average employment of the Thai worker tends towards the manual.

Coming up: Thai music is mostly now acoustic covers of western top 40 hits (why?); ATM fees are price discriminating wonderfully; a coffee and a meal here are almost the same price (very cheap); and more!