I'm a coffee chain owner in San Francisco, and I'm being radically transparent about why I must hike prices

• A local SF coffee chain is posting in-store notices on why it must raise drink prices by 7.5%.
• A mix of extreme weather, labor costs, and rising demand may be ending the era of cheap coffee.
• Small businesses are being hit by rising employee healthcare premiums and the effect of tariffs.

This as-told-to essay is based on a conversation with Lauren Crabbe, co-owner of San Francisco-based coffee chain Andytown Coffee Roasters, alongside her husband, Michael McCrory. Crabbe is battling tariffs and a spike in the cost of coffee and employee health insurance. Business Insider verified her identity. This essay has been edited for length and clarity.

Raising prices is the last thing any small-business owner wants to do.

At Andytown, we really, really fought it. But this year, we could no longer hold that line. We had to raise prices across all of our drinks by 7.5%, and we are posting a letter in all our cafés explaining why.

A lot of businesses raise prices quietly, and only the most loyal customers even notice. But for us, transparency is important. We want people to understand the full context when we make a decision that affects their wallet.

This most recent increase isn't about one single thing. It's about the cumulative effect of higher coffee costs, lingering tariff impacts, and rising prices across our entire supply chain.

Even though tariffs on coffee itself have been walked back, the effects are still showing up everywhere else — on packaging, milk, chocolate, and tea. Every ingredient that goes into a latte has slowly crept up in price over the past year. When you add it all together, it becomes impossible to absorb forever.

At a certain point, if we want to stay open and keep doing things the right way, we have to pass some of those costs on.

The era of cheap coffee may be over

The reality is that the entire coffee industry is under pressure.

Coffee has been an affordable luxury for a very long time. People remember when a cup of coffee cost 50 or 99 cents, and they're shocked when a drip coffee is now $3. But these pressures are hitting everyone, even massive companies. Last year, instant coffee brands like Nescafé raised prices dramatically, and people panicked. Market forces don't care about company size.

The price of coffee is shaped by a lot of forces, starting with basic supply and demand. Extreme weather, including massive monsoons in parts of Asia and droughts in Brazil, directly affects how much coffee can be produced. When supply tightens, prices rise, and the farmers we work with feel that immediately.

Labor is another major factor. Throughout Central and South America, some workers can't cross borders, and others don't feel safe doing so. That makes it harder for farms to rely on the same workforce they've depended on for years.

At the same time, global demand for high-quality coffee is growing fast. Emerging markets in Asia and the Middle East are becoming serious coffee connoisseurs. Countries like China, the Philippines, and nations across the Middle East are driving demand for specialty coffee.

As a business, you can absorb some cost increases. Milk prices fluctuate throughout the year, and you learn to manage that ebb and flow. What's happening in coffee right now is different. It's a sustained increase, not a temporary spike. Businesses that waited too long to raise prices in hopes that costs would fall back down are now in a very tough position.

Staying true to our values

My husband and I started Andytown after meeting as baristas, opening our first shop just a few blocks from our home in the Outer Sunset. We've grown carefully, with gratitude, and with a deep love for this city and the community around us, but that commitment to our values also means we feel the price volatility more acutely.

We offer health insurance to all full-time employees, and our premiums jumped more than 20% this year. That increase is staggering, but between raising prices or eliminating health insurance, that's not a choice at all. I will always choose to raise prices. Part of running a small business is constant problem-solving and choosing the least bad option.

We're also helping revitalize downtown San Francisco. This year, we will be opening a new location on Kearny Street in a space that used to be occupied by a Starbucks. They closed that location during COVID and just never reopened it, but we said, "We love Downtown, and we want to be there!"

We're fortunate that many of our customers in San Francisco aren't extremely price-sensitive. Some people didn't even notice the increase until they saw our letter. But for those who do notice, they deserve honesty.