Foodservice price inflation falls below 20% for the first time in five months

It is the fourth consecutive fall in year-on-year inflation and the first time in five months that the rate has dipped below 20%. While prices increased by 0.7% month-on-month between February and March, there are clear signs that inflation is steadily slowing after enormous challenges throughout the last year.

“After months of relentless pressure on prices we can be cautiously optimistic that foodservice inflation is at last softening,” says James Ashurst, client director at CGA by NIQ.

“But much damage has already been done to businesses’ costs and consumers’ spending, and with various areas of food and beverage supply still volatile, conditions will remain difficult for some time to come.”
The downward trend has been driven by an easing of prices in key commodity markets. The dairy and oils and fats categories within the Foodservice Price Index both recorded month-on-month deflation on the back of improved availability, aided by increased milk production and falling edible oil prices. Only two of the Index’s 10 categories reported month-on-month inflation of 2% or more.
Inflation has also been slowed by significant falls in the cost of crude oil, a major upstream influencer on the price of food. Crude prices fell 24.4% year-on-year and 4.4% month-on-month, which should help to alleviate supply costs.
While other factors including labour, energy and currency markets will continue to influence pricing, the new edition of the Foodservice Price Index forecasts further falls in inflation in the months ahead. However, some categories including meat and sugar are likely to remain volatile as a result of supply uncertainties.

“The continued fall in inflation will be some welcome relief for the hospitality sector,” says Shaun Allen, Prestige Purchasing CEO.

“However, prices remain high and with eight out of 10 categories still reporting month-on-month increases, the overall cost of food and beverages in the sector continues to rise just at a slower rate. The pressure on operators’ margins is still increasing and acting now to optimise their supply chain and limit the impact is critical.”