Let's talk about food prices in Phnom Penh, Cambodia. It's cheap living, but let me give you some background before we dive in. I run a few small businesses including a cafe and a pepper farm. In the six years since I moved to Cambodia the exchange rate hasn't budged, staying around 1 US Dollar to 4000 Cambodian Riel the whole time. US Dollars are accepted everywhere in Cambodia (and often preferred) thus simplifying our discussion of prices.
Cambodia is a place where consumers are highly sensitive to prices. Combine that with low barriers to entry for businesses and a highly entrepreneurial society and what you get is a very efficient system of price-discovery for any given good or service. This means that profit margins are razor thin. That has been my experience with my cafe, where our customers would balk were we to raise drink prices by as little as a nickle. So let me give you an idea of exactly how thin those margins can be from my experience with Coin Cafe.
We sell a cup of coffee for 2000 Riel (That's 50 cents, but coins do not circulate so Riel notes are required for amounts under $1). Sounds cheap, right? Well, there is a girl with a stand around the corner from us who sells it for 1000 Riel. There must be a dozen places that sell coffee within 3 blocks of us, and that would be true for any given location in Phnom Penh. It's the Wild West of cafes!
Coffee is cheap, especially in South-East Asia where Vietnam is the world's second largest exporter. The primary growing regions in Cambodia, the mountainous provinces bordering Vietnam, Mondulkiri and Rattanakiri, have not enjoyed nearly the same renown as their neighbor. Having sampled several of the local brews on a recent trip to Mondulkiri I can tell you it is not for lack of quality. Vietnamese brand coffee beans, in spite of traveling across borders, enjoy greater penetration at coffee shops across Cambodia than the domestic stuff. The reasons for this anomaly are many, but let's just say the Cambodian coffee market, like most other domestic food production, is light-years behind the more mature markets of neighboring countries. Significantly more capital and expertise will be required before Cambodia can reach it's potential.
In keeping with the theme at our cafe of selling Cambodian products, we offer coffee produced in Rattanakiri Province, the Northeastern-most region of Cambodia. 500 gram bags are $4 at Coin Cafe or you can visit the retailer, Cafe Nation Shop near O'Russei Market, and pick up a bag for $2.50.
Do you want fresh milk with your coffee? Well, that's a problem. All the dairy in Cambodia is imported from neighboring countries and a 2-liter jug of milk (half a gallon) will run you $4.30 from the supermarket. That's expensive enough to preclude most eateries from keeping it on-hand, especially smaller places like ours. Instead, we use condensed, sweetened milk which is ubiquitous in Cambodia for it's longer shelf-life and cheaper price. I'll admit that iced coffee with sweet milk can be a delicious treat but it troubles me that there is such a small market for the real deal, especially in largely agrarian Cambodia.
Until recently, Cambodia has lacked the expertise to produce domestic dairy products at a commercial level. However, I'm excited to report that a new dairy farm has recently sprung up on the outskirts of Phnom Penh and is poised to take the city by storm. I've walked the facility and tested the milk and, in my opinion, it is outstanding. The company is still in its nascent stage, limiting distribution and marketing until the details have been ironed out. In the meantime, we sell it at the cafe for $2.50 per liter. Get more information on the farm or order some for yourself by visiting www.khmerfreshmilk.com.
Beer, our best seller at the cafe, and probably all of Cambodia at large, sells for 2500 Riel. That's right, a mere 63 cents will get you a can of the local brew and our lovely staff will even open it for you, free of charge! We buy a case (24 cans) for $13. Do some math and that's $2 profit per case. We have to sell 24 cans of beer just to make $2, and that is BEFORE subtracting expenses! That sounds like a great deal for the consumer, right? Not so fast. If you are the average Khmer person (Khmer, the ethnicity of most Cambodian people), what is stopping you from buying a case yourself, or buying single beers from the convenience store for slightly less? The street where we operate is packed with cheap alternatives, and most people are outside drinking with friends and family anyway (public drinking laws? Not here).
I have to mention that there are at least a dozen breweries that have come online in the last 5 years. Remember how regulations are low, margins are tight, and society is entrepreneurial in Cambodia? Those factors are at play in the beer market. And now, believe it or not, these factors have spilled over into the budding, craft brewing scene. You heard right, home-brew distilleries are popping up in Cambodia and many are flying under the radar. While distributing menus for my cafe in Tuol Sleng neighborhood I stumbled on one such operation whose first batch will be ready this week! Believe me, these guys know what they're doing. More about them can be found here.
Let me tell you a bit about cost-effectiveness in Cambodia. Our menu is packed with delicious dishes whose ingredients we keep tucked away in our fridge. But we couldn't possibly maintain an inventory for all those sumptuous delights on-hand at all times because food spoils and we do not do enough volume to justify it. If you were to order, say, mushroom-cream steak, chances are we probably don't have the mushrooms, the creamer or even the steak available on-hand. No problem, we simply fire up the motorbike and go to one of the many markets nearby. The cost to you for this guaranteed freshness wouldn't exceed 5 minutes. Isn't that neat? This is how things work in Cambodia: take the moment as it comes.
Steak is the priciest dish we offer. In Cambodia, all of the good beef is imported. We buy Australian beef at $14.50 per kilo of "oyster blade". The domestic beef industry consists mostly of family operations doing their butchering in open-air market stalls. The meat is often tough and stringy but passable when cut into small pieces for stir-fry or BBQ. So you won't hear many locals complaining about poor quality steak right now because that's not how they usually eat their beef. And believe me, they eat plenty of it. One of the best and most ubiquitous pieces of local nightlife comes from beer gardens. You can't spit outside the tourist areas without hitting one. You can get a big plate of BBQ beef (with rice of course) and a pitcher of beer for $4. What else could you want?
Cambodia isn't all coffee and beer. In a follow-up piece I'll discuss some of the other non-food prices in the neighborhood, like energy and entertainment. The sky is the limit for this country, let's hope the cost of living doesn't follow suit.
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