Operators should expect a "prolonged spell" of instability in food prices

By James McAllister

- Last updated on GMT

Operators should expect a "prolonged spell" of instability in food prices CGA Coronavirus

Related tags: Cga, Restaurant, Supply chain, Coronavirus

Foodservice operators should expect a "prolonged spell" of instability in food prices as a result of the Coronavirus pandemic, according to the latest CGA Prestige Foodservice Price Index.

This is despite food and beverage pricing deflating for the first time in its recorded history in March 2020.

In March, the index recorded a year-on-year deflation rate of 2.9%, continuing a downward trend that began in July last year. 

However, as the effects of the crisis started to impact global trade, a fall in demand and output began to emerge.

In April, the Federation of Wholesale Distribution indicated an 80% drop in members’ sales; and fresh produce supplier Reynolds reported a 95% drop in business almost overnight.

While a fall in demand might usually result in a universal fall in prices, lockdown measures in many countries have started to affect food production output and the availability of exports, meaning prices may be driven up instead.

UK farmers have already faced a shortage of pickers from the European Union following the country’s Brexit vote, but they now face an even larger deficit of up to 40,000 pickers ahead of 2020’s peak harvest period.

“The Covid-19 pandemic is now having a marked effect on supply chains and food pricing," says Prestige Purchasing CEO Shaun Allen.

"The wholesale suppliers that service our sector have had much the same experience as operators, with demand falling off a cliff in mid-March. As a result, it will be challenging for foodservice operators to reinstate the same supply chain as was present just eight weeks ago when they closed.”

With sharp fluctuations in supply and demand causing both upward and downward pressures on the market, the index forecasts a period of instability in the months ahead.

“Restaurants, pubs, bars and cafes are facing especially challenging futures," says Fiona Speakman, CGA client director for food and retail.

"Even if the sector begins to reopen in July, site openings will be phased and gradual. A prolonged spell of price upheaval will only add to the pressure.

"All foodservice businesses will need to stay vigilant and agile in their purchasing and operations in the months ahead."

Related topics: Business & Legislation

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