The CGA Prestige Foodservice Price Index recorded deflation for the first time in its history in March 2020—but the COVID-19 pandemic is set to create significant instability in pricing in the months ahead.
The Index has continued a downward trend that began last July, and reached a year-on-year deflation rate of -2.9% in March. However, multiple impacts and pressures from the pandemic fully emerged in April, with the Federation of Wholesale Distribution indicating an 80% drop in members’ sales and fresh produce supplier Reynolds reporting a 95% drop in business almost overnight.
While a fall in demand might usually result in a universal fall in prices, lockdown measures in many countries have started to affect food production output and the availability of exports, which may drive prices upwards instead. UK farmers have already faced a shortage of pickers from the European Union following the country’s Brexit vote, which helped to push year-on-year inflation in the Fruit category above 10% last July—but they now face an even larger deficit of up to 40,000 pickers ahead of 2020’s peak harvest period.
With sharp fluctuations in supply and demand causing both upward and downward pressures on the market, the Foodservice Price Index forecasts a period of instability in the months ahead.
Prestige Purchasing CEO Shaun Allen said: “The COVID-19 pandemic is now having a marked effect on supply chains and food pricing. The wholesale suppliers that service our sector have had much the same experience as operators, with demand falling off a cliff in mid-March. As a result, it will be challenging for foodservice operators to reinstate the same supply chain as was present just eight weeks ago when they closed. Price fluctuations are to be expected, and collaboration with suppliers will be key over this difficult time.”
CGA Client Director Food and Retail Fiona Speakman said: “Restaurants, pubs, bars and cafes are facing especially challenging futures. Even if the sector begins to reopen in July, site openings will be phased and gradual. A prolonged spell of price upheaval will only add to the pressure. All foodservice businesses will need to stay vigilant and agile in their purchasing and operations in the months ahead.”