In my previous posts, I shared about the currency war, how nations manipulate their currencies to protect national interests and compete for control over global value chains. But while currency wars are fought by central banks and politicians, cost-push inflation is the silent wave that’s hitting everyone in the coffee industry from producers to every single cup of espresso.
A few years ago, I started reading books on finance and eventually took a few basic courses. To be honest, I’ve never been particularly interested in making money. But it was exactly because I used to overlook it that I knew I had to understand it, so that financial issues wouldn’t end up affecting my family. You can only be free when you truly understand the nature of what’s holding you back.
One of the first basic concepts in finance is "Inflation". And actually, there’s not just one kind of inflation. Economists divide it into two main types.
The first is "Demand-pull Inflation",when inflation is caused by a surge in consumer demand. Too many people chasing too few goods causes prices to rise. This is the kind of inflation most people think of, like when everyone rushes to buy houses, cars, or gold, driving prices up.
But the second type, less talked about but very real right now, is "Cost-push Inflation". In this case, prices rise not because of excessive demand, but because the costs of production ,raw materials, energy, labor, logistics are increasing. Businesses are forced to raise prices just to survive, not to boost profits.
These two concepts may sound similar, but they impact the market in very different ways. With demand-pull inflation, central banks can raise interest rates to cool down spending. But with cost-push inflation, higher interest rates don’t help much because the problem isn’t demand, it’s pressure from the supply side.
Right now, the coffee industry is at the epicenter of cost-push inflation. Early this year, green coffee prices jumped due to climate change, drought in Brazil, prolonged El Niño, and a forecasted drop in Vietnamese output. On the financial market, coffee became a speculative commodity for investment funds, pushing prices up not by growers or roasters, but by traders seeking quick profits. Meanwhile, small roasters without cash flow couldn’t afford to buy in advance and had to pay much higher prices later on.
Energy costs are another massive burden. One liter of fuel isn’t just fuel anymore, it’s the lifeline of the entire supply chain: transporting green coffee, powering roasters, and delivering to cafes. Gas and electricity prices have been rising quarter after quarter, making every step more expensive and harder to manage.
Even small things like packaging, zip bags, heat seals, and labels are getting more expensive almost doubling in cost. And no quality-focused coffee producer will cut corners here.
Labor costs are also rising. Cafes need to keep skilled baristas. Roasters need experienced staff. But with rents, groceries, and utility bills increasing, there’s no way to retain talent without adjusting wages. And if you raise wages without raising prices, margins shrink. But if you do raise prices, customers complain.
From a financial perspective, I believe today’s coffee prices are still at the bottom. Even though they’re higher than a few years ago, they still don’t fully reflect the real pressure on the supply chain. Unless there’s major macro-level support like financial assistance, supply chain restructuring, or energy cost relief, prices will almost certainly keep rising.
We’re entering a phase where the economy is stagnant, yet prices keep climbing a classic case of stagflation. When costs go up from all directions while income remains flat, producers get stuck. They can’t cut quality, but they can’t survive by keeping prices the same either.
This is not the time for flashy branding. It’s a time for honesty to rebuild sustainable systems and communicate clearly with customers. A cappuccino is no longer just a drink. It’s the result of dozens of financial and human decisions behind the scenes.
I’m sharing this as a follow-up to my ongoing series on the coffee economy and market dynamics. If this post helps you understand what’s really happening, then that’s exactly why I keep writing. Even though I’ve never truly loved money, I’ve come to realize that if you want freedom from financial pressure, you need to understand how money works. And once you understand it, you won’t be ruled by it.
Thanks for reading. If you found this helpful, feel free to share it with others in the coffee industry or anyone wondering why everything is getting more expensive.
