Foodservice price inflation dipped to 2.5% in January 2018, according to new figures from the CGA Prestige Foodservice Price Index.
The figure is a fall from year on year inflation of 5.1% recorded in December 2017, and marks the lowest point reached by the Index since early last year. It is partly the result of seasonal trends driven by the supply and demand of key foodservice items, but may also be an indication that some of the inflationary pressures that have beset the industry in the last couple of years might be easing. It also pulls inflation in the foodservice sector down to broadly in line with the wider level of UK inflation as measured by the Consumer Price Index.
The CGA Prestige Foodservice Price Index identifies a relaxation of inflation in key categories including bread and cereals (2.3%) and milk, cheese and eggs (0.2%), while fish prices fell by 2.6% year on year after months of high inflation. Troughs in inflation are to be expected in the early part of any year, but are significantly sharper than usual in 2018, indicating a degree of price correction in the aftermath of the EU Referendum and the consequent weakening of the pound against the Euro and dollar.
Despite the positive signs, the Foodservice Price Index outlines a number of inflationary challenges that lie in wait for the sector in 2018 and beyond. They include the impact of Brexit on the availability of migrant labour, on which vegetable, fruit and fish and meat processing industries depend. There is further uncertainty over oil prices, trade tariffs and supply from the UK meat industry, which has been hit by controversy over food safety standards at Russell Hume, which went into administration in February.
Inflation may also be impacted by the government’s introduction of the ‘sugar tax’, which is likely to affect demand for soft drinks this year. The effect of the ‘Beast from the East’ winter weather on farmers and others in the foodservice supply chain in the UK and Europe is also yet to be determined, but may well have dented supplies of important food items.
The monthly CGA Prestige Foodservice Price Index contains in-depth analysis of inflation in these and other categories of food and beverages, and helps businesses in the foodservice supply chain keep up to date with trends, challenges and opportunities.
Christopher Clare, head of consulting & insight at Prestige Purchasing, said: “FPI has seen another fall this month as multiple categories see dramatic drops, notably Fish and Dairy which are by far the most volatile categories. If the index continues downwards we may finally see FPI reach levels comparable to those of 2016, however, price fluctuations and continued uncertainty about Britain’s economic future will exacerbate volatility.”
CGA client director of food Fiona Speakman said: “The CGA Prestige Foodservice Price Index has identified significant volatility in prices over the last couple of years, and there are few signs of it settling down as we move further into 2018. January’s headline inflation rate of 2.5% will be welcomed by the industry, and it is a relief to see foodservice come into line with CPI inflation. But it should be remembered that some of the pressures pushing down inflation are seasonal, and with factors like Brexit still causing uncertainty, businesses will have to monitor price trends and purchasing very closely throughout 2018.”
The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using data drawn from over 50% of the foodservice market and around 7.8m transactions per month. More information on specific categories is available on a subscription basis.