Hospitality food prices rise again as supermarket prices ease

Month-on-month food inflation in hospitality was more than five times higher at 2.2% compared to supermarkets where prices increased by just 0.4% in June, according to CGA’s prestige foodservice price index.

It said the difference in prices is caused by a variety of factors, including the fact that top ten grocers own 75% of the market, making them more able to exploit their scale with sophisticated contracting and controlled distribution.

In contrast, hospitality buys primarily from multiple wholesalers, which dissipates scale, creates diverse ranging and has less contractual price protection. Upstream cost improvements can also take longer to feed through and are subject to continued volatility, such as the recent failure of the UK grain corridor arrangements.

In addition, suppliers squeezed by rising costs and smaller margins will be seeking some respite as their inbound costs ease.

Cost of global food commodities continued to fall in June, averaging 23.4% below the peak reached in March 2022. However, conditions for UK producers continue to deteriorate, with farming input costs such as energy, feed and fertiliser remaining high, and near-full employment levels tightening the labour market.

James Ashurst, client director at CGA by NIQ, said: “Hospitality has been besieged by food and drink price inflation for many months now, and it’s frustrating to see another jump at a time when retail price rises are slowing. Alongside relentless pressure on energy bills, labour costs and consumers’ discretionary spending, it leaves some businesses extremely vulnerable through no fault of their own.

“Sales remain solid and people remain eager to eat and drink out when they can, but trading conditions are going to be tough for some time to come.”

Shaun Allen, CEO of Prestige Purchasing, added: “Food prices in the UK hospitality sector continue to increase at around 2% per month. This rate of increase is likely to be close to a tipping point, where deflationary factors should start to compensate for the currently dominant inflationary pressures. The exact timing of this tipping point though remains uncertain whilst the factors described above remain volatile.

“We strongly advise operators to ensure that buying skills, levels of resource and quality market data feature heavily in their operational plans for the foreseeable future.”