Foodservice price inflation hits all time high as supply chain struggles with reopening

Food and drink prices continued their upward trend in May, with basket costs up by 2.5% on April, the latest edition of the CGA Prestige Foodservice Price Index shows.

The index recorded month-on-month rises in seven of its 10 categories, as a result of challenges in production and distribution and new Brexit-related costs, meaning that inflation reached the highest point since CGA began measuring foodservice prices in January 2015.

May’s mounting inflation came as the hospitality sector reopened for inside service, placing pressure on the supply chain. High demand and severe shortages of labour across food manufacturing, agriculture, warehousing, wholesale distribution and hospitality have led many firms to raise pay levels, which it said can be expected to feed through into prices in the months ahead.

A combination of the pandemic and Brexit are also causing issues at major ports, slowing down food and drink imports and generating stock-outs in suppliers.

Categories that were particularly affected included fruit, where prices rose 7% month-on-month due to poor harvests in parts of Europe as well as import problems. Vegetables saw a 3.2% increase, with many UK producers struggling to recruit pickers, while milk, cheese and eggs (up 9.9%) were affected by the jump in demand from foodservice as well as a fall in milk production.

With demand rising and supply and labour issues continuing, the latest Foodservice Price Index predicted that inflationary pressures are likely to intensify over the summer.

Shaun Allen, chief executive of Prestige Purchasing, said: “The reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated. Some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers. With the sector still to fully reopen after lockdown, we expect food and drink supply to be challenging and inflation to strengthen.”

Leonie-Jade Leigh, client manager at CGA, said: “While it has been great to see hospitality venues opening their doors again, rising food and labour costs and Covid restrictions have created tough market conditions. Supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.”

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