Foodservice Pricing Falls Slightly In December But Remains Nearly 2% Up Year On Year

CGA-StrategyInflation revealed in the Foodservice Price Index from Prestige Purchasing and CGA Strategy contrasts with deflationary consumer trends in food and drink

Pricing on food and non-alcoholic drinks dropped slightly in December but remains 1.8% higher than a year ago, the latest Foodservice Price Index from Prestige Purchasing and CGA Strategy reveals.

The figure contrasts sharply with the Office for National Statistics’ Consumer Price Index figures for food and non-alcoholic beverages of -1.1% for December. It indicates that foodservice is having to cope with price increases that have not yet reached the general public.

The figures continue divergent trends for the two measures. For over two years now foodservice pricing has taken an inflationary course in contrast with the CPI—though the latter is now playing catch-up with a stabilising Foodservice Price Index. Fierce competition between big-name stores with significant negotiating power means that increases in the price of raw materials or transport costs are often suppressed in the ONS’ figures, and the purchasing profile of businesses in each sector can also vary significantly.

While the Foodservice Price Index indicates upward movement over the medium term, prices actually fell slightly month-on-month. This is in line with typical movement from November to December, when festive discounting and an increase in the sales of goods targeted specifically at the Christmas market tends to push down prices.

The latest Index data from Prestige and CGA suggests that the outlook for pricing in the next three months is unsettled. There is particular volatility in salad and fruit items imported from Spain and Italy, while salmon, cream and butter prices are soaring.

Christopher Clare, Head of Consulting & Insight at Prestige Purchasing said, “The level of volatility currently being experienced is significant, driven by a perfect storm of key commodity challenges and political and economic uncertainty. The foodservice market typically reacts more quickly to the former given the market dynamics where the large number of individual customers have less influence on price changes being passed on.”

“Our latest Index data provides more important insights for all those in the foodservice sector. It shows that the Christmas season triggered a little respite in rises, but it is clear that the direction of travel in pricing remains firmly upward. As 2017 goes on it will be crucial for operators to stay on top of pricing trends and manage their customers’ expectations,” said Phil Tate, Chief Executive, CGA.