Year on year inflation in eight categories of the February edition of the Foodservice Price Index from CGA and Prestige Purchasing, with deflation seen in only two categories.

13 March, 2019

Significant inflation in Fish, Dairy, Soft Drinks, Oils and Fats

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Maintaining its upward position on last year, Fish has experienced the most significant year on year inflation in FPI, reveals the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing.

High prices are being maintained by quota reductions for white fish, and with no sign of total allowable catches going up, year on year inflation is likely to continue into the long-term. There is a more positive trend in salmon prices, following good availability recently.

Inflation in the Oils & Fats category of the Index has meanwhile softened after a period of very high year on year inflation, and month on month movements in February, were deflationary. The category has benefited from a decrease in crude oil pricing since late 2018 and a strengthening of the Pound against the Euro and Dollar. Mounting US stocks of soybeans and China’s introduction of legislation to reduce requirements on imports is creating a potential future global surplus.

With production costs up due to feed shortages following last year’s harsh summer, Dairy prices have seen high year on year inflation. Contributing factors include the Milk to Feed Price Ratio recently dropping below the long-term average. However, month on month movement here is also deflationary, after an increase in production thanks to healthy grass growth for use as silage following good rains, reducing the requirement on expensive feed. Milk production forecasts suggest an increase for this year, but demand is expected to remain strong, and could drive price rises later in the year.

Inflation in the Soft Drinks category has been on a general upward trend since the Index began, and has now reached its highest point to date. Much of the rise can be attributed to a shift away from alcohol consumption, reformulation of products and increasing varieties of adult soft drinks. With many brand owners set to adjust pricing in February and March in light of factors including Brexit, currency fluctuations and rising costs of production, inflation is likely to keep moving up.

Shaun Allen, Chief Executive at Prestige Purchasing, said: “The continued rise in year on year food and drink inflation for the sector will not be welcome news for operators who are also facing a challenging trading environment. However, the future outlook is showing more positive signs that inflation could ease during the year, with the Index showing a number of categories falling back month on month. The recent improvement in exchange rates should also help, providing of course that the outcome of Brexit over the next couple of weeks does not lead to major disruption to availability of products from the EU and introduction of WTO tariffs.”

Fiona Speakman, CGA Client Director – Food, said: “The latest edition of the Foodservice Price Index shows some significant and widespread movements in prices, creating more headaches for foodservice businesses. Month on month easing of inflationary pressures in key categories like Dairy and Oils & Fats provide some grounds for optimism, but with the impact of Brexit on the supply chain and currency rates still so unclear, we can expect more volatility. It will be absolutely vital for businesses to stay right on top of market trends as we move deeper into 2019.”

The exclusive Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using foodservice data drawn from 7.8m transactions per month. It contains myriad insights and information pertinent to the foodservice sector, and is essential reading for anyone seeking to keep ahead of price trends and understand why they occur. More information on specific categories is available on a subscription basis. https://www.prestige-purchasing.com/services/foodservice-price-index-fpi  

     

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