Foodservice inflation remains steady in October

Inflation in wholesale foodservice prices declined for the second month in a row in October 2017 to reach 5.8%, according to the latest edition of the CGA Prestige Foodservice Price Index.

It is the joint lowest monthly figure recorded by the Index since February, and an indication that inflationary pressures in the foodservice sector may be starting to ease.

This has created “cautious optimism” that the costs of imports to the UK are settling after a year of historically high levels of inflation following the effects of post-Brexit exchange rate volatility, which have now filtered through to most categories of food and drink.

The CGA Prestige Foodservice Price Index predicts a further easing of pressures into 2018, and forecasts average inflation for the next 12 months of under 4%.

It does add that uncertainty around issues including Brexit negotiations and the La Niña weather phenomenon may yet have a negative impact on the cost of food and drink items brought into the UK from overseas. Foodservice price inflation also remains well above consumer-side inflation as measured by the Office for National Statistics.

Inflation was also held down in the meat and vegetable categories, thanks in part to increased levels of domestic sourcing. However, pressures on supply mean price inflation continues to remain high in other sectors like fish and oils and fats, where inflation is in double figures.

Meanwhile, concern over the availability of migrant labour after the conclusion of Brexit negotiations is affecting some categories, where UK producers have long relied on EU nationals for a large part of their workforces.

Christopher Clare, head of consulting & insight at Prestige Purchasing, said: “In a week where the Chancellor announced changes to the calculation of business rates, the drop in inflation for product purchases will of course be further welcome news. Prices have now been broadly steady for around eight months, albeit at a higher base than a year ago – this might provide some relief for busy operators over the festive season.”

CGA commercial director Graeme Loudon said: “As we near the end of a year of very high inflation in foodservice prices, it is encouraging to see evidence that stresses may be easing in the latest edition of our Index. The government’s negotiations to leave the EU continue to have a significant knock-on effect on exchange rates and migrant labour, and the sector will need to keep a close eye on issues like La Niña. But the Foodservice Price Index does at least suggest that a welcome degree of stability is starting to return to the supply chain.”

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