31 July, 2017

Weak pound keeps foodservice price inflation high at 8.8% in June

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Exchange rate and a sharp increase in the price of fish among the inflationary pressures in the latest edition of the CGA Prestige Foodservice Price Index

Wholesale foodservice prices saw inflation of 8.8% in June 2017, according to the new edition of the CGA Prestige Foodservice Price Index.

The rate is fractionally down on the figure of 9.0% recorded in May, which was the Index’s highest point in nearly nine years. But June’s figure of 8.8% is still significantly ahead of historical averages, and continues a year of substantial challenges in the categories of wholesale foodservice that depend on imports.

The Index also reveals the disparity between foodservice price inflation and the Consumer Price Index, which measured 2.3% in June, according to the Office for National Statistics. It highlights how the foodservice supply chain is exposed to notably more inflationary pressures than some consumer-side sectors.

Inflation ran high in June in most of the categories measured by the CGA Prestige Foodservice Price Index. The most sharply affected category was Fish, where inflation stood at 20.8%, driven by sea lice problems in Norwegian and Scottish farms, concern over cod and tuna quotas and the pressure that low exchange rates is placing on imported catches. In the Ambient Hot Categories meanwhile, inflation was running at 12.0% in June, thanks to rising coffee and tea prices. Inflation in Fruit, a category particularly dependent on imports and vulnerable to exchange rates, stood at 13.6%.

One bright spot in the foodservice market is to be found in the Sugars, Preserves and Confectionary category, where prices in June 2017 were 5.1% lower than in June 2016. The dip has been caused by increased sugar cane production and yields in Brazil, healthier beet sugar production across the EU, and relatively low cocoa prices.

There are tentative signs that inflation in some other food and drink categories could also be starting to ease a little, but uncertainty surrounding Brexit negotiations is likely to keep the value of the pound low and general foodservice price inflation high in coming months. Other macro issues, like fluctuations in oil prices affecting transport and production costs, are also set to continue working against the foodservice sector.

Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said: “Indexed prices this month are slightly higher than in May 2017, but a bigger increase over the same period last year means a small drop in the rate of inflation reported today. Although we are forecasting far lower rates of inflation for this time next year, the quirk is that we still expect pricing in many categories to be higher than what we are seeing today.”

Graeme Loudon, Commercial Director at CGA Strategy, said: “These latest figures from the CGA Prestige Foodservice Price Index confirm the scale of the inflationary pressure brought by Brexit and the impact of the Referendum on sterling. Alongside other issues like oil prices and supply challenges, particularly in the fish markets, they are forcing businesses in the wholesale foodservice sector to stay on their toes. Operators that can optimise their procurement and pricing strategies and mitigate some of the inflationary factors will be best placed to succeed in the months ahead.”

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

     

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