Supply chain uncertainty could worsen food price inflation, report shows

Hospitality has been warned of potential supply chain issues amid unpredictable weather and avian flu.

Despite a marginal increase in year-on-year inflation in the hospitality sector, with figures rising by 2% in March compared to February’s 1.8%, the CGA Prestige Foodservice Price Index (FPI) said rates could be aggravated by “supply shocks” across the market.

The produce sector has not yet demonstrated the usual price reductions ahead of the summer months. Instead, significant rainfall and flooding in Europe has taken a toll on root vegetables, leading to price rises for onions. Similarly, butter and cream production are still recovering from adverse weather conditions earlier in the year, which limited milk volumes.

Meanwhile, meat and poultry are facing headwinds as a result of tightened cattle supply, with UK beef production expected to drop 5% in 2025 amid rising demand for summer barbecues. The chicken market remains volatile as a result of avian flu outbreaks, as does the egg market.

The oils and fats category remains the most inflationary, reporting a 5.8% increase compared to March 2024, followed by sugar, jam, syrups and chocolate, which has seen a 2.4% year-on-year rise due to changes in cocoa pricing.

Shaun Allen, chief executive of Prestige Purchasing, said: “While the latest CGA Prestige Foodservice Price Index offered a glimmer of hope in March, the persistent pressures in key areas like oils and fats, coupled with emerging challenges in produce, dairy, and particularly meat and poultry, underscore the continued need for strategic supply chain management within the hospitality sector. Navigating these complexities will be crucial for businesses looking to maintain margins in the coming months.”

Reuben Pullan, senior insight consultant at CGA by NIQ, added: “March’s uptick in foodservice price inflation, albeit marginal, is more unwelcome news for hospitality businesses in an extremely challenging environment. Alongside an increase in labour costs from April, it adds to heavy pressure on menu pricing and margins. Underlying demand for hospitality remains strong, but all suppliers and operators will be hoping for calmer waters in pricing as we move towards the crucial summer months.”

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