11 February, 2020

Unseasonal price falls drive down food and drink inflation

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Year-on-year inflation fell to half the 12-month average in December 2019, according to the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing.

The strong downward trend saw unseasonal month-on-month drops in inflation in seven of the ten categories in the Index—and inflation across the entire basket of food has now fallen for six months in a row. It will be welcome news for operators who have faced rising costs for much of the last few years, and presents an opportunity to lock in savings in purchasing.

While the holiday season brought the usual increase in the price of salmon and festive meats like pork and turkey, inflation fell in other categories including Vegetables and Dairy, which is extremely rare for the time of year.

A strong harvest for potatoes and onions helped bring down the price of Vegetables. Last year’s poor potato harvest where extreme heatwaves lead to the smallest crop in six years, has resulted in a big shift in the index.

But the monthly Foodservice Price Index report also sounds some notes of caution about prospects for 2020. With oil-producing countries looking likely to cut production by 1 million barrels per day in order to mitigate the impact of the coronavirus, the price of transportation and packaging could well be pushed upwards later in the year, directly affecting the cost of food.

Prestige Purchasing CEO Shaun Allen said: “Now is an excellent time for operators to be looking at their pricing, and taking steps to ensure that it reflects the wider market. It is very possible that this a temporary respite and we will see the index begin to rise again in the second quarter.”

CGA Client Director Food and Retail Fiona Speakman said: “Christmas demand usually delivers an increase in food and drink price inflation, so the easing of pressures across the Price Index is good news. Foodservice businesses have been battling many inflationary pressures since the Brexit Referendum in 2016, but will now be hopeful that prices are settling.”

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.cga.co.uk/all-reports/cga-prestige-foodservice-price-index-january-2020/

     

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