Foodservice providers feel the strain as inflation increases by 2%

01 December 2016 by
Foodservice providers feel the strain as inflation increases by 2%

Foodservice providers are feeling the brunt of inflation as the gap between Consumer Price Index (CPI) and Foodservice Price Index (FPI) has doubled to 4%.

Hospitality advisor Prestige Purchasing is warning that foodservice providers need to look past CPI, which is currently 2% lower than last year, to understand the cost of their supply.

In the FPI, Prestige Purchasing and CGA Strategy found that the sector is experiencing a 2% increase in supply prices compared with last year.

The FPI has analysed over four million lines of data per month since 2014 to track operators' performance against inflation.

Over the last year, the inflation gap has increased by 2%, which is credited to agricultural and political factors, alongside competition against supermarket discounting.

The areas that have been most affected are: salmon, due to a supply in Chile being affected by disease, putting pressure on the price of salmon from Norway and Scotland; alcohol, which is proving to be more expensive to import due to the falling pound; chocolate and coffee, where demand is greater than supply, which is being hindered by global warming; and avocados, which have seen a rise in popularity over the last few years, resulting in a high demand on what is a limited supply.

David Read, chief executive of Prestige Purchasing, said: "Despite what the CPI is showing, we're seeing a noticeable rise in inflation for foodservice operators, and the widening gap between CPI and FPI is one of the many huge challenges operators are facing. While consumers are protected somewhat by the continued supermarket price wars, political and agricultural supply issues have led to a perfect storm, which is driving prices up.

"For some contract caterers this problem is further compounded by clauses that benchmark budgets to CPI. Our message to those that do have these clauses is to review them immediately and link them to the true cost of supply for operators.

"There has never been a time when more accurate pricing data is needed in our industry. Looking to 2017, the Trump presidency, the triggering of Article 50, a restriction on oil production, and Russian sanctions are just some of the headline factors that will affect inflation - it is this that has prompted our organisations to collaborate and develop the only industry-specific index that will allow foodservice operators to track their performance vs food inflation in our industry".

Phil Tate, chief executive of CGA Strategy, said: "It is a turbulent time in food pricing, and we are pleased to offer operators some practical help via this new FPI with Prestige. With so many macro and micro economic factors impacting on the food supply chain at the moment, there are significant issues for both supply- and consumer-side pricing, but smart operators will find ways to mitigate the extra costs and grow their market share. This Index gives them the tools they need to track food pricing, monitor their performance and protect their margins".

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