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Morning Briefing for pub, restaurant and food wervice operators

Wed 31st May 2017 - Foodservice inflation hits 5.8% in April
Foodservice inflation hits 5.8% in April: Inflation in wholesale foodservice prices reached 5.8% in April, the new edition of the Foodservice Price Index from Prestige Purchasing and CGA Strategy has revealed – continuing a sharp upswing in costs for the sector in 2017. The figure is broadly in line with price inflation of 6.0% in March – a figure that in turn continued an acceleration from 2.9% in January and 3.7% in February. Inflation has been driven by a combination of macro-economic factors including the weak pound and micro-pressures on specific food items. Categories seeing particularly sharp price increases in April included fish, where inflation stood at 13.4%, caused in part by a sea lice problem and associated treatment costs. Inflation in the hot beverages category meanwhile reached 11.0%, with coffee prices affected by weak sterling and declining stocks of some bean varieties. A third category to see notable pressures was bread and cereals, where tightening supply of wheat meant prices were 2.0% higher than a year previously. For the second month in a row, April prices were higher year-on-year across all ten sub-categories measured by the CGA Prestige Foodservice Price Index. The rises have pushed the headline rate of inflation to more than three times that of the Consumer Price Index, which was 1.5% in the 12 months to April. With the pound still struggling against foreign currencies and Brexit uncertainty continuing, the gap between the two inflation measures is likely to remain substantial in coming months. But the Foodservice Price Index also reveals signs that inflation in some food items – while still high by historical levels – may be starting to ease a little. Bright spots include fruit, where price inflation was relatively modest at 1.9% in April 2017 – the smallest increase of any of the index’s sub-categories, and down on March’s figure. Vegetable price inflation was running at 4.4% in April, a sharp drop on the rate of 10.4% in January. Increased UK production and reduced reliance on imports have helped to ease inflationary pressures here. Graeme Loudon, commercial director of CGA Strategy, said: “Inflation in foodservice prices continues to run higher than the sector would wish, and the pound’s exchange rate with the euro, dollar and other currencies means imports will continue to be much more costly than in recent years. But with domestic production increasing and some other pressures possibly easing, we can cautiously hope for some respite in key costs in the coming months.” Christopher Clare, head of consulting and insight at Prestige Purchasing, said: “As the summer kicks in we have started to see some relief in pricing in a few categories. Whilst we would be hard-pushed to describe this as unusual for the time of the year, many of the larger impacts will begin to be factored out of inflation measurements and so, like CGA, we are cautiously optimistic.” The Foodservice Price Index is jointly produced by Prestige Purchasing and CGA Strategy, using data drawn from more than 50% of the foodservice market and about 7.8 million transactions per month. 


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