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Foodservice inflation reaches four-year high of 9.8%

Shaun Allen foodservice price index inflation CGA Prestige Purchasing
Shaun Allen: Expecting prices to ease now
09 Apr 2019
Fish and fruit prices have helped drive the Foodservice Price Index from CGA and Prestige Purchasing to 9.8% - its highest point of year on year inflation since it began in January 2015.

Shaun Allen, chief executive at Prestige Purchasing said the fish category of the Foodservice Price Index had seen another jump in inflation month on month, with much of the increase down to difficulties in the North Sea, where poor weather had kept ships off key fishing grounds for long periods and reduced catches.

Fishing vessels had already been limited to lower quotas for cod and haddock over the last year, and recent weather conditions had only compounded the impact, resulting in a high level of inflation against the same time last year.

“Inflation in the fruit category also remained high in this month, but is expected to ease as we move into spring and summer and the UK’s reliance on imports reduces.

“Similarly, dairy commodities, while still up compared to 12 months ago, have also started to fall, and are expected to continue doing so as we head into the peak production season of the spring flush.

“Food prices in the sector have been consistently tracking at higher levels for nearly a year, and the latest inflation level of almost 10% this month reflects the extent of how much the supply markets have been impacted compared to the same period last year.

“However the outlook on inflation is looking more positive for operators, as the Foodservice Price Index has fallen slightly over the past two months, indicating that inflation in the sector looks to have peaked and is forecast to drop back over the coming months,as long as the outcome of Brexit does not lead to major disruption to availability of products from the EU and introduction of WTO tariffs.”

The oils and fats category of the index continues to trend downwards, and now sits below levels at March 2018. Major food oil commodities are tracking below price levels of last year, helped by strong import volumes into the European Union in recent months.

The fall in UK butter prices seen since last October has also contributed to the drop in inflation for this category.

The meat category of the index has fallen again this month, as it recovers from the peak of Christmas demand. Pork and lamb prices remain down from this time last year, but demand for certain products, such as bacon, has seen some recent uplifts, with reports of some stockpiling in the lead-up to Brexit.

Fiona Speakman, CGA client director – food, said: “The challenge of inflation in the foodservice sector intensified yet again this month, with prices of important items like fish and fruit running at high levels. Combined with Brexit-related economic uncertainty, patchy consumer confidence and various supply issues, it is making forecasting extremely difficult for operators across the industry.

“Whatever the eventual outcome of Brexit negotiations, it will be absolutely crucial in the coming months for all firms to stay right on top of both business-side and consumer-side trends and make their purchasing strategies as sharp as possible.”

The index is jointly produced by Prestige Purchasing and CGA, using foodservice data drawn from 7.8m transactions every month.