Foodservice price inflation likely to rise as sector reopens

Several months of falling food and non-alcoholic drinks prices are expected to come to an end as the hospitality industry reopens, the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing reveals.

Figures for the February 2021 Index showed the total ‘food basket’ price falling by 2.6% on January 2021, though it was up 2.2% on a year-on-year basis. There were notable dips in dairy and fish/seafood prices, caused by Brexit-related falls in export volumes. The speed of resolution on issues including problematic customs processes and an EU ban on imports of certain UK shellfish will be a key factor in reducing supply and price volatility during the rest of 2021.

As the sector takes the first cautious steps out of lockdown and sales volumes recover, the Foodservice Price Index suggested that a repeat of the considerable firming of prices experienced during the sector’s unlocking in summer 2020 can now be expected. The easing of deflationary Brexit pressures and the introduction of new government policies around debt, taxation and inflation gradually may also bolster prices.

Shaun Allen, chief executive of Prestige Purchasing, said: “We expect prices to rebound as volumes recover, probably to above 2020 levels by later in the year. Operators would be well advised to seek price holds from suppliers while the current inflation levels remain benign. They should also avoid taking a renewal of pre-lockdown supply for granted, as the commercial impacts of the winter lockdown have been harmful to many supplier balance sheets.”

Fiona Speakman, CGA client director – food, said: “After a tumultuous 2020 and early 2021, it is heartening to see the hospitality sector starting to return, and the success of the vaccine rollout raises confidence that consumer spending will bounce back well as the year goes on. However, these figures are reminders that foodservice supply remains volatile, and that the many impacts of both Covid and Brexit will be felt for some time to come. All businesses will need to stay alert to pricing issues if they are to make a positive start to the recovery journey.”

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