Infuckinflation

In another life inflation was a major measurement to me. Every decision revolved around world economics and trends and we would spend the day watching GDPs, current account deficits, commodity prices, interest rates, bond movements and other such meaningless stuff.

During that time, I had the pleasure of working with one of the finest economists who had more letters after his name than I have ever seen and had the distinction of not being a fuckwit like many other people with letters after their names! He was that rare breed of smart people that can actually apply their smarts to solve shit. He had a PhD in econometrics and during the years that we sat next to each other I absorbed a lot about the dark art of having two hands and not being afraid to use them both at the same time (this is an economist joke, and about as funny as they get sadly; I would explain but it would be even less funny.)

Having spent all those years pouring over data and making decisions that you could justify were the rights ones at the time you made them (and why they were wrong the next day) I now cannot help but read a newspaper and apply economics to stories. Whether it is the price of petrol (supply and demand of the raw commodity, oil, mixed with distribution and taxes) or a sale at Pumpkin Patch (goods manufactured in China and brought to NZ with some level of currency hedge to protect the retailer) right down to cheap LCD TVs (over manufacture leading to glut of stock that need to be shifted fast before it becomes obsolete) I simply cannot help it.

Inflation is a really easy concept. It is simply a measurement between the price of a basket of goods that you bought a wee while ago and the price of the same basket now. Goods tend to go up and so the value of your dollar appears to buy less hence the old, "When I was a lad, I could buy a bag of chips, a small house and three horses and still have change from a dollar..." kind of talk.

Some things go up more than inflation and some less. Today, a particular commodity that is a huge part of Wellington life went through the roof. I'm taking about coffee of course. The establishment that supplies the daily dose for me and a whole bunch of the guys and girls around me, shifted the price of the black nectar from $3.50 to $4.50 for a takeaway - that is a massive 28.5% and has broken through my personal tipping point. As a result, we have had to source a new cafe and the jury is still out. Either way, at nearly $5 a cup, it just seems like a luxury item and not a daily need.

The economics here are pretty simple but the decision to hike the price so much is a bit flawed. Put up the price by 28% and you can still lose customers and make more money is the argument. The price hike is probably linked to wage pressures, rental increases, raw goods costs and a bit of greed thrown in for good measure. The flaw is in how many customers can you afford to lose before your staff are standing around idle for long periods or you have a large stock of beans that are approaching their best before date. It is a very fine line between profit and loss and if you lose a solid customer base, it will cost you more to acquire new ones. This is particularly true in Welly where some of the smaller cafes, just off the beaten track, are making primo coffee at reasonable prices. We are a fickle bunch us coffee snobs and whilst we are addicts, we can choose who our dealer is.

Perhaps they are using Kopi Luwak beans? These particular beans sell for up to US$175 a pound and get the unique taste and aroma from the simple fact that they pass through the arse of the Palm Civet, a native of Indonesia. The little beasties eat the ripe coffee cherries and the beans are collected from the droppings. Don't believe me? Check out this site for some pretty graphic images of the process - it explains why some coffee actually tastes like shit.....