For many people in the Peoria area, like most other places, the daily routine gets a jump start with a visit to the nearby café for some coffee and maybe a pastry.
“I’m always convinced that coffee is an important thing for everyone's day,” said Mitchell Popadziuk, the CEO of CxT Roasting Company. “But it's hard to say that specialty coffee still will be.”
For Popadziuk and other proprietors of local Peoria coffee shops, the cost of operating their businesses has grown increasingly volatile in the past few months. Factors contributing to that volatility include inflation, potential international tariffs, and a climate-related supply shortage.
“It's been a really crazy story here in the coffee market and coffee world for us. Prices of coffee have almost doubled since six months ago,” Popadziuk said during a conversation at CxT’s Keller Station location.
“As of around six months ago, it seemed like it was going to be a really good harvest, especially in Brazil. But they've actually had a very severe drought come through and now the coffee harvest has been a lot lower than expected, causing that [commodities] market price to hit an unexpectedly high level.”
Ty Paluska, owner of Intuition Coffee and Juice in downtown Peoria’s historic Kickapoo Building, shares a similar story.
“Coffee right now is at an all-time high; it's been hitting all-time highs for the last several months. And when I say, ‘all-time highs,’ it's like double what it's historically been,” said Paluska. “For 50 years, coffee's kind of been in a buyer's market, and we're starting to see that sort of change in a big way right now.”
Paluska said the shortage in the Brazilian supply has forced wholesalers to import from other places.
“People are looking elsewhere, like Guatemala, Colombia, other coffee-producing countries, to get that coffee, and it's creating a huge spike in demand,” he said. “So more and more people want it, and there's a lot less of it than ever. And that could be a trend for this foreseeable future.”
Sharp rise in cost of doing business
Couple the supply shortage with the rising prices of many goods and the threat of impending trade wars, and it creates a sharp rise in the cost of doing business — which may lead to customers having to spend more at the coffee shop counter.
“We are doing our best to absorb as much of the cost as we can as a business,” said Savannah Hattan, co-owner of Zion Coffee Bar in the Warehouse District. “We have a lot of different things that we use at our café that the price goes up and down throughout the year, so we try to temper that cost before bringing it to the consumers as much as possible.
“But yeah, when [expenses] increase once and then a couple weeks later continue to increase, then of course we have to be able to cover those.”
Likewise, Popadziuk said CxT has a policy not to pass on every price fluctuation to its customers.
“We try to find ways to be more efficient or find different economic buys. But the options are starting to run a little bit harder when interest rates are going up and prices of everything are going up,” he said.
Do the increasing prices raise concerns that coffee shop patrons may start changing their habits?
“I don't know if it’s for good or for bad, but coffee forms a very strong habit to coffee lovers,” said Heber Vidal, owner of Café Santa Rosa in Peoria Heights. “The closest that you can think that you can replace your coffee is chocolate, but chocolate is very expensive — more expensive than coffee. So, I think people will find a way, and they will still be coffee drinkers.”
The supply shortage isn’t as much of a concern for Vidal and his son Rafael, general manager of the business. The family operates its own 25-acre farm in the Colombian town of Timbio, a couple hours south of Cali.
“That coffee farm is where we produce all the coffee that we use here at our local coffee shop,” said Rafael Vidal, adding they also source beans from some of their neighboring growers. “So we only serve Columbian coffee, but we can trace that coffee back to specific farms and specific lots.”
Other factors in play
Although they aren’t facing those same supply concerns, there are other factors in play. For one thing, the Trump Administration was set to place a tariff on Colombian imports in January. While that ultimately didn’t happen, another international situation has made it more expensive to operate the farm.
“You need a whole bunch of other products to be able to plant the seed and to make sure that seed blooms and the flowers pollinate and everything. That brings us to the point of fertilizers,” said Rafael. “Unfortunately, most of the fertilizers that you need for coffee come from Russia and Ukraine. But we all know with the situation over there, fertilizer prices have skyrocketed.”
The business owners say the threat of tariffs present a great deal of uncertainty, as the possibilities seem to shift almost daily. But one item largely imported from Mexico is almost certain to cost more.
“Most coffee shops sell a lot of avocado toast, so the price on avocados definitely goes up and down and is raised quite a bit right now,” said Hattan.
“Aside from the coffee itself costing a lot more, we're seeing the cost of other products also increase quite a bit,” added Popadziuk, pointing to such things as specialty milks used as coffee additions but which don’t provide much profit.
“We have a drink on our menu that's just called the ‘Americola,’ which used to be an imported Mexican Coca-Cola and we add a shot of espresso and some vanilla to it, and it makes a nice kind of energy drink-style beverage. Well, that Coca-Cola, a year or two ago, used to cost like $.87 a bottle and now it's up to $1.50.”
Paluska also points to the well-publicized surging prices of eggs due to bird flu.
“We do a lot of hard boiled eggs for our toasts; we’ve mentioned avocados. Just the price of everything, in general is already causing things to go up,” he said. “It's hard because we're a specialty coffee shop.
“We buy a lot of organic, so a lot of our produce for our juices is skyrocketing because of limited supply and potential tariffs. Just the fear of tariffs is causing things to spike because the market's unsure, so that, in a big way, is causing things to go a lot higher for us.”
Paluska said as a business with a sustainability focus, Intuition offers patrons discounts through their reusable mugs and juice bottles that can help offset any price increases.
Heber Vidal notes that while his own farm supplies Café Santa Rosa, the market spike is likely a long-term situation as it will take time to replace plants affected by the drought in Brazil.
“What is important to emphasize here is that there’s nothing wrong with the coffee; there is no coffee pandemic that is happening right now,” he said. “It’s something with the volatility in the market, and that is affecting the prices.”
