12 April, 2018

Foodservice price inflation dips to pre-referendum levels in early 2018

Download Monthly Snapshot Report - March 2018

Foodservice price inflation dropped back to 0.5% in February 2018—the lowest point since the EU referendum. That is the headline finding of the latest edition of the CGA Prestige Foodservice Price Index.

The vote to leave the EU in June 2016 triggered an immediate weakening of the pound and a sharp spike in foodservice prices, especially on imported items. Price Inflation has been running at relatively high levels ever since but halved from 5.1% in December 2017 to 2.5% in January 2018. It has now reduced again to barely above zero—an inflation level not recorded by the Foodservice Price Index data since the month of the referendum, and well below the rate of inflation recorded by the Consumer Price Index which currently stands at 3.0%.

The downward trend has been driven by the easing of pressure in several key food and drink categories, and by improved confidence around the UK’s transitional arrangements for its departure from the EU. Categories seeing a fall in prices include Fish, where inflation tumbled from 9.8% in December to -4.2% in February. Inflation meanwhile fell to -2.5% in the Dairy category this month, largely thanks to falling farmgate milk prices.

However, foodservice prices remain high in several key categories including Oils and Fats, where soybean supply issues contributed to pushing inflation up to 16.5% in February. The government’s plan to introduce a soft drinks levy in April encouraged prior adjustments in retail prices and drink formulas, helping to drive inflation in the Soft Drinks category up to 6.8%.

The exclusive Foodservice Price Index from CGA and Prestige suggests there are grounds for optimism that inflationary pressures may continue to ease in the coming months. But it also warns that prices remain vulnerable to supply issues, currency fluctuations and wider economic factors, including the potential for a tariff-driven trade war between the US and China.

The monthly CGA Prestige Foodservice Price Index contains in-depth analysis of inflation in ten different categories of food and beverages and helps businesses in the foodservice supply chain keep up to date with trends, challenges and opportunities.

Shaun Allen, Chief Executive at Prestige Purchasing, said: “This month’s Foodservice Price Index inflation figure of 0.5% continues the positive downward movement we have seen over the past few months and will give some much-needed respite for the Foodservice industry. However, whilst the overall inflationary pressure continues to ease we also recognise that a significant level of volatility remains within the individual food and drink categories. This volatility demonstrates that a number of supply markets remain fragile and vulnerable to sudden movements from events that can result in sharp inflationary and deflationary swings.”

Fiona Speakman, CGA Client Director of Food, said: “Foodservice price inflation of just 0.5% in February 2018 is welcome news after prolonged turbulence. Our Foodservice Price Index gives reasonable cause for optimism that we might now be entering a sustained period of lower inflation, and with Brexit arrangements becoming clearer and the ‘sugar tax’ now established, we can be hopeful that the worst of recent volatility is behind us. But businesses need to remain vigilant to any fresh pressures on prices, and stay right on top of their purchasing and pricing strategies.”

The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using data drawn from over 50% of the foodservice market and around 7.8m transactions per month. More information on specific categories is available on a subscription basis.

For further information, interviews or images, contact food@cga.co.uk.

     

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