Ukraine Crisis is A Long Term Threat to Food Prices, Warns Lynx Purchasing

The Russian invasion of Ukraine will have an ongoing impact on hospitality food prices, and is likely to end any hopes that spiralling food inflation is just a blip, warns Lynx Purchasing.

“We’ve all witnessed the horrifying events in Ukraine, and hospitality operators and their customers understand the tragic human cost driving the need for sanctions,” says Lynx Purchasing managing director Rachel Dobson, “but it’s also important that they plan for the impact of the invasion, and the measures to oppose it, on their businesses.”

The warning comes as Lynx publishes the Spring 2022 edition of its regular Market Forecast, to support customers as they plan for a peak trading season which includes Easter, the May Bank Holiday, and the Platinum Jubilee celebrations.

Dobson adds:
“There is now further pressure on hospitality and catering operators, who were already seeing unprecedented levels of food and drink inflation, driven by a combination of spikes in commodity prices, increased transportation and import costs, and higher labour costs.

“All of this has to be factored into the prices suppliers charge to customers. The latest inflation figures from the ONS show that restaurant prices were up 6.4% year-on-year in February.”

Examples of the impact of the Ukraine crisis on the hospitality sector include:

• Poultry: The cost of feed is one of the biggest factors in the price of poultry, and so the loss of grain from both Ukraine and Russia will have a significant impact on prices. In addition, both Ukraine, and neighbouring countries such as Poland which are facing disruption due to the invasion, are major processors of poultry, producing products for the catering market.

• Vegetable Oil: Ukraine supplies 60% of the world’s sunflower oil, and the loss of this will inevitably lead to cost increases. Oil prices on the global commodities markets were already reported to have reached an all-time high in January, mainly due to global weather challenges, including drought in South America. With vegetable oils used in the production of many staple foods, operators can expect to see the impact on food bills in the months ahead.

• Fuel: Higher fuel costs driven by spikes in the price of oil significantly increase production and distribution costs, which suppliers will factor into increased prices charged to operators.

• Utilities: Energy prices were already increasing sharply, and gas and electricity suppliers are currently only likely to offer new fixed price contracts at very high rates.

Dobson adds:
“While we all hope that the immediate crisis can be resolved quickly, the impact of both the war itself, and sanctions, mean that operators will now have to budget for high prices for some time to come; at the very least for the rest of this year.
“The best advice to operators is to plan for costs that can’t be controlled, and focus on those that can – one of which is purchasing. Best practice includes planning menus well in advance, and consolidating orders to meet free delivery and minimum value thresholds.

Our advice is to order early, keep speaking to suppliers about availability, and to keep menu descriptions flexible to allow for changes if needed.”