Weather playing dominant part in food and beverage pricing

Weather conditions are increasingly influencing patterns of food and beverage pricing, the latest CGA Prestige Foodservice Price Index shows.
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Weather conditions are increasingly influencing patterns of food and beverage pricing, the latest CGA Prestige Foodservice Price Index shows.

Seven of the ten categories of the Index recorded year-on-year inflation in January 2020, with half also seeing month-on-month inflation. Price turbulence over the last three years has been attributed to Brexit and currency fluctuations—but it is becoming clear that the weather is now playing the dominant part.

The last six months have seen a variety of climate-related issues plague food categories and in some cases trigger high inflation. A very bad summer with storms, hail and flooding caused the Fruit category to hit an unprecedented inflation rate of 17% inflation in September 2019. The Vegetables category meanwhile saw widespread problems with brassica harvests in the run-up to Christmas, leading to concerns about the supply of popular Christmas vegetables like Brussels sprouts and cabbage.

Stormy weather has also caused problems for the Fish category, with treacherous sea conditions reducing fleets’ catches and leading to year-on-year inflation of 22.6% in January.

On the other side of the globe, lack of rain is causing problems. Droughts in Thailand have hit the Sugar industry, while wildfires caused by extreme heat in Australia have impacted livestock and cereal supplies. As the effects of extreme weather become more measurable and media coverage intensifies, climate change will become a key part of supply chain management, challenging businesses to seek sustainable sources and manage costs.

On top of these impacts, coronavirus is set to have a major impact on the cost and supply of food. Norway, China’s Salmon export partner, has already seen spot pricing plummet following the Covid-19 outbreak, with surplus supply in the market expected to bring pricing down. While the overall impacts are still unknown, in the event of global pandemic commodity prices will fall, causing some food items to drop in price. Alongside the fall in commodity pricing, it is also very likely that fresh produce coming into the country will be delayed at the border as authorities do what they can to contain the outbreak.

CGA Client Director Food and Retail Fiona Speakman said: “The weather has always had an impact on food production, but the increasing frequency of extreme events worldwide is creating more tangible impacts. Coupled with the spread of coronavirus it will make for a very challenging spring for the foodservice sector, at a point when many were optimistic about calmer conditions post-Brexit.”

Prestige Purchasing CEO Shaun Allen said: “External influences such as weather and disease have been playing a key part in food and beverage pricing for some time. With Covid-19 now looking likely to have an effect on supply chains, it is more important than ever for buyers to be mapping their supply chains and seeking additional origins to manage the supply risk on products that come from identified problem areas.”

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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