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Inflation | What Are We Seeing and Doing About It?

Posted by James Helms on

Inflation image

(Image source: Wikimedia Commons)

From inception we have maintained a focus on value and we have not raised our whole bean prices...we've held the line of pricing as long as we can and want to discuss the realities of inflation, how we will continue to focus on value, reinforce our values and continue to grow our business in the years ahead. Numerous articles are being written about inflation, but what is it, how is it effecting our coffee company and how are we adapting through it? 

Inflation, defined by "a general increase in prices and decrease in the purchasing value of money" is having a very real effect on our coffee business. Overall inflation in the last two years has spiked. The below chart (BLS.GOV) shows a relatively low inflation rate of 2% on average from 2012-2020, this has not been the case for 2021-22. 

On the ground we are seeing the real life implications of inflation. Over the last two years there has been a:
  • 16.6% increase in our monthly rent.
  • 200% increase in our international shipping costs.
  • 17% increase in our ice costs.
  • 10% increase in our milk costs.
  • 11.7% increase in our syrup costs.
  • 7.4% increase in postage costs.

With other increases from gas prices and per/unit prices for our packaging, inflation isn't an illusive concept but a present day reality for our business. Our ability to consistently measure and adjust to new realities will make or break our business.

What we are doing about inflation:
  • We are continuing to focus on our efficiency. The more efficient we are at producing exceptional coffee, the lower our costs. We've identified core KPI's that allow us to measure our efficiency and build that measurement into conversations that relate to our company's goals.
  • We are continuing to focus on scaling our business. Economy of scale is real, you can drive down costs by growing bigger, a significant feat in the marketplace.
  • We have our eyes set on owning real property. One of the biggest hurdles to stabilizing a business is controlling rising costs. If a business scales with stepped costs for production, costs rise in proportion to scale and decreases the benefit of scaling.
  • Incrementally raising our prices. We've developed a formula that allows us to quickly adapt our pricing to new realities so that we can keep on top of inflation and price our products appropriately.
Aggressive Goals That Stretch Us
We have set aggressive goals as a small business. We want to continue building direct relationships with coffee farmers and pay well over fair trade prices so that farmers are taken care of. We want to provide a living wage for our team members. We want to scale into providing very competitive benefits so that our team and their families do not have to struggle to survive. We also want to decrease the number of hours that our team works, full time employment means a 30 hour work week.
Ultimately, to pay more for coffee, pay more to the team, to focus on livability, continue to focus on exceptional coffee and have resources to expand..in the midst of significant inflation, all of our goals need to align with how we position ourselves in the market. While these are trying times we are committed to people, place and exceptional coffee and are grateful to be able to serve you with our company.

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