Hospitality inflation falling but still double retail rate

03-Apr-2024 - Last updated on 03-Apr-2024 at 08:10 GMT

Data shows: food prices have fallen month-on-month in five categories, according to the index (image: Getty/fcafotodigital)

The rate of food price inflation in the hospitality industry is easing but remains more than double the rate seen in the retail sector.

The latest CGA Prestige Foodservice Price Index showed there has been steady easing over the past 12 months.

March last year saw the level of food inflation in hospitality and retail briefly at 19% however, while retail inflation, as measured by the consumer price index (CPI) has since eased to 5%, wholesale price inflation for hospitality operators as measured by the Foodservice Price Index has also dropped to 12%. This means inflation for hospitality is 2.4 times higher than in retail.

Typically, supermarket food inflation falls faster than for hospitality due to the big retailers’ ability to quickly pass on reductions in energy and commodity costs to consumers.

These firms often have more streamlined supply chains and can adjust prices quickly in response to market changes and Government pressure to keep prices stable, particularly in economic downturns, which can drive the deflation process.

Welcome steadying

In contrast, hospitality suppliers, which have more fragmented and complex operational modems, may not be able to reflect cost savings so quickly.

However, there has been month-on-month deflation for only the second time in 28 months, the Foodservice Price Index reported and this is the first time since October 2023.

It signalled a welcome steadying of markets but, it is not yet clear if this marks the beginning of much-needed longer-term stability.

Year-on-year inflation remains in double digits in eight of the 10 categories within the index. Only the oil and fats category was in deflation.

Remaining vigilant

Prestige Purchasing CEO Shaun Allen said: “It is positive to see inflation continuing to fall and it will be encouraging for operators to see after two years of sharp increases, food prices have fallen month-on-month in five categories.

“It is vital for businesses to remain vigilant to all price movements, both up and down, ensuring food costs accurately reflect the changes in the market.”

The steady relaxation of foodservice price inflation has been welcome for hospitality firms but the fact it is still hovering above the rate of their retail counterparts is frustrating, according to CGA by NIQ client director James Ashurst

He added: “Hospitality has dealt well with the inflation crisis but has inevitably had to pass on higher costs to menus, which in turn compromises consumer spending.

“We will hopefully see more easing over the spring and summer but for now, the trading environment remains challenging.”

In January, the index recorded year-on-year inflation of 12.6% – a 1.2 percentage point fall from December’s rate of 13.8%.