Foodservice inflation hits double-digits in February

Cost pressures are intensifying as year-on-year inflation in the foodservice sector hit 10.2% in February 2022, according to the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing.

The double-digit increase was fueled by challenges including a surge in demand, the “lingering” impacts of Covid, additional costs of trade after Brexit and surges in energy and packing prices. Inflation has also been further heightened by the comparisons with February 2021, when Britain’s lockdown temporarily eased the pressure on prices.

According to the CGA, inflation in the Foodservice Price Index is now running at exactly twice the level of the comparable Consumer Price Index number. It underlines the structural differences between the retail and foodservice sectors, with security of volumes and tighter ranging, forward contracting and hedging used to protect pricing over a more extended period in the retail sector.

The report from CGA and Prestige also highlights the volatility of pricing, with a wide range of highs and lows across its ten categories. The sugar category recorded a drop of 10.9%, while oils and fats was up by 56% year-on-year. Five of the 10 categories have inflation of more than 20%, with fish, fruit, dairy and soft drinks also affected.

The CGA said inflation will become “even more acute” following Russia’s invasion of Ukraine in late February. The war will add to the “stress” on energy markets and generate new challenges in key commodities like Wheat, oils and fats, fish and fertilisers. This is likely to drive up prices for months to come, and further increases in inflation are inevitable.

James Ashurst, client director at CGA, said: “Two years of Covid turmoil have weakened many businesses across the foodservice sector, so the huge upward pressure on prices comes at the worst possible time.

“The surge in energy and commodity costs shows no sign of easing, and with consumers’ disposable incomes heavily impacted as well, there will be pressure on sales as well as margins. The long-term future of the foodservice sector remains good, but there are undoubtedly some turbulent times ahead.”

Shaun Allen, Prestige Purchasing CEO, added: “The Ukraine war has the potential to drive an extended period of increasing food and drink costs, which if coupled with recent changes to VAT, rising labour costs and potentially falling volumes could well generate conditions worse than during the pandemic.”