Food prices to rise 3.4% in 2017

Food prices for the foodservice industry are expected to rise by 3.4% in 2017.

That's the projection from Prestige Purchasing, looking ahead at where prices might move over the next 12 months after what has been a much more turbulent 2016 than expected.

Within that, food prices are set to rise by 4% while the price of soft drinks and hot beverages is due to rise 2%.

Speaking at an event held by Prestige Purchasing and CGA Foodservice at The Brewery on Chiswell Street in London, Prestige's purchasing operations director Shaun Allen told the audience that the foodservice industry was "back in an inflationary world".

He said that Prestige saw several potential influences on prices in the coming year, including: the outcome of Brexit negotiations, the results of which are currently very hard to predict; the West's relationship with Russia, which may see economic sanctions against it lifted next year and which has become a far bigger producer of wheat since they were imposed, possibly leading to downward pressure on some commodities; the outcome of various elections in Europe such as the French presidential election; and the arrival of President Trump on the world stage.

Allen's comments came as CGA and Prestige unveiled their collaboration on the Foodservice Price Index Report, which aims to offer a true reflection of price movements in the foodservice industry. Currently Prestige estimates that there is a 4% gap between foodservice prices and prices as measured by the Consumer Prices Index (CPI), which has been pushed lower by intense competition between supermarkets and covers a different selection of goods.

On looking at the potential risks to food and drink pricing following a turbulent 2016, Prestige Purchasing's chief executive David Read said: "In 2016, and caused by Brexit, sterling has declined 10% against the dollar and 13% against the Euro. The consensus among currency analysts is a level of around 15%-20% depreciation will be where rates will rest when the current instability is resolved. During the period where we are sitting in the EU departure lounge we can probably assume an impact on total food and drink costs in the region of +5%, emerging as importers hedging protection gradually reduces over the next 6-12 months."

Read added that two major areas of uncertainty for the future were how the government redistributes cash it no longer sends to the EU, of which a large proportion currently supports the Common Agricultural Policy (CAP), raising a question mark over how UK farmers will be subsidised in the future, and to what extent and on what terms Europe and non-EU countries will establish trade agreements and tariffs with the UK.

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