Hedonic Adjustment
Inflation has been a hot topic globally, with rising prices impacting nearly every sector—and the cafe industry is no exception. As the cost of goods increases, cafes face a unique set of challenges that affect both their operations and their customers.
- Rising Ingredient Cost
- Rising Labour Cost
- Reduced Customer Spending
I have been in this business for a while now, and the current inflationary environment is unlike anything I have ever witnessed. One thing seems obvious to me - the CPI based inflation rate is not telling the whole story of what is happening on the ground for cafe goers AND cafe operators. It seems likely to me, that prices driven up by inflation over the last few years may be permanent and may still be rising. The bank of Canada is claiming a CPI rate of 1.8% (December 2024) - I am not seeing anything this low in real terms. Interestingly and at the same time, inflation of fiscal assets (stocks, real estate, etc) is trumpeted and overstated. This inflation is considered a sign of a strong economy, but of course benefits only the holders of hard fiscal assets.
Basing top-line economic policy on artificially and subjectively low inflation rates will be catastrophic for most people and the small business' that serve them.
Thus, the plight of todays cafe. Prices are rising, and are doing so at a rate greater than 1.8% a year. We hope that our customers appreciate this reality, and that we as operators can adjust to new spending patterns etc.