Foodservice price inflation hits lowest point since EU referendum

Foodservice price inflation tumbled to 0.5% in February reaching its lowest point since the EU referendum in June 2016.

That's the finding of the latest CGA Prestige Foodservice Price Index, which said the fall was driven by improved confidence around the UK's transitional arrangements for its departure from the EU as well as the easing of pressure in several key food and drink categories.

The report noted that the vote to leave the EU sparked an immediate weakening of the pound that was accompanied by a sharp rise in foodservice prices, particularly on import products.

But while price inflation has been running at relatively high levels ever since, it has been on a downward trend in the last few months.

In December 2017 it was 5.1%. By January 2018 it had halved to 2.5%.

It has now fallen again to 0.5% - an inflation level not recorded by the Foodservice Price Index data since the month of the referendum and well below the rate of inflation recorded by the Consumer Price Index, which currently stands at 3.0%.

Categories seeing a fall in prices include fish, where inflation dropped from 9.8% in December to -4.2% in February. Inflation meanwhile fell to -2.5% in the dairy category this month, largely thanks to falling farmgate milk prices.

But foodservice prices remain high in several key categories.

Soybean supply issues contributed to pushing inflation up to 16.5% in February for oils and fats, while the government's plan to introduce a soft drinks levy in April encouraged prior adjustments in retail prices and drink formulas, helping to drive inflation in the soft drinks category up to 6.8%.

The Index suggests there are grounds for optimism that inflationary pressures may continue to ease in the coming months but also warns that prices remain vulnerable to supply issues, currency fluctuations and wider economic factors, including the potential for a tariff-driven trade war between the US and China.

Shaun Allen, chief executive at Prestige Purchasing, said the latest figures will provide "much needed respite" for the foodservice industry.

"However, whilst the overall inflationary pressure continues to ease we also recognise that a significant level of volatility remains within the individual food and drink categories," he said.

"This volatility demonstrates that a number of supply markets remain fragile and vulnerable to sudden movements from events that can result in sharp inflationary and deflationary swings."

“But businesses need to remain vigilant to any fresh pressures on prices, and stay right on top of their purchasing and pricing strategies.”

The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using data drawn from over 50% of the foodservice market and around 7.8 million transactions per month.

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