Foodservice inflation jumps back above 20%

14-Jun-2023 - Last updated on 14-Jun-2023 at 08:41 GMT

Price hike: inflation was driven up by cost rises in vegetables, fish, sugar and jams & syrups categories (credit:Getty/fcafotodigital)

Year-on-year foodservice inflation has jumped up to 21.4% after slowing at the end of March – the first time it had dropped below 20% since mid-2022.

Price increases had begun to slow in the first quarter of this year but the rebound in April 2023 underlines the severe cost pressures facing businesses throughout the foodservice sector at the moment, according to the new edition of the CGA Prestige Foodservice Price Index.

The index’s authors said the rise was driven by pressure in the vegetables, fish and sugar, jams & syrups categories, each of which saw prices increase by between 3% and 4% month-on-month.

Optimism in major influencers

Potatoes, in which the UK is more than 90% self-sufficient, suffered a particularly sharp increase during April, in the wake of rising production costs, labour shortages, lower storage crops and significant short supply in many parts of Europe. CGA forecasted this supply-demand imbalance is set to continue for much of the rest of 2023.

More optimistically, conditions within three major upstream influencers on the price of food – oil, exchange rates and commodity markets – are now relatively benign compared to the volatility of 2022.

The cost of Brent Crude oil has eased from $87 per barrel at the beginning of April to below $80 at the end of the month, with more falls expected during May, while sterling has remained stable. Inflation in categories that had been affected by high inflation since the start of the war in Ukraine, including oil & fats and dairy, continues to be subdued.

Inflation to ease over 2023

Prestige Purchasing CEO Shaun Allen said: “In spite of these April increases, we expect to see inflation ease slowly over the course of 2023 as commodity pricing and prior year impacts kick in.

“The major question that remains is the speed of that decline as energy, labour costs and climate change remain significant constraints on progress with inflation reduction.”

CGA by NIQ client director James Ashurst said: “After welcome signs respite over the first quarter of the year, it was disappointing to see inflation surge above 20% again in April.

“On top of soaring costs in other key inputs and the impact of the cost-of-living crisis on consumers, it leaves hospitality businesses facing some seismic challenges.

“The long-term outlook for this sector remains good, but trading remains exceptionally difficult.”