Foodservice Price Index remains high as inflation begins to ease

A slight fall in some food prices is eliminated by rises in beverage categories keeping the Index from CGA and Prestige Purchasing at a high level, but last Spring’s increases ease the inflation numbers.
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Year on year foodservice inflation fell back in April from March, the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing reveals—but price rises on hot and soft drinks have kept the total basket of goods static month on month.

The Soft Drinks category saw particularly high levels of inflation, following reduced demand for high-sugar drinks in the wake of the government’s sugar tax, and increased costs from investment in more environmentally friendly packaging after widespread scrutiny of single-use plastics. The extra costs to manufacturers of reformulating soft drinks to contain less sugar, and of developing healthier and high-quality drinks in response to public demand, are also resulting in higher prices.

Inflation has also risen in the Hot Drinks category of the Index, due in large part to tea production issues caused by drought conditions in key regions – including Kenya and India. With yields hampered, and the costs of materials (including those used to make tea bags) increasing, prices can be expected to continue rising. Inflation here has offset a fall in global coffee prices to keep the Index category high.

Prices in the Fish category have eased after April’s historic peak thanks to the Easter holiday. But the global salmon market may see some significant uplift in the next few months from two major issues: a possible plummeting of Norwegian salmon yields after an algal bloom hit stocks; and an investigation into overuse of chemicals by leading producer Mowi, which may cause damage to Scottish Lochs.

The Milk, Cheese and Eggs category witnessed high year-on-year inflation in April—an effect of high milk production in early 2018 keeping prices low this time last year.
But with milk production hitting a new three-year high in April 2019, the Index is likely to fall in coming months as cheaper milk hits the market.

Shaun Allen, Chief Executive at Prestige Purchasing, said: “It is encouraging to see that the overall inflation in foodservice is slowly starting to ease and good weather conditions over the coming months should help further as we move into the UK summer season for fruit and vegetables. However, there are several categories that remain vulnerable to seeing further upward pressure on prices, most notably in meat and fish where disease is affecting stocks, such as pork continuing to be heavily impacted by African Swine Fever and salmon now under threat from an outbreak of an algal bloom. It will be critical that operators actively manage these risks.”

Fiona Speakman, CGA Client Director of Food, said: “The modest easing of year on year inflation from recent peaks is welcome news for the foodservice sector—but inflation remains stubbornly high month-on-month. Pressure is particularly heavy in the Soft Drinks category, where CGA research has revealed a notable upswing in demand for low-calorie options in the year since the introduction of the government’s sugar tax—and as more consumers move towards healthier drinking and eating, we see this trend continuing.

With Brexit and tariff issues adding to uncertainty at a macro level, businesses will need to stay right on top of both supply issues and consumer trends as we move into the second half of 2019.”

The exclusive Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using foodservice data drawn from 7.8m transactions per month. It contains myriad insights and information pertinent to the foodservice sector and is essential reading for anyone seeking to keep ahead of price trends and understand why they occur. More information on specific categories is available on a subscription basis.  

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