Latest UK foodservice inflation drops by more than 50%

Christopher Clare CGA Prestige Foodservice Price Index
Christopher Clare: Some inflationary pressures may be easing
08/03/2018 - 07:00
Foodservice price inflation in the UK dipped to 2.5% in January, according to figures from the CGA Prestige Foodservice Price Index, primarily due to an easing of seasonal and supply trends. The figure is a fall from year-on-year inflation of 5.1% recorded in December 2017.

The 2.5% figure marks the lowest point reached by the index since early last year, and this may be an indication that some of the inflationary pressures that have beset the industry in the last couple of years might be easing, according to Christopher Clare, head of consulting and insight at Prestige Purchasing. It also pulls inflation in the foodservice sector down to fall broadly in line with the wider level of UK inflation as measured by the Consumer Price Index.

The CGA Prestige Foodservice Price Index identifies a relaxation of inflation in key categories including bread and cereals (2.3%) and milk, cheese and eggs (0.2%), while fish prices fell by 2.6% year on year after months of high inflation. Troughs in inflation are to be expected in the early part of any year, but are significantly sharper than usual in 2018, indicating a degree of price correction in the aftermath of the EU Referendum and the consequent weakening of the pound against the Euro and dollar.

Clare said that despite the positive signs, the Foodservice Price Index outlined a number of inflationary challenges that lay in wait for the sector in 2018 and beyond. These included the impact of Brexit on the availability of migrant labour, on which vegetable, fruit and fish and meat processing industries depend. There was further uncertainty over oil prices, trade tariffs and supply from the UK meat industry, which had been hit by controversy over food safety standards at Russell Hume, which went into administration in February.

Inflation might also be impacted by the government’s introduction of the ‘sugar tax’, which is likely to affect demand for soft drinks this year. The effect of the ‘Beast from the East’ winter weather on farmers and others in the foodservice supply chain in the UK and Europe is also yet to be determined, but may well have dented supplies of important food items.

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

Clare added: "FPI has seen another fall this month as multiple categories see dramatic drops, notably fish and dairy which are by far the most volatile categories. If the index continues downwards we may finally see FPI reach levels comparable to those of 2016, however, price fluctuations and continued uncertainty about Britain’s economic future will exacerbate volatility.”

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