Rising coffee prices squeeze home bakers and small food businesses
Coffee prices rose 30% year over year, adding pressure on home bakers who use beans as an ingredient. Small operators are adapting instead of expanding.
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By Torontoer Staff
Coffee prices climbed about 30 per cent year over year, contributing significantly to a 5 per cent annual increase in grocery inflation. For small food entrepreneurs who rely on brewed beans or roasted grounds as an ingredient, that jump is forcing operational changes and holding back plans to expand.
Stephanie Presta runs MTL Latte Heart, a Montreal home business that pairs roasted coffee with baked goods. Presta says the higher cost of coffee has narrowed margins and made a storefront impractical for now, despite brisk holiday sales.
Why coffee prices are rising
Economists point to a mix of weather-related production problems and rising global demand as the primary drivers of the coffee price spike. Droughts and other weather variability have reduced yields in key producing regions, tightening supply and lifting prices at a time when consumption is rising.
Weather variability and lower yields means that there are less coffee beans being produced and there is more global demand. That is driving up the prices.
Colin Mang, economist
Statistics Canada highlighted coffee among several food items with sharp price increases. Beef is another example, with prices roughly 16 per cent higher because of earlier droughts that pushed up feed costs and reduced herd sizes. Those concentrated pressures helped push grocery inflation to levels consumers have not seen in several years.
What this means for small operators
Presta started by selling bags of roasted coffee and then added coffee-infused cookies to her lineup. She says the ingredient elevates flavour and has been popular with customers, but the added cost changes the business calculus.
From my passion for coffee came cookies. I infuse my cookies with coffee, and it really enhances the flavours.
Stephanie Presta, MTL Latte Heart
Over the holiday season Presta baked and sold 600 boxes of six cookies each. Still, she has decided against taking on the higher fixed costs of a physical shop because that would require either charging more, or accepting smaller returns on each sale.
High costs definitely impact my business. I don’t want to expand and get a physical space to do business. That would increase the costs even more, and that would mean raising the cost of the cookies, or the amount I am getting back, at the end of the day.
Stephanie Presta, MTL Latte Heart
Many small food businesses face the same trade-offs. Passing costs to customers can suppress demand; absorbing costs squeezes margins. Some operators shift product mixes, reduce portion sizes, or buy different grades of beans to manage prices while trying to preserve quality.
How small food businesses are adapting
- Shop around for suppliers and consider local micro-roasters who may offer more stable small-batch pricing.
- Adjust recipes to use coffee more efficiently, such as intensifying flavour with smaller quantities or using espresso extracts.
- Offer smaller package sizes or seasonal items to maintain price points without permanently raising base prices.
- Introduce limited runs or premium lines at higher prices while keeping core items steady.
- Use pre-orders and batch planning to reduce waste and improve cash flow.
- Communicate transparently with customers about ingredient costs and why prices change.
Some economists suggest the broader food inflation outlook brightens if you exclude items hit by extreme weather and supply shocks. That would leave a more moderate picture for many staples, but it does not remove immediate pressures on businesses that rely on those hard-hit ingredients.
If you take out beef and some of the secondary effects on proteins, and you take out coffee and a couple of other products that have had extreme weather issues, news is relatively optimistic for food prices, going forward.
Mike von Massow, University of Guelph
For now, operators like Presta are prioritizing control over costs and cautious growth. The popularity of her coffee-infused cookies shows demand for specialty treats remains, but higher input prices make entrepreneurship riskier and expansion slower.
What consumers can expect
Shoppers will likely see some price volatility in cafes and packaged coffee products until supply conditions stabilise. Specialty items that use coffee as an ingredient, such as baked goods and confections, may be harder to find at former price points. Some retailers and small producers will absorb costs temporarily, while others will adjust prices or offerings.
Short-term relief for prices depends on improved harvests and more stable yields in producing regions. In the meantime, small food entrepreneurs will continue to balance product quality with the economic realities of a tighter input market.
Presta says she will keep baking, for now, and watch costs carefully. The choice is to adapt recipes and operations, rather than risk expanding into a storefront that could undo the gains she has worked to build.
coffeesmall businessinflationbakingfood industry
