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Weak pound keeps foodservice price inflation high at 8.8% in June

25 July 2017 by

Wholesale foodservice prices increased by 8.8% in June, according to the latest CGA Prestige Foodservice Price Index.

The rate is fractionally down on the 9% recorded in May, the Index's highest point in nearly nine years. But 8.8% is still significantly ahead of historical averages, and continues a year of substantial challenges in the categories of wholesale foodservice that depend on imports.

The Index also reveals the disparity between foodservice price inflation and the Consumer Price Index, which measured 2.3% in June, according to the Office for National Statistics. It highlights how the foodservice supply chain is exposed to notably more inflationary pressures than some consumer-side sectors.

Inflation ran high in June in most of the categories measured by Prestige Purchasing and CGA Strategy. Most sharply affected was fish, where inflation stood at 20.8%, driven by sea lice problems in Norwegian and Scottish farms, concern over cod and tuna quotas and the pressure that low exchange rates is placing on imported catches.

In the ambient hot categories, inflation ran at 12% in June, thanks to rising coffee and tea prices. Inflation in fruit, a category particularly dependent on imports and vulnerable to exchange rates, stood at 13.6%.

One bright spot was the sugars, preserves and confectionary category, where prices in June 2017 were 5.1% lower than in June 2016. The dip has been caused by increased sugar cane production and yields in Brazil, healthier beet sugar production across the EU, and relatively low cocoa prices.

There are tentative signs that inflation in some other food and drink categories could also be starting to ease a little, but uncertainty surrounding Brexit negotiations is likely to keep the value of the pound low and general foodservice price inflation high in coming months. Other macro issues, like fluctuations in oil prices affecting transport and production costs, are also set to challenge the foodservice sector.

Christopher Clare, head of consulting and insight at Prestige Purchasing, said: "Although we are forecasting far lower rates of inflation for this time next year, the quirk is that we still expect pricing in many categories to be higher than what we are seeing today."

Graeme Loudon, commercial director at CGA Strategy, added: "Operators that can optimise their procurement and pricing strategies and mitigate some of the inflationary factors will be best placed to succeed in the months ahead."

The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA Strategy, using data drawn from over 50% of the foodservice market and around 7.8 million transactions per month.

Foodservice inflation hits highest level for nine years >>

Price inflation in foodservice hits 5.8% >>

Foodservice price inflation climbs to 6% in March >>

Foodservice price inflation hits 3.7% in February >>

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