Cost pressures on the sector have intensified as foodservice price inflation hit double digits in February, according to the latest CGA Prestige Foodservice Price Index (FPI).

Year-on-year inflation rose to 10.2%, fuelled by challenges including a surge in demand, the covid-19 pandemic, additional costs of trade after Brexit, and increases in energy and packing prices.

Categories such as oils and fats are up 56% while categories including fish, fruit, dairy, and soft drinks were up more than 20%. The sugar category recorded a 10.9% drop, highlighting the volatility of pricing.

Inflation is forecasted to increase further due to the war in Ukraine, which will add to the stress on energy markets and generate new challenges in key commodities like wheat, oils and fats, fish, and fertilisers.

Inflation in FPI is running at exactly twice the level of the comparable Consumer Price Index number, underlining the structural differences between the retail and foodservice sectors.

James Ashurst, client director at CGA, said: “Two years of COVID turmoil have weakened many businesses across the foodservice sector, so the huge upward pressure on prices comes at the worst possible time. The surge in energy and commodity costs shows no sign of easing, and with consumers’ disposable incomes heavily impacted as well, there will be pressure on sales as well as margins. The long-term future of the foodservice sector remains good, but there are undoubtedly some turbulent times ahead.”

Shaun Allen, Prestige Purchasing CEO, commented: “The Ukraine war has the potential to drive an extended period of increasing food and drink costs, which if coupled with recent changes to VAT, rising labour costs and potentially falling volumes could well generate conditions worse than during the pandemic.”