As San Francisco settles into the first official week of summer amid scorching high temperatures, record levels of inflation are playing a role in how residents experience the season.
In May, year-over-year inflation in the U.S. reached 8.6%, the highest level in four decades, leading the Federal Reserve to raise interest rates by 75 basis points, or three-quarters of one percent, its most aggressive hike since 1994.
High inflation is hardly news to drivers. As of June 21, the current average cost for a gallon of regular gas in San Francisco is $6.53, according to the AAA Gas Prices Tracker, more than 50% higher than one year prior.
While local inflation is currently hovering around 5%, businesses that provide the raw materials for summer fun are still seeing the impacts of higher costs on their operations. The Standard took a closer look at five small businesses that play a role in San Franciscans’ plans for carefree decadence to see how the inflation surge is hitting them.
Mollusk Surf Shop in the Outer Sunset has been plugging along for 17 years as a center for the city’s surf culture and commerce, three blocks away from the wide expanse of Ocean Beach.
Business ebbs and flows alongside surf conditions and weather patterns, according to Keegan Kujawa, Mollusk’s manager. But the store has been the beneficiary of an industrywide wave of “Covid surfers.”
While sales have been boosted—around 30% according to Kujawa—inflation has reared its head on the price of the surfboards themselves.
The foam core that makes up surfboards is costlier, as are the petroleum-based resins used for their protective coating.
The sport’s popularity has also slammed artisanal surfboard shapers, leading to longer wait times and supply back-ups.
In an effort to keep cost competitive from national brands, Kujawa said the company has started to design and sell its own fins and wetsuits.
“We’re able to eliminate the middle man and keep our prices lower than some of the competition,” Kujawa said. “That way it’s more friendly for our customers and allows them to better support us by buying local.”
Waterlilies Swimwear has been selling high-end bikinis, swimsuits and beach wear in tony Presidio Heights for more than a quarter-century.
“Put it this way,” said co-owner Amanda Peters. “If Amazon is carrying it, then we’re not.”
Supply chain issues continue and many of the shop’s partners in Europe are still not working at full capacity. Peters foresees these issues continuing and highlighted the difficulty in sourcing luxury fabric.
That has all compounded to higher wholesale prices for the unique items that Waterlilies has staked its business and reputation on.
“We need to be very selective for the ladies that shop with us, and I would say across the board prices on pretty much everything have gone up,” Peters said.
The logo of Laughing Monk Brewing features a Catholic monk throwing his head back in amusement, a fitting symbol for the small craft brewer’s irreverent takes.
“We’ve already had price increases prior to these past few months of crazy inflation,” said Jeff Moakler, the brewery’s director of operations. “Now everything is going up 5-6%.”
Basic materials like cleaning chemicals have seen 6-8% increases, and shipping rates are up, in line with sky-high gas prices. The company did a limited price increase on wholesale clients, but if inflation continues unabated, another bump will be in the cards.
The summer months are traditionally a busy time for the company, which hopes to welcome a host of new customers in its reopened Bayview tap room, but that could come alongside new pricing.
“We haven’t changed prices much in the six years we’ve been open, but I think we’re going to have to increase them on pints and beer-to-go to help get us through the next year,” Moakler said.
Adam Zolot fondly—if not a bit ironically—calls his business Dogpatch Paddle a “mid-life crisis.”
“Paddling turned out to be my respite from the shelter-in-place,” said Zolot. “It was really never meant to be a business.”
As early supply chain kinks have been worked out, Zolot has observed an oversupply issue as manufacturers rushed to meet a demand that no longer existed, meaning better deals for hard goods in his business.
Where he’s seen some of the impacts of cost increases has been in his partnership with the YMCA to build out a warehouse a 701 Illinois St. into a fitness center as well as a new hub for Dogpatch Paddle.
San Francisco's high construction costs, exacerbated by a more than 20% increase in building material costs, has led the team to rethink its original plan.
To meet the demand for labor, the business employs a number of camp counselors from Ireland through the J-1 Visa program, which allows for temporary seasonal work from foreign students.
“That’s been miraculous for me, it’s really difficult to find competent workers who are able to work all day outdoors while having the skill set of managing a number of kids,” Zolot said.
Traditionally the summer is a boom time for cannabis retailers like Nate Haas, the co-owner of Moe Greens, a dispensary and cannabis lounge in the Mid-Market neighborhood.
“Think about it, people are outdoors more, you’re at a barbecue and pull out a joint like you’d pull out a beer from the cooler,” Haas said, adding that sales would be typically be bumped up 15-20%.
While Haas cautioned it was still early, he has already noticed that this year average basket sizes for customers have declined and pointed to a “switch to value” in their purchasing patterns.
When painting the larger macroeconomic picture for his industry, Haas centered on a familiar complaint: burdensome taxes that have made it difficult for business owners to dig out of their Covid-induced hole, while also making the cheaper illicit market an attractive option for potential customers.
“We’re in retail, so inflation is a really a kick in the gut,” Haas said. “When you dump the 8.6% inflation rate in May on top of onerous taxes, it really hurts.”
Haas said the challenges of the cannabis industry have led to him becoming an amateur tax expert and economist in addition to a dispensary owner as he looks to the horizon at future challenges.
“I’m rooting for the government’s efforts to make inflation go down, while hoping we don’t create a recession,” Haas said. “As a small fish in a very, very large ocean a lot of things are out of my control, but I bought the ticket so I’m taking the ride.”
Kevin Truong can be reached at [email protected]