There's good news and bad news; rising prices are easing, but they're not coming back down soon. Lynx Purchasing gives its predictions on the coming months
Hospitality operators face a difficult choice between keeping the food and drink prices they charge customers down or maintaining a point of difference by serving high-quality produce, hospitality buying specialists believe.
While the Bank of England is forecasting that inflation will ease later this year, the price rises operators have seen over the past two years are now bedded in, according to Lynx Purchasing managing director Rachel Dobson.
She said: "We're starting to see some price improvements on products that have seen the biggest increases, such as dairy and oils, but higher food costs are here to stay. Once consumers start to feel more confident about spending, the opportunity for hospitality will be to add value to menus, rather than cut margins, as many have been.
"Consumers may be going out less often, but many are looking for better quality when they do. In addition, showing support for British food producers has genuine customer appeal." As Lynx Purchasing publishes the summer 2023 edition of its regular Market Forecast, Dobson said that though there are some very difficult choices for operators ahead, those that offer consumers a genuinely different choice to what they can buy in supermarkets can help to drive a recovery.
"In retail, while supermarkets are not necessarily profiteering, their drive for lower prices often comes at a cost in terms of food quality," she added. "The choice for foodservice businesses is whether to follow retail in relying on lower-cost products, with an inevitable impact on menu quality, or to focus on providing consumers with high-quality produce that represents good value for money."
The National Farmers Union (NFU) has recently called for closer links with hospitality, with NFU president Minette Batters arguing that "developing relationships between the out of home sector and British farmers and growers will create even more opportunities to serve up local food that is safe and fully traceable, providing the provenance the public increasingly appreciates".
Dobson said: "There are plenty of examples of produce where poorer quality has become the norm. Think of fruit and veg that looks good but has no flavour; chicken that is intensively produced; or potatoes that are small and damaged due to extreme weather."
Using insight supplied by the range of suppliers that Lynx Purchasing works with, as well as official inflation data, product areas highlighted in the latest edition of the Market Forecast include the following.
Beef and pork
With the barbecue season moving into high gear, the continuing high cost of rearing cattle means all popular cuts of beef, as well as mince for making burgers, are in demand. Pork prices are also at very high levels, with strong global demand.
Salads
Falling energy prices are making UK production of salad produce more economic, but after the supply problems earlier in the year, it will take UK growers some time to fully gear up to meet demand for produce such as tomatoes, lettuce and cucumber.
Poultry
Continued concerns about the spread of avian flu mean restrictions on poultry have been introduced in many countries and the supply situation can change quickly. Prices for chicken, as well as turkey and duck, continue to be high as demand for fresh, frozen and pre-made products continues.
Eggs
With egg production also severely hit by avian flu, prices for both fresh and liquid egg have seen increases. Suppliers expect egg production to take some time to return to normal levels.
Dairy
Prices for milk, butter and cheese have started to come down, following an increase in global milk production. In due course, this will also help to reduce the price of many manufactured products that use cream.
Potatoes
The yields of larger potatoes such as bakers are extremely low, due to a poor harvest after the very hot weather last summer. Frozen chips and potato products are now seeing sharp price increases as the quality issue works through into food manufacturing. Suppliers are waiting for the new crop in July to assess quality.
Oils
Prices for rapeseed oil are starting to fall as this year's crop becomes available, making it a more economic option than both sunflower oil, which is still impacted by the Ukraine situation and made worse by the flooding of arable land after the recent dam destruction, and olive oil, where a drought has affected both price and supply.
Higher demand for rapeseed from food manufacturers will mean that reductions in the price of processed food may take some time to come through.
Dobson added: "Operators will have to factor continued volatility across a range of produce into their planning. Each hospitality business has to make its own decision about the trade-off between menu quality and pricing, based on its customers' expectations. In the current market, though, trying to compete with the cheapest place in town for eating out is a race to the bottom.
"Poor quality produce also contributes to food waste, for example by loss of yield during preparation and cooking or simply when indifferent-tasting food is returned uneaten on customers' plates. There is a real opportunity for operators to forge partnerships with British food producers and make eating out a genuinely different experience."
Lynx Purchasing
Lynx Purchasing works with more than 2,200 accounts in the hospitality and catering sector, on a no-membership and no-contract basis.
As purchasing professionals, Lynx works with leading suppliers in the hospitality and catering industry. These include specialist fresh food suppliers, wines and spirits, catering equipment providers, utilities, and specialist service providers such as telecom, business rates consultancy and waste management.
A FREE copy of the Summer 2023 Market Forecast can be downloaded from the website at www.lynxpurchasing.co.uk. For more information call 01325 710143 or email hello@lynxpurchasing.co.uk.
