Food and beverage inflation low but pricing uncertainty looms

Foodservice pricing reached its lowest point for 12 months in February with most food and beverage categories showing no or minimal year-on-year inflation.

But with the Covid-19 pandemic causing major disruption to global supply chains and prompting shutdowns of some industries and consumer sectors, it is likely that pricing will be volatile in the coming months.

This is according to the latest edition of the CGA Prestige Foodservice Price Index. Categories already affected by the pandemic include soft drinks, where large manufacturers such as Coca-Cola have seen delays to artificial sweetener shipments, leading to predictions of tighter supplies in the longer term, should Chinese operations remain restricted.

Some categories were seeing large price reductions in the early weeks of the pandemic, including fish and seafood. With demand from China slowing dramatically, Norway's export market has diminished, causing over-supply and a drop in salmon spot prices.

Sugar recorded a small rise in pricing in February, partly due to a 24% drop in India’s sugar output after a prolonged drought followed by flooding. With India in lockdown during its main sugar harvest, a further tightening of supply on a global scale is now expected.

Prestige Purchasing chief executive Shaun Allen said: “This is a concerning time for supply chains across the globe. We are already seeing categories affected by the Covid-19 pandemic, and there will be many more affected before we are back to normal. While many operators are currently closed, buyers will need to be prepared for a different landscape, both in supply and demand once they are up and running again.”

CGA client director food and retail Fiona Speakman said: “After a prolonged period of relatively high inflation in the foodservice sector, the last few months have shown signs of welcome stability—but that has been shattered by the Covid-19 pandemic. With out-of-home eating and drinking sectors in lockdown in many countries and availability and distribution facing major disruption, we are likely to see a great deal of inflationary volatility in the months ahead.”

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