Ingredients inflation ‘highest in history of Foodservice Price Index’

03-Oct-2017 - Last updated on 04-Oct-2017 at 08:16 GMT

Rising: milk, cheese and eggs inflation has increased 14.7%

Wholesale foodservice price inflation grew to 9.3% in August this year, reversing two months of falls, according to new figures.

The latest CGA Prestige Foodservice Price Index revealed that inflation has risen by more than two percentage points from 7% in July, compared to 8.8% in June and 9% in May.

Foodservice price inflation was also ahead of historical averages throughout the summer months, and significantly higher than consumer-side inflation as measured by the Office for National Statistics.

Levels of inflation in August were higher in nine of the 10 categories of food and drink measured by the index, year-on-year.

Key drivers causing inflation included the weak pound, which was pushing up the price of imports from overseas, and rising oil prices, which are adding to the costs of transportation and packaging.

Fish had a particularly high level of inflation in August, as it soared to 22.7% from 5% in July. Costs have been increased by concerns over the future availability of tuna and ongoing lice problems affecting salmon supplies alongside the low exchange rates and high oil prices.

Double-digit inflation

Other categories with double-digit inflation included oils & fats and milk, cheese & eggs where levels were 15.4% and 14.7% respectively.

The only category to see deflation year-on-year in August was sugar and confectionery, where prices fell 2.1% compared to last year.

Meat prices also dropped to a four-month low thanks to improved supplies in the UK, but were still more expensive than August 2016.

The index also highlighted possible future pressures in categories including fruit and vegetables caused by labour shortages.

The weak pound and uncertainty over worker status following Brexit talks may lead to shortages of migrant pickers for domestic fruit and vegetable growers from 2018, weakening supplies and increasing the UK’s dependence on imports.

With Brexit negotiations likely to hold down the value of sterling, and oil prices unlikely to fall in the near term, the Foodservice Price Index forecasts little respite for inflation in most food and drink categories in the coming months.

Highest year on year movement

Prestige Purchasing head of consulting and insight Christopher Claire outlined how supply issues and a weak pound has impacted inflation.

He said: “With the CGA Prestige Foodservice Price Index up more than two percentage points on last month, we are now experiencing the highest year-on-year movement since the index began.

“We have seen high increases in nearly every category, compounded by a weak pound and a number of supply issues in key categories.”

Carefully monitoring trends and refining purchasing strategies can help pubs mitigate against some inflationary pressures, according to CGA commercial director Graeme Loudon.

He said: “After a couple of months of a modest easing of pressures, our latest index reveals another upswing in inflation.

“The weak pound and increased oil costs are both conspiring against UK businesses and specific categories of food and drink are facing added challenges like weather-related production issues and changing trading patterns.

“All of these issues are outside the control of the foodservice supply chain in the UK, but by carefully monitoring trends and refining purchasing strategies, foodservice businesses can at least mitigate some of the inflationary impacts.”