Operators should expect significant instability in food prices as a result of the Covid-19 pandemic, despite record deflation recorded in March.
Food prices reached a year-on-year deflation rate of 2.9% in March, according to the CGA Prestige Foodservice Price Index.
Prices have been on a downward trend since July 2019, but the authors of the index – which draws data from 7.8 million transactions a month - warned that the multiple impacts of the pandemic were likely to make prices volatile due to sharp fluctuations of supply and demand.
Sales dropping significantly would usually lead to a drop in prices, but with lockdown affecting food production and the availability of exports, prices may be driven up instead.
Prestige Purchasing chief executive Shaun Allen said: "The Covid-19 pandemic is now having a marked effect on supply chains and food pricing. The wholesale suppliers that service our sector have had much the same experience as operators, with demand falling off a cliff in mid-March. As a result, it will be challenging for foodservice operators to reinstate the same supply chain as was present just eight weeks ago when they closed. Price fluctuations are to be expected, and collaboration with suppliers will be key over this difficult time."
CGA client director – food and retail Fiona Speakman added: "Restaurants, pubs, bars and cafés are facing especially challenging futures. Even if the sector begins to reopen in July, site openings will be phased and gradual. A prolonged spell of price upheaval will only add to the pressure. All foodservice businesses will need to stay vigilant and agile in their purchasing and operations in the months ahead."