Inflation steady as disruptions to food and drink supply hit reopening

Food and drink supply markets have been hit by widespread distribution problems and a spike in demand following the return of out-of-home eating and drinking, observes the new edition of the CGA Prestige Foodservice Price Index.

June saw supply issues in the south of England after the return of restaurants, pubs, bars and other venues, amplified by warm weather. Problems were compounded by a shortage of labour, particularly HGV drivers, as well as insufficient manufactured stocks and Brexit-related challenges with imported goods.

As June progressed, many suppliers put mitigation strategies in place, including the refusal of some orders to cap demand and improvements to wages and conditions to attract new employees. The situation has stabilised in July, but demand is likely to peak again in early September when schools and businesses increase order levels.

The Foodservice Price Index revealed that food inflation stood at 1.6% in June, having levelled off at a time of year when it typically falls. Non-alcoholic beverage prices increased month-on-month but remain below the levels of 2020. The remaining months of 2021 are likely to see further increases in the level of food inflation, as sector demand returns towards pre-pandemic normality and extra supply costs and wage inflation feed into price increases.

Shaun Allen, chief executive of Prestige Purchasing, said: “June brought an unwelcome realisation to operators and suppliers alike that availability of labour will be a challenge for the foreseeable future. The difficulties with HGV drivers has been particularly impactful, and operators should consult carefully with suppliers to ensure that supply chains are as lean and efficient as possible.”

James Ashurst, client director at CGA, said: “It has been a long journey back for the foodservice sector, and the recent disruption to supply has come at the worst possible time. Labour shortages and price inflation are unwelcome challenges as consumer demand continues to increase, and fragile businesses must hope that conditions start to ease in the next few months.”

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