27 October, 2017

Foodservice price inflation eases to 6.5% in September

CGA Prestige Foodservice Price Index suggests a softening of inflationary pressures but continued volatility in many areas of food and drink 

Download Monthly Snapshot Report - October 2017

Inflation in wholesale foodservice prices dipped modestly to 6.5% in September 2017, the latest edition of the CGA Prestige Foodservice Price Index reveals.

It is a sign that foodservice price inflation, which has been rampant for much of 2017, might now be starting to ease—though many categories of the market continue to experience volatility in prices.

September’s figures from the Index, which is compiled by CGA and Prestige Purchasing, represent a fall from year on year inflation of 9.3% in August. It is the lowest figure recorded by the Index since April, though it remains well above both historic levels and consumer-side inflation as measured by the Office for National Statistics.

The data suggests that the impacts of the weakening of the pound since the EU Referendum may now be settling in some food categories, though concerns around global supply and Brexit negotiations continue to dog the foodservice sector. The Index now forecasts inflation of 3.8% for the next 12 months—a more modest figure than has been recorded in much of 2017.  

Inflation levels in September were higher in nine of the ten categories of food and drink measured by the Foodservice Price Index. Inflation was at double figures in categories including oils and fats, because of challenging olive and sunflower oil supplies; and mineral waters, soft drinks and juices, thanks to high fruit juice prices and transportation costs. But in these and several other categories, the Index forecasts a steadying of supply and costs, which should reduce inflation levels in the months ahead.

Inflation is also showing signs of easing in categories including vegetables, where domestic production has improved; and sugar, where the removal of quotas has ramped up supply and led to year on year deflation of 7.6% in September. However, fears of a post-Brexit shortage of migrant labour may dent confidence in categories that are heavily dependent on domestic supply.

The Foodservice Price Index from CGA and Prestige Purchasing contains a host of other insights across the sector, and is essential reading for businesses seeking to stay on top of pricing trends and mitigate the impact of inflation.

Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said: “The easing in overall inflation means a respite for many businesses where commercial pressures have been rising – not just in input prices but also through the impact of business rates and slowing sales as consumers tighten their purses in the tougher economic conditions.  Whilst food prices are not yet falling, we are optimistic that we have seen the bulk of any broad increases coming through.”

CGA Chief Executive Phil Tate said: “The foodservice sector’s year has been characterised by historically high levels of price inflation, triggering substantial challenges for operators throughout the supply chain. Our latest Foodservice Price Index reveals some grounds for hope that inflation levels may now start to ease a little, and that would provide the sector with some very welcome stability. But with economic factors, supply issues and Brexit all contributing to price volatility, any optimism about a long-term easing of inflation must be tempered with a high degree of caution.”

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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