Hey crew, here’s to another week of cutting through the noise and focusing on what actually moves financial minds forward.

No buzzwords, just the stuff affecting wallets, business & the economy:

💰 Come For The Caffeine, Stay For The Deposit

🛡️ Pricing When Your Costs Won’t Sit Still

Here’s to the 121st weekly edition

Let’s dive in.

Not sure about you guys but not once did CBE or Awash offer coffee while we were busy filling out their withdrawal forms, asking what today’s date was.

There was no ጀበና or ረከቦት in sight, so it was no surprise.

After all they are financial service providers not ፈንዲሻ handing local coffee boutiques…

This is the point where you ask: Where are going with this? And did you guys stumble on a potential business idea?

We get it, we hear your curiosity brewing ☕(no pun intended).

Here is the thing: the crossover between coffee and banking is peculiar, but nobody told Starbucks. 

If you don’t know Starbucks, it's a coffee shop that kinda sorta is a big deal around the world. You won’t be surprised to know that Ethiopian coffee is heavily consumed by the juggernaut. 

So Starbucks ❤️ Ethiopia.

Now, where does banking come into this?

Starbucks offered gift cards, plastic cards with cash loaded onto them. You can buy them for yourself or gift them to a friend.

When they are not in use, they are in Starbucks’ custody. 

Just sitting there…well, sort off.

People upload billions of dollars onto them, for Starbucks, that’s interest-free cash that they can use for other stuff. 

And all of a sudden, Starbucks is in the banking business..

They can go out and put that money into investments like new equipment, new markets, strategic acquisitions.

Starbucks has (unknowingly, perhaps?) created a financial wing, with ‘Stars’, its proprietary loyalty points acting as currency, seemingly out of reach from regulators.

At the end of the day, when trust (strong brand), convenience (user friendly app) and value (redeem at any Starbucks) align, it creates the perfect monetary economy.

Where do we draw the line?

If Starbucks was a bank in Ethiopia, its deposits would eclipse even some the elites!

When established institutions are sending out clerks with notepads asking passers by to open an account, a coffee shop overseas figured out a way to do it with a promise of a delicious Caramel Frappuccino.

So let’s ask ourselves, if Koba or Effoi pizza came up with a similar scheme would the NBE come knocking?

Even more, will customers start demanding interest on their gift card deposits? 👀

That coffee while queuing up is looking more like a genius strategy for the banks after all.

So if any of our readers have access to a big bank CEO’s internal memo line, hit us up, we have a proposition for you!

For many Ethiopian business owners, pricing used to be straightforward. Calculate your cost, add a margin and set a selling price.

That formula becomes much harder when input costs, exchange rates and inflation keep moving the bar.

A wholesaler may buy a product for 10,000 birr today and discover that the same product costs 11,500 birr when it is time to restock. A manufacturer faces higher costs for imported raw materials. A restaurant discovers that the ingredients behind yesterday's menu price are now significantly more expensive.

Customers, however, don't necessarily accept a new price every time your costs rise.

This creates a dangerous situation. Your business made a profit, but inflation has eaten most of the purchasing power of that profit.

This is why replacement cost matters.

For each product, calculate:

Selling Price = Replacement Cost + Operating Costs + Desired Margin

And please don't confuse markup with margin.

If your cost is ETB 10,000 and you add a 20% markup, the selling price is ETB 12,000. Your margin is actually 16.7%.

If you need a 20% margin, the price must be:

10,000 ÷ 0.80 = 12,500

The important thing is to replace guesswork with a system. Create a trigger such as “If replacement cost increases by 10%, I review the price.”

For fast-moving products, you might review weekly while other sectors might need to review quarterly or even annually. Addis Fortune recently highlighted how cement retailers are facing regular price swings from distributors and struggling to make profits.

Formal businesses have an additional challenge: pricing decisions need to align with invoicing, accounting, tax treatment and compliance requirements. As Ethiopia strengthens revenue administration and tax compliance, businesses should keep their pricing, sales records and tax documentation consistent.

Informal businesses face a different problem: many don't calculate the full cost of selling a product. May think, “I bought it for 1,000 and sold it for 1,100, so I made 100 birr”. But after transport, rent, labor and other expenses, the actual profit may is much smaller.

The solution for both is the same: know your numbers.

Don't automatically pass every increase to customers. Pricing isn't simply “my costs went up, so my price goes up.”

You might decide to raise prices selectively, negotiate better supplier terms, reduce operational cost or accept a temporary margin reduction on strategic products. Drawing on our earlier cement retailer example, this is why most of them have complementary higher margin ህንፃ መሣሪያ products to compensate their thin margin on cement.

When you do raise prices, explain briefly and honestly the circumstances for your revision.

Customers may accept an increase more readily when they understand that it is based on real costs rather than arbitrary pricing.

In a volatile economy, pricing is a regular exercise.

The best price isn't necessarily the highest. It is the price that allows your business to remain profitable, competitive and promoting loyal customers.