Foodservice prices falling as inflationary pressures ease

Foodservice prices may be stabilising after three years of steady inflation, according to the latest CGA Prestige Foodservice Price Index report.

The latest edition reveals a month-on-month drop in prices in eight of 10 food and drink categories in September 2019. The index has been dropping since February, aside from a slight rise over the summer due to poor conditions for seasonal fruit and vegetables — although uncertainty over Brexit and challenges to some categories of food and drink mean more turbulence is possible.

One major exception to the ongoing decline has been fish, where year-on-year inflation stood at 13.3% in September. Much of the pressure on prices can be traced back to quota changes last year and the low value of sterling pushing up the cost of imports. Since much of caught fish is frozen, there is a six to 12-month lag before issues like these impact pricing in the category.

For the first time since December 2018, the soft beverages category of the index has seen a 10.6% fall in month-on-month inflation. However, a September drop is expected each year, as suppliers drop prices to drive volume and shift stock after the high demand of the summer months. The recent trend of premiumisation in soft drinks means inflation remains high year-on-year at 26.5%, and pricing is now expected to level out before rising again going into the Christmas period.

After a difficult summer for the fruit category, the index has finally seen a month-on-month drop in prices of 2.7%. This, however, does little to ease pressures, and year-on-year inflation is at 17%. Polish apples are increasingly popular worldwide, and after poor weather conditions this year's crop is reportedly close to half the size of 2018’s, pushing prices up by nearly 50%. The UK has seen its own problems from a shortage of fruit picking labour, with the National Farmers’ Union reporting up to 16 million apples are being left to rot in orchards.

Prestige Purchasing chief operating officer Phil McGuinness said: “We are still seeing issues occurring across multiple categories as we head into the winter months. However, the continued drop in month-on-month inflation across the index is a good sign for buyers. After a couple of tough inflationary years, the recent trend of negative month-on-month numbers across numerous categories will be helping to relieve pressure on operators.”

CGA client director food and retail Fiona Speakman said: “The low value of sterling and a host of weather and supply changes have created significant turbulence in pricing over the last three years, and signs of stability will be very welcome to businesses across the foodservice sector.

“But high year-on-year inflation in key categories like fruit, fish and soft beverages are reminders that we are not out of the woods yet, especially with the impacts of Brexit still so uncertain.”

The Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using foodservice data drawn from 7.8 million transactions per month.