Food and drink price inflation jumps back to 21.4%

Food and drink price inflation in the foodservice sector unexpectedly rose to 21.4% in April after dipping below 20% in March, according to the CGA Prestige Foodservice Price Index.

Price increases had begun to slow in the first quarter of this year, with year-on-year inflation dipping below 20% in March for the first time since mid-2022.

The rebound in April underlines the severe cost pressures in the foodservice sector, according to CGA by NIQ and Prestige Purchasing.

The figure rose to 21.4%, driven by pressures in some categories, including vegetables; fish; and sugar, jams, & syrups categories, each of which saw prices increase by 3-4% month-on-month.

Potatoes – in which the UK is more than 90% self-sufficient – saw a particularly sharp increase in April in the wake of rising production costs, labour shortages, lower storage crops, and significant short supply in many parts of Europe.

This imbalance between supply and demand looks set to continue for much of the rest of 2023.

CGA and Prestige note that food inflation is still expected to ease in the coming months, with conditions within three major influencers on the price of food – oil, exchange rates, and commodity markets – now relatively benign compared to the volatility of 2022.

The cost of Brent Crude has eased from $87 at the beginning of April to below $80 at the end of the month, with more falls expected in May.

Sterling has remained stable, while inflation in categories such as oil & fats and dairy continues to be subdued.

Prestige Purchasing CEO Shaun Allen said: “In spite of these April increases we expect to see inflation ease slowly over the course of 2023 as commodity pricing and prior year impacts kick in. The major question that remains is the speed of that decline as energy, labour costs and climate change remain significant constraints on progress with inflation reduction.”

James Ashurst, client director at CGA by NIQ, said: “After welcome signs respite over the first quarter of the year, it was disappointing to see inflation surge above 20% again in April. On top of soaring costs in other key inputs and the impact of the cost of living crisis on consumers, it leaves hospitality businesses facing some seismic challenges. The long-term outlook for this sector remains good, but trading remains exceptionally difficult.”