Why the Cost of Coffee Is Tough to Control

Kansas-based Reverie Roasters had always charged $15 for a 12-ounce bag of its Boneshaker Espresso beans. Soon the price will be $18.

The reasons relate to a slew of costs.

Coffee Costs

Leaping by $1.89, the wholesale price of a pound of unroasted beans rose from $2.41 to $4.30. That’s almost an extra $200,000 for the 95,000 pounds Reverie purchases. Decomposing the price hike, we have the 40% tariff levied by President Trump after a Brazilian court decision that displeased him. (Tariffs cost Reverie close to an extra $14,000 in 2025.) In addition, we have the impact of the drought that hit Vietnam and Brazil. Then, further exacerbating a small roaster’s plight, they are unable to hedge against future price hikes and withstand the impact of financial speculation.

They have no place to hide with all land, labor, and capital rising:

Called a roller coaster, coffee prices slid after the President withdrew the 40% tariff. And, with a record crop predicted for this year, price was supposed to go down. But maybe it won’t as the closed Strait of Hormuz elevates freight costs.

Commenting on his costs’ whiplash, Reverie’s owner said there were too many variables for him to plan ahead.

We could say this FRED graph displays the whiplash:

Our Bottom Line: Competition

Although Reverie and IHOP are quite different, they occupy the same competitive market structure. For coffee and breakfast, we are looking at monopolistically competitive markets. With monopolistic competition, we have many small and medium size firms that have something unique and yet also are quite similar to their competition. Entry and exit are somewhat easy.

And yet now, as much as their special qualities can stand out, it appears that price is most crucial.

While inflation nudged prices up 22% between 2020 and 2025, at 16 major restaurant chains, the hike averaged 39%. However, IHOP stood out with its 82% eye popping increases for its top 10 menu items. Smaller but still egregious, prices rose 32.7% at Waffle House and 36% at Denny’s. Probably reflecting diners’ limited elasticity, IHOP’s domestic same store sales were down 1.5% year over year.

As a result, IHOP introduced a $6-$7 value menu breakfast option. Yahoo Finance tells us it’s not just a promotion; it’s survival.

Returning to where we began, we can ask how Reverie Roasters will compete.

My sources and more: Thanks to Cary for suggesting it was time to return to coffee because of this Wall Street Journal article. From there, we also took another look at breakfast.