<p>Technically prices of single chain <em>could</em> affect inflation, but practically that is extremely improbable (assuming we talk about consumer goods which seems to be implied, prices of base commodities that are inputs in production like oil are different story), since in a typical economy you will have billions of different consumer prices, and any given item will typically be just small piece of consumer basket.</p>
<p>Inflation is positive change in (typically consumer) price level and price level is weighted average of consumer prices. A single item technically can change an weighted average but if we talk about real life it is extremely uncommon.</p>
<p>The exact weight of coffee sold by chains such as Starbucks in representative consumer basket is not publicly available knowledge, however we can try to estimate it from some data. For example, per <a href="https://economics.stackexchange.com/questions/56508/could-a-single-large-retail-chain-by-its-own-actions-contribute-significantly-to/56510?noredirect=1#comment92608_56510">Giskards suggestion</a>, let's estimate this share as a ratio of Starbucks revenue (<span class="math-container">$\approx 23$</span>bn dollars in 2022 according to <a href="https://cheshnotes.com/starbucks-revenue-from-the-united-states/" rel="nofollow noreferrer">Cashnotes</a>) and US consumer Spending in 2022 was <span class="math-container">$\approx 15000$</span>bn dollars in 2022 according to <a href="https://tradingeconomics.com/united-states/consumer-spending" rel="nofollow noreferrer">TI</a>. This gives us implied weight of 0.15%, and note this is still likely an overestimate since it is reasonable to assume that richer people consume more coffee in cafes compared to poor people who more likely just consume canned coffee, and hence 0.15% weight is still overestimate. Note to you personally it might sound low because perhaps you and your friends love coffee from Starbucks, but note some consumers do not consume coffee at all and most people likely do that just occasionally, again 0.15% is still likely an overestimate for US.  Next, even big chain such as Starbucks only has about 36% market share in <a href="https://fullcoffeeroast.com/what-is-starbucks-market-share/" rel="nofollow noreferrer">US</a>, despite being the biggest coffee brand.</p>
<p>So even if Starbucks would increase its prices by 100% which is quite large price increase, inflation would increase only marginally. Given the market share of Starbucks and share in the basket it would increase inflation just by 0.054% which is less than typical measurement error for measuring inflation (using <a href="https://www.aeaweb.org/articles?id=10.1257/002205103321544729" rel="nofollow noreferrer">Lebow &amp; Rudd 2003</a> estimates).</p>
<p>You would typically need whole industry, such as all food producers together, to raise prices so you see significant increases in price level. Only, when we talk about firms that are at the bottom of supply chains you can see significant effect due to price changes of single commodity, and that is not because consumers buy that  commodity but because it is input in many other products (e.g. oil without which groceries would not be able to sell you food etc), precisely because increase in cost of important input will raise costs of products across a board.</p>

CC BY-SA 4.0
2023-09-28T22:28:10.483Z
I think u under estimate percentage of coffee as cost per day: 5 or 6 buck is not 1/200 of what I spend per day -- I don't make 1000/day and people often drink a daily cup of coffee.
releseabe
CC BY-SA 4.0
2023-09-29T07:51:10.633Z
@releseabe How much coffee in cafe's are you drinking? Inflation depends on what representative consumer basket not some random consumer with extreme preferences basket. Most people will have starbucks once or twice per week, many dont drink it at all. If you do that more you need to be in upper part of income distribution. In any case make it 2% instead of 0.5%, a 100% increase in starbucks cofee would still have effect on inflation that is comparable to upper estimates of rounding error, and that ignores the fact that 100% increase in prices would drastically reduce demand for
1muflon1
CC BY-SA 4.0
2023-09-29T07:54:15.200Z
their coffee and change consumer basket, realistically you would not see 100% price increases, but something in ballpark of 10-20% max. In any case you won't see a significant effect on inflation.
1muflon1
CC BY-SA 4.0
2023-09-29T08:25:29.520Z
"*make it 2% instead of 0.5%*" Is there absolutely no data on the weight of this in US inflation calculations? Would taking the ratio of total US consumer spending vs. Starbucks US revenue, and assume that sales to foreigners is negligable.
Giskard
CC BY-SA 4.0
2023-09-29T08:37:32.220Z
@Giskard there are weights for groceries in general publicly available but not for starbucks coffee. The problem with what you suggest is that richer people in US may disproportionally overconsume things like starbucks so you will get biased estimate upward. In any case lets do it anyway. According to internet US starbucks revenue is estimated to be about 23 billion, total consumer spending in us about 15000 billion. That gives us 0.15% of a budget and again this is likely and overestimate, so already my 0.5% of a budget was extremely generous, it should probably be around 0.1% or maybe even
1muflon1
CC BY-SA 4.0
2023-09-29T08:38:52.980Z
less once we adjust for the fact that this is skewed by richer households and representative household might have different basket selected. Source for data: https://cheshnotes.com/starbucks-revenue-from-the-united-states/ https://tradingeconomics.com/united-states/consumer-spending
1muflon1
CC BY-SA 4.0
2023-09-29T08:42:08.770Z
@releseabe btw see my response to giskard it is relevant for you as well
1muflon1
CC BY-SA 4.0
2023-09-29T09:36:53.157Z
@1muflon1 Will upvote if you integrate parts of [this comment](https://economics.stackexchange.com/questions/56508/could-a-single-large-retail-chain-by-its-own-actions-contribute-significantly-to/56510?noredirect=1#comment92609_56510) to the answer
Giskard
CC BY-SA 4.0
2023-09-29T09:59:27.920Z
@Giskard done..
1muflon1
CC BY-SA 4.0
2023-09-28T21:58:19.130Z
2023-09-29T09:59:13.200Z
2023-09-29T09:59:13.200Z
1muflon1
<p>Typically well-known chains defend raising prices because of their costs which they might link to inflation.</p>
<p>But without mentioning names, I can recall paying maybe (years ago) a quarter for a bottomless cup in a restaurant. Nowadays fancy, no-refill espressos to go from more than one chain go for like five bucks now, which is far more than inflation I believe.</p>
<p>Could even a single popular chain that people use daily cause inflation by raising their prices? It feels to me like things like that contribute to inflation at least by perception: People in board rooms discussing wages (or in union halls, etc.) must say, &quot;Look, do you know what a cup of coffee costs nowadays??&quot;</p>
<p>It seems to me any &quot;essential&quot; (because people are addicted to caffeine I am sure people consider coffee and not just in the morning essential) commodity that goes up can be a lever that begins inflation.</p>

CC BY-SA 4.0
2023-09-30T06:22:17.053Z
Some economists are blaming single concerts as a source for temporary increases in inflation, See for example [this FT article](https://www.ft.com/content/abc431c4-426d-4a9f-9674-f437ed504eb7). If Walmart raises prices across the board, I am pretty sure the US will see that in inflation numbers.
AKdemy
<inflation>
Could a single large retail chain by its own actions contribute significantly to inflation?
releseabe
# Could a single large retail chain by its own actions contribute significantly to inflation?

(Asked by: username_0 on 2023-09-28)

Typically well-known chains defend raising prices because of their costs which they might link to inflation.

But without mentioning names, I can recall paying maybe (years ago) a quarter for a bottomless cup in a restaurant. Nowadays fancy, no-refill espressos to go from more than one chain go for like five bucks now, which is far more than inflation I believe.

Could even a single popular chain that people use daily cause inflation by raising their prices? It feels to me like things like that contribute to inflation at least by perception: People in board rooms discussing wages (or in union halls, etc.) must say, "Look, do you know what a cup of coffee costs nowadays??"

It seems to me any "essential" (because people are addicted to caffeine I am sure people consider coffee and not just in the morning essential) commodity that goes up can be a lever that begins inflation.

**Tags:** inflation
> **Comments:**
> **username_1**: Some economists are blaming single concerts as a source for temporary increases in inflation, See for example [this FT article](https://www.ft.com/content/abc431c4-426d-4a9f-9674-f437ed504eb7). If Walmart raises prices across the board, I am pretty sure the US will see that in inflation numbers.  

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## 1 answers

### Answer by username_2 on 2023-09-28. Score: 1

Technically prices of single chain *could* affect inflation, but practically that is extremely improbable (assuming we talk about consumer goods which seems to be implied, prices of base commodities that are inputs in production like oil are different story), since in a typical economy you will have billions of different consumer prices, and any given item will typically be just small piece of consumer basket.

Inflation is positive change in (typically consumer) price level and price level is weighted average of consumer prices. A single item technically can change an weighted average but if we talk about real life it is extremely uncommon.

The exact weight of coffee sold by chains such as Starbucks in representative consumer basket is not publicly available knowledge, however we can try to estimate it from some data. For example, per [Giskards suggestion](https://economics.stackexchange.com/questions/56508/could-a-single-large-retail-chain-by-its-own-actions-contribute-significantly-to/56510?noredirect=1#comment92608_56510), let's estimate this share as a ratio of Starbucks revenue ($\approx 23$bn dollars in 2022 according to [Cashnotes](https://cheshnotes.com/starbucks-revenue-from-the-united-states/)) and US consumer Spending in 2022 was $\approx 15000$bn dollars in 2022 according to [TI](https://tradingeconomics.com/united-states/consumer-spending). This gives us implied weight of 0.15%, and note this is still likely an overestimate since it is reasonable to assume that richer people consume more coffee in cafes compared to poor people who more likely just consume canned coffee, and hence 0.15% weight is still overestimate. Note to you personally it might sound low because perhaps you and your friends love coffee from Starbucks, but note some consumers do not consume coffee at all and most people likely do that just occasionally, again 0.15% is still likely an overestimate for US. Next, even big chain such as Starbucks only has about 36% market share in [US](https://fullcoffeeroast.com/what-is-starbucks-market-share/), despite being the biggest coffee brand.

So even if Starbucks would increase its prices by 100% which is quite large price increase, inflation would increase only marginally. Given the market share of Starbucks and share in the basket it would increase inflation just by 0.054% which is less than typical measurement error for measuring inflation (using [Lebow & Rudd 2003](https://www.aeaweb.org/articles?id=10.1257/002205103321544729) estimates).

You would typically need whole industry, such as all food producers together, to raise prices so you see significant increases in price level. Only, when we talk about firms that are at the bottom of supply chains you can see significant effect due to price changes of single commodity, and that is not because consumers buy that commodity but because it is input in many other products (e.g. oil without which groceries would not be able to sell you food etc), precisely because increase in cost of important input will raise costs of products across a board.

> **Comments:**
> **username_0**: I think u under estimate percentage of coffee as cost per day: 5 or 6 buck is not 1/200 of what I spend per day -- I don't make 1000/day and people often drink a daily cup of coffee.  
> **username_2**: @releseabe How much coffee in cafe's are you drinking? Inflation depends on what representative consumer basket not some random consumer with extreme preferences basket. Most people will have starbucks once or twice per week, many dont drink it at all. If you do that more you need to be in upper part of income distribution. In any case make it 2% instead of 0.5%, a 100% increase in starbucks cofee would still have effect on inflation that is comparable to upper estimates of rounding error, and that ignores the fact that 100% increase in prices would drastically reduce demand for  
> **username_2**: their coffee and change consumer basket, realistically you would not see 100% price increases, but something in ballpark of 10-20% max. In any case you won't see a significant effect on inflation.  
> **username_3**: "*make it 2% instead of 0.5%*" Is there absolutely no data on the weight of this in US inflation calculations? Would taking the ratio of total US consumer spending vs. Starbucks US revenue, and assume that sales to foreigners is negligable.  
> **username_2**: @Giskard there are weights for groceries in general publicly available but not for starbucks coffee. The problem with what you suggest is that richer people in US may disproportionally overconsume things like starbucks so you will get biased estimate upward. In any case lets do it anyway. According to internet US starbucks revenue is estimated to be about 23 billion, total consumer spending in us about 15000 billion. That gives us 0.15% of a budget and again this is likely and overestimate, so already my 0.5% of a budget was extremely generous, it should probably be around 0.1% or maybe even  
> **username_2**: less once we adjust for the fact that this is skewed by richer households and representative household might have different basket selected. Source for data: https://cheshnotes.com/starbucks-revenue-from-the-united-states/ https://tradingeconomics.com/united-states/consumer-spending  
> **username_2**: @releseabe btw see my response to giskard it is relevant for you as well  
> **username_3**: @1muflon1 Will upvote if you integrate parts of [this comment](https://economics.stackexchange.com/questions/56508/could-a-single-large-retail-chain-by-its-own-actions-contribute-significantly-to/56510?noredirect=1#comment92609_56510) to the answer  
> **username_2**: @Giskard done..  

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