Dip in the value of sterling and rising fruit and dairy costs lead to sharp increase in the new CGA Prestige Foodservice Price Index
Inflation in wholesale foodservice prices hit 9.0% in May 2017, the latest edition of the CGA Prestige Foodservice Price Index reveals—the highest point in nearly nine years.
The rate of inflation is a significant increase on the figure of 5.8% in April. It is also more than four times as high as inflation in the equivalent Consumer Price Index, which measured 2.0% in May, according to the Office for National Statistics. It marks the sharpest inflation in foodservice prices since August 2008, and for the third month in a row, foodservice prices were higher year on year across all ten sub-categories measured by the Index.
An increase in the farm gate price of milk, low stocks and a rise in global demand have all fueled a sharp rise in dairy prices, where inflation is 9.9% year on year. Inflation in the fruit category was even higher at 12.7%, with the weak pound substantially pushing up the costs of items imported from around the world. Poor weather and disease in some key fruit growing regions of the UK and Europe have reduced stocks and pushed prices up further.
Many other macro factors have added to inflationary pressures in foodservice, including UK political uncertainty surrounding Brexit negotiations and the General Election, and fluctuating oil prices. More issues are impacting specific areas of foodservice, like sea lice problems pushing up fish prices, and tightening wheat supply adding to cost burdens in bread and cereals.
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Although there are signs that inflation in some food items may start to ease, the figures from the latest CGA Prestige Foodservice Price Index continue a sharp upswing in costs for the sector in 2017. The widening gap between the rate of inflation here and in the Consumer Price Index emphasises the need for foodservice businesses to seek expert independent help with their procurement and pricing strategies.
Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said: “There are few places to hide from the increased costs we are seeing flow through to operators – we would always recommend though, that operators test the competitiveness of their pricing in the marketplace and fully understand the justification for any increases.”
Headline price inflation of 9.0% reveals the scale of the challenges facing foodservice businesses at the moment. The weak pound, political uncertainty and a host of supply and demand factors are whipping up something of a perfect storm, and operators will need to be at the top of their game on procurement in the months ahead.
With food inflation reaching 9%, this is when procurement people really earn their money – organisations without formal procurement expertise would be well advised to seek some professional support in the months ahead.
The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA Strategy, using data drawn from over 50% of the foodservice market and around 7.8m transactions per month.
The full report is currently available to all interested parties as a complimentary three-month subscription. Contact Christopher.Clare@Prestige-Purchasing.com today to access.
For further information, interviews or images, contact Prestige Purchasing on 01908 222678 or christopher.clare@prestige-purchasing.com.
About Prestige Purchasing
Prestige Purchasing is one of the UK’s leading specialists in procurement and supply chain management for the hospitality, catering, leisure, retail and private healthcare sectors.
We are the only truly independent foodservice and hospitality procurement consultants, as well as being free from supplier income, giving clients access to the whole market and not taking the supplier relationship away from clients.
In addition to FPI which measures the movement of prices, Prestige Purchasing offer an independent benchmarking solution which is supported by an extensive database with latest market prices and enables businesses to understand their current costs compared to the market. This amount of data along with a highly trained purchasing and operations team means that Prestige Purchasing are the only supply chain consultancy able to deliver truly bespoke solutions with the maximum commercial benefit that always reaches their clients.
About CGA Strategy
CGA is the world’s leading business intelligence and strategic consultancy provider for the out of home leisure market; the definitive source of integrated consumer insight and market measurement informing strategies for our clients’ growth. We live, love and breathe our industry, harnessing our passion and knowledge to help the market make smarter and more informed decisions. CGA works closely with consumers, retailers, suppliers, trade bodies and government so that our expert consultants can bring every strategic insight to life.
