Foodservice inflation hits 11.5% in June

Inflation in the foodservice sector hit 11.5% in June, marking the fifth consecutive month of double-digit percentage inflation, according to the CGA Prestige Foodservice Index.

All 10 food and drink categories in the Index moved upwards year-on-year, with three (fruit, dairy, and oils and fats) recording inflation of more than 20%. Additionally, several categories surged month-on-month as the impacts on key commodities from Russia’s invasion of Ukraine continued to mount.

CGA said that concerns are also growing about drought conditions in many parts of the UK in the wake of the recent heatwave.

Strategies from the National Drought Group to deal with very dry weather could include a ban on farmers watering their crops in the “crucial” period of August and September, which would put root vegetables including potatoes under particular threat.

CGA added that shortages of seasonal labour are adding to growers’ problems by threatening their ability to get their product to market, while poor grass growth is impacting dairy and livestock yields.

Beyond the UK, drought is already a “major” problem in Italy, with crops including tomatoes and durum wheat already affected, and conditions across the rest of the EU are also causing concern.

Shaun Allen, Prestige Purchasing CEO, said: “Instability continues to be the dominant feature of food and drink markets, and we predict that this will continue into 2023. It’s essential for operators to mitigate the impact on gross margins by investing in skills and resource levels to effectively manage this volatile environment.”

James Ashurst, client director at CGA by NielsenIQ, added: “Drought is the latest in a very long line of threats to global foodservice supply, and alongside the ongoing war in Ukraine it means inflation is likely to remain high for some time.

“With consumers as well as businesses feeling a tightening squeeze on their spending, the outlook for all food and drink businesses remains challenging.”