Foodservice Inflation Rises 1.8% as Cost Pressures Persist

Hospitality food and drink prices rose 1.8% month-on-month in June, the latest Foodservice Price Index from NIQ and Prestige Purchasing has revealed.

Despite the easing of prices in May, the inflationary spike has been put down to structural supply issues and unpredictable weather overriding relief to costs from recent drops in global energy markets.

While increases were felt across nearly all food and beverage categories, the biggest increases were in fish and seafood, driven by strict quota restrictions across North Atlantic whitefish fisheries and unyielding biological challenges constraining farmed salmon output.

The meat and poultry sector was also impacted as tight cattle availability and resilient global demand restricted supply. Meanwhile, the coffee, tea and cocoa category continued on an inflationary trajectory, after adverse weather and structural plantation issues in Brazil, Vietnam and West Africa.

Meanwhile, vegetables and dairy, which have recently provided a deflationary buffer, recorded notable month-on-month increases in June, after extreme heatwaves in Europe put stress on water-intensive crops and reduced milk yields.

Shaun Allen, CEO of Prestige Purchasing, said: “The 1.8% month-on-month spike in June is a stark reminder of how fragile the food supply chain remains. We are currently witnessing a significant disconnect in the market; global oil prices have fallen, yet UK operators are facing continued cost increases across both fresh and manufactured categories.

“This paradox clearly demonstrates that structural supply deficits, such as fish quotas and cattle shortages, combined with the immediate impacts of European heatwaves, are overpowering the benefits of cheaper energy. The protective buffer of forward contracts is being severely tested.

“Operators must look beyond headline energy prices and focus their procurement strategies on mitigating climate and structural risks, which will undoubtedly dictate market pricing as we move through the second half of the year.”

Reuben Pullan, senior insight consultant at NIQ, added: “Hopes in hospitality that relief on oil prices might slow inflation were dashed in June. The upward movement in virtually all food and beverage items adds yet more weight to the burden of costs carried by businesses across the supply chain and will further reduce the confidence of businesses and consumers alike.

“Macro challenges like extreme weather and conflict in the Middle East are fusing with micro supply issues to make procurement extremely challenging, with little sign of respite in the coming months. With the arrival of a new Prime Minister, now is the moment for targeted intervention to ease conditions for hospitality.”