Hospitality operators warned to prepare for food inflation surge in 2013

By Peter Ruddick

- Last updated on GMT

Related tags: Food inflation, Inflation

Food prices are set to surge in 2013 and chefs and restaurant operators should prepare for the impact of inflation, according to a new report from Prestige Purchasing
Food prices are set to surge in 2013 and chefs and restaurant operators should prepare for the impact of inflation, according to a new report from Prestige Purchasing
Food prices are set to soar next year and chefs and hospitality operators need to prepare for the impact on their businesses of a surge in food inflation, according to the latest report from supply chain consultants Prestige Purchasing.

In its annual food inflation report, the company is warning restaurateurs will need to prepare for at least six to nine more months of food price rises with the current high rate of inflation for vegetables in particular expected to jump further.

"What we’re seeing is a surge in food inflation which will continue into 2013," David Read, chief executive of Prestige Purchasing, told operators as he presented his report at The Goring hotel in London last night.

Across all categories of food and drink, inflation is expected to rise by more than a third, from 3.3 per cent this year to 4.5 per cent in 2013.

That would still remain below the 2008 peak but Read warned he saw no stop to the surge of food inflation.

"We may even in due course be heading back towards 2008 levels where food inflation peaked at over 8 per cent. This would obviously have quite an impact on the catering and hospitality trade," he added.

Food Inflation: Prestige Purchasing's predictions:

food-inflation
Prestige Purchasing has outlined the likely and predicted rates of food inflation next year

Prices pressure

The rate for vegetables, including potatoes, currently stands at 5.5 per cent - the price has been pushed up by a poor potato harvest in terms of yield and quality. This rate is also expected to grow next year and beyond as a number of factors continue to impact food prices.

"Per tonne production costs for agriculture are increasing significantly, due to low yields and a dramatic increase in feed costs," Read explained. Oil costs and a rise in chemical costs will also put pressure on food and drink inflation.

"In the longer term, broader trends like climate change, population growth and the increasing sophistication of commodity markets will continue to impact food and drink prices.

"As such, we expect food inflation to continue to rise above current levels next year," he added.

Key points

In its report, Prestige Purchasing highlighted a number of foods likely to be particularly impacted by inflation:

  • Pork - a hike in feed prices along with costly EU reforms are expected to continue to push pork prices up
  • Alcohol and soft drinks - volatile commodity markets, climate change and increases in the cost of energy, grains and some sugars have contributed to inflate the cost of drinks this year
  • Breads and cereal - inflation levels for breads and cereals are currently lower than expected but will likely shoot up next year due to a poor grain harvest
  • Milk - dairy industry mergers have served to move production and distribution costs downstream from farmers and the impact may be felt by hospitality operators

However negative inflation rates of oils and fats, particularly palm oil, rape seed oil and soya oil, are expected to continue next year due to high stock levels.

"Smart catering and hospitality operators need to explore mitigating options to manage the impact of food inflation," Read argued.

"Single site operators can enhance their buying by utilising tools like benchmarking and market reports to ensure they are managing their business to meet these changes. In addition, multi-­site operators can focus on more sophisticated techniques like distribution and sourcing optimisation," he concluded.

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