Food and drink price inflation surges to 3.5%

The latest edition of the CGA Prestige Foodservice Price Index reports that inflation is currently being driven by a combination of the impacts of Covid-19 and lockdowns on food and drink production; ongoing chaos in international shipping; and the sharply rising costs of energy and petrol across the supply chain.

Brexit, meanwhile, 'choked' Britain’s labour market, leading to shortages of product and higher wages.

It adds that the current crisis in Ukraine may add to disruption by driving gas prices to new highs and disturbing the wheat market. Even without a war in Ukraine, many economists now expect the overall Consumer Price Index to rise to 8% during 2022, and the CGA Prestige Foodservice Price Index predicts similar levels for food.

“2022 will be a year we will all remember as the first year of significant inflation for over a decade,” says Shaun Allen, Prestige Purchasing CEO

“Coupled with rising costs in other areas such as energy and wages these increases will impact margins without both strong management action on procurement, and the raising of prices.”

Unlike some inflationary periods in the past, the report anticipates that the current spike will be relatively temporary. The shipping crisis is slowly resolving itself, container prices are expected to fall by this summer, and production is gradually stabilising as Covid-19 vaccination programmes continue to roll out.

“As the out-of-home food and drink market recovers from two years of Covid disruption, high inflation is the last thing it needs,” James Ashurst, client director at CGA.

“With consumers’ spending increasingly squeezed by rising costs as well, sales and profits are going to be under strain for at least the next few months. Businesses will have to work hard to mitigate the effects of inflation, and hope for an easing of pressures as 2022 goes on.”