You're right, but, a nit: coffee shops aren't selling a cup of flavored caffeine water. They're selling a service that produces flavored caffeine water, to order, in a coffee shop (read: high rent) environment. When you factor payroll and rent into it, the cost to serve a cup of coffee isn't actually a great deal for the shop. Most of them fail.

That's neither here nor there for the one case of a loyal customer asking for a discount; of course this business owner is sorely mistaken (and also doesn't appear to understand the concept of a marketing budget, or figuring out what that marketing budget can buy).