Foodservice price inflation rises as supply struggles with reopening

Foodservice Price Index from CGA and Prestige reached its highest ever level in May 2021 as indoor service resumed in hospitality venues
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Food and drink prices continued their upward trend in May, with basket costs up by 2.5% on April, the latest edition of the CGA Prestige Foodservice Price Index shows.

 

The Index recorded month-on-month inflation in seven of its ten categories, reaching the highest point since it began measuring foodservice prices in January 2015. The rising costs are the result of a combination of factors including restocking, challenges in production and distribution and new Brexit-related costs.

 

May’s mounting inflation came as the hospitality sector reopened for inside service, placing pressure on the supply chain. High demand and severe shortages of labour across food manufacturing, agriculture, warehousing, wholesale distribution and hospitality have led many firms to raise pay levels, which can be expected to feed through into prices in the months ahead. A combination of pandemic and Brexit impacts are also causing issues at major ports, slowing down food and drink imports and generating stock-outs in suppliers.

 

Categories that have been particularly affected include Fruit, where prices rose 7.0% month-on-month thanks to poor harvests in parts of Europe as well as import problems. The Vegetables category saw a 3.2% increase, with many UK producers struggling to recruit pickers, while the Milk, Cheese & Eggs category (up 9.9%) was impacted by the jump in demand from foodservice as well as a fall in milk production.

 

With demand rising and supply and labour issues continuing, the latest Foodservice Price Index predicts that inflationary pressures are likely to intensify over the summer.

 

Shaun Allen, CEO of Prestige Purchasing said “The reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated. Some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers. With the sector still to fully reopen after lockdown we expect food and drink supply to be challenging, and inflation to strengthen.”

 

Leonie-Jade Leigh, client manager at CGA, said: “While it has been great to see hospitality venues opening their doors again, rising food and labour costs and COVID restrictions have created tough market conditions. Supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.”

 

For further information contact Leonie-Jade Leigh, CGA Client Manager leonie-jade.leigh@cgastrategy.com.

 

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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