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Inflation in foodservice prices firms up to 1.8% in March 2018

Download Monthly Snapshot Report – April 2018Foodservice price inflation remained relatively low at 1.8% in March, continuing a level of stability in 2018 after a turbulent year-and-a-half in the sector.

The finding from the latest edition of the CGA Prestige Foodservice Price Index will be reassuring news for operators, who have faced high levels of inflation since the EU Referendum in mid-2016 and the subsequent weakening of sterling. Inflation halved from 5.1% in December 2017 to 2.5% in January 2018 and fell again to 0.5% in February. The figure rose month on month to 1.8% in March but is still below the rate of inflation as measured by the Consumer Price Index.

The downward trend in inflation has been driven by the increased supply of several key materials including sugar, where a global surplus led inflation to fall dramatically. Meat and Dairy were among the other categories to fall into deflation territory in March. In recent months the value of Sterling has stabilized against the Euro and improved versus the Dollar, helping to ease pressures on the price of imported items. Increased certainty over the UK’s exit from the European Union has also restored more confidence to the sector.

But the Foodservice Price Index indicates much higher inflation in other important categories. In Oils and Fats, inflation was rampant, displaying the highest figure recorded in a single category of the Index—following news of poor soybean output in key territories. In Fruit, a period of poor weather and declining volumes across much of Europe drove inflation higher.

March inflation was also relatively high in Soft Drinks, where the introduction of the government’s ‘sugar tax’ has created uncertainty about producers’ costs and consumers’ spending.

The latest Index findings give cause for optimism that inflation may continue at reasonably low levels as 2018 moves on, especially if weather conditions are favourable over the coming months. But Brexit and the threat of US-led tariff wars between major countries are among several reasons for caution over the next few months.

The monthly CGA Prestige Foodservice Price Index contains in-depth analysis of inflation in ten different categories of food and beverages and provides businesses in the foodservice supply chain with intelligence to stay on top of trends, challenges and opportunities.

Shaun Allen, Chief Executive at Prestige Purchasing, said: “It is encouraging to see that inflation levels in the sector have remained at a lower level in the first quarter of 2018, providing some stability to Operators. However, some very high levels of inflation remain within categories such as Oils & Fats, Drinks and Fruit. As we enter into an important period of food production, good weather conditions in major growing regions will be fundamental to keeping inflation at a low level.”

Fiona Speakman, CGA Client Director – Food, said: “Although foodservice price inflation rose month on month, the figure of 1.8% is significantly below rates measured by our Index through most of 2017. It suggests that the modest inflation of early 2018 is not just a blip but a welcome return to stability after the price volatility that was triggered by the EU Referendum. Positive signs on the supply of some items will add to the sector’s confidence—but exchange rates, tariffs and the weather are among the many issues that mean businesses will have to keep on their toes in purchasing and pricing this year.”

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