Rise in Commodity Prices Pinches Local Business Owners

By Beacon Staff

The Flathead Valley’s backbone and engine for economic fertility remains small business. But as the national economy flounders and the price of some goods rises faster than inflation, many moms and pops are finding it harder to stay afloat.

Nationwide, everything from wheat to coffee, from cheese to raw materials, has increased in price over the last several months. And the effects are forcing small business owners to cut corners to save money, absorb the costs or raise prices.

Espress Way coffee shop owner Peg Whary takes a Darwinian stance, “It is survival of the fittest. It’s a battle every day to stay on top of it.”

She says her plight encompasses more than increased competition – after all, many coffee shops close soon after they open. Instead, what many of the valley’s small business owners find daunting are poor crop yields, rising oil prices and increased demand for products that has the price of goods surging. Couple that with a stagnant economy, and many vendors are left pinching pennies.

Jenna Mickens, right, hands Kelly Gesker her morning coffee at Espress Way Drive-Thru in Kalispell. Gesker said she stops at the coffee shop every morning on her way to work.

Inside Espress Way, Kalispell’s first drive-thru espresso stand located on the corner of East Montana and Fourth Avenue East, bleary eyed customers wait for their morning caffeine fix.

Formerly a convenience store, Espress Way has remained unchanged for 15 years, while the cost of a cup of coffee has not. Whary sells a latte for just 50 cents more than she did in the early 1990s, but the price of the coffee she buys has skyrocketed – from $2.95 a pound to more than $9. A gallon of milk costs more than twice as much as it once did.

“I can’t raise prices according to cost,” Whary said. “I wouldn’t be able to sell my product. It makes it difficult to have much of a profit margin.”

She has looked into cheaper syrups and coffee, but there are some things she will not compromise: “To survive, maintain quality, and give excellent customer service. Those are things you don’t sacrifice. I would rather not be in business at all than do that.”

Adjoining Espress Way is its sister business – Superwash – and just like the coffee shop, the carwash faces similar obstacles. In nearly 17 years of operation the price of a self-service wash has only increased a dollar, from $1.25 to $2.25, while the costs of doing business has risen substantially. The water and sewage bill, for example, has tripled in the last two months to more than $4,000.

Espresso drips into shot glasses at Espress Way Drive-Thru in Kalispell.

“Most people have no idea what it costs to run a business,” Whary said. Lately, some sectors have been hit especially hard. The bread market has been left reeling. Wheat prices across the country have risen dramatically for several reasons: poor harvests, the weak dollar, increased world-wide demand, growers turning to higher yield crops like corn for ethanol production and food producers facing higher fuel and transportation costs.

Domestic wheat production is down about a third from its 1981 peak, while exports are up nearly 30 percent. Stockpiles have dramatically decreased.

Big League Bagels & Deli, on U.S. Highway 2 East in Evergreen, has already had to raise prices in an attempt to offset cost. A 50-pound bag of flour cost $12.47 last September; as of last week that same bag cost more than $34. By summer, owner Gary Fuller predicts it will reach $50.

On Main Street in Kalispell, Ceres Bakery owner Hannah Bjornson haswatched wheat prices quadruple in the last year. “All you can really do is raise prices and have fewer people trying to do more,” Bjornson said. “We are also reducing our waste.”

Cars line up early in the morning outside Espress Way Drive-Thru in Kalispell.

Droughts in Europe and Australia, as well as skyrocketing demand for wheat – to use in flour production and to feed cattle for the newly acquired taste of beef in countries like China – are major contributors to the swift rise in costs.

In spite of a marketplace brimming with competitors trying to get a piece of the buzz, Whary says the strain of day-to-day is what makes owning a small business so daunting. Hard work and self-reliance have produced success thus far, but now ingenuity is what will keep Whary and her competitors afloat.

“People don’t realize how hard it is to keep your head above water,” Whary said. “To make it work you have to be constantly involved and adapting. We’re going to survive one way or another.”

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