The rate of inflation is a significant increase on the figure of 5.8% in April. It is also more than four times as high as inflation in the equivalent Consumer Price Index, which measured 2.0% in May, according to the Office for National Statistics. It marks the sharpest inflation in foodservice prices since August 2008, and for the third month in a row, foodservice prices were higher year on year across all ten sub-categories measured by the Index.
An increase in the farm gate price of milk, low stocks and a rise in global demand have all fueled a sharp rise in dairy prices, where inflation is 9.9% year on year. Inflation in the fruit category was even higher at 12.7%, with the weak pound substantially pushing up the costs of items imported from around the world. Poor weather and disease in some key fruit growing regions of the UK and Europe have reduced stocks and pushed prices up further.
Many other macro factors have added to inflationary pressures in foodservice, including UK political uncertainty surrounding Brexit negotiations and the General Election, and fluctuating oil prices. More issues are impacting specific areas of foodservice, like sea lice problems pushing up fish prices, and tightening wheat supply adding to cost burdens in bread and cereals.
Although there are signs that inflation in some food items may start to ease, the figures from the latest CGA Prestige Foodservice Price Index continue a sharp upswing in costs for the sector in 2017. The widening gap between the rate of inflation here and in the Consumer Price Index emphasises the need for foodservice businesses to seek expert independent help with their procurement and pricing strategies.
Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said: “There are few places to hide from the increased costs we are seeing flow through to operators – we would always recommend though, that operators test the competitiveness of their pricing in the marketplace and fully understand the justification for any increases.”
“Headline price inflation of 9.0% reveals the scale of the challenges facing foodservice businesses at the moment. The weak pound, political uncertainty and a host of supply and demand factors are whipping up something of a perfect storm, and operators will need to be at the top of their game on procurement in the months ahead,” said Graeme Loudon, Commercial Director, CGA.