Weak pound keeps foodservice inflation high

By Nikkie Sutton

- Last updated on GMT

Going bananas: fruit is particularly dependent on imports and vulnerable to exchange rates
Going bananas: fruit is particularly dependent on imports and vulnerable to exchange rates

Related tags Inflation

Exchange rates and a sharp rise in the price of fish were among the inflationary pressures affecting the sector, experts have said.

Wholesale foodservice prices saw inflation of 8.8% in June, according to the new edition of the CGA Prestige Foodservice Price Index.

Facts and figures

The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA Strategy.

The data involved is drawn from more than 50% of the foodservice market and around 7.8m transactions a month.

This rate is marginally down on May (9%), which was the index’s highest point in almost nine years, but the figure for June is still significantly ahead of historical averages, and continues a year of challenges in the wholesale foodservice categories that depend on imports.

The index also showed the disparity between foodservice price inflation and the consumer price index, which was 2.3% in June, according to the Office of National Statistics.

This highlights how the foodservice supply chain is exposed to more inflationary pressures than some other sectors.

Inflation was high in most categories measured by the index in June but the most sharply affected category was fish, where inflation stood at 20.8%.

Fishy issues

This was driven by sea lice problems in Norwegian and Scottish farms, concern over cod and tuna quotas and the pressure that low exchange rates placed on imported catches.

Inflation in fruit, a category particularly dependent on imports and vulnerable to exchange rates, stood at 13.6%.

However, it wasn’t all doom and gloom as one bright spot was found in the sugars, preserves and confectionery category where prices in June were 5.1%, lower than June last year.

This slump has been caused by increased sugar cane production and yields in Brazil, healthier beet sugar production across the EU and relatively low cocoa prices.

CGA Strategy commercial director Graeme Loudon urged licensees to optimise their pricing in order to succeed in a challenging future.

Impact on sterling

He said: “These latest figures from the CGA Prestige Foodservice Price Index confirm the scale of the inflationary pressure brought by Brexit and the impact of the referendum on sterling.

“Alongside other issues like oil prices and supply challenges, particularly in the fish markets, they are forcing businesses in the wholesale foodservice sector to stay on their toes.

“Operators that can optimise their procurement and pricing strategies, and mitigate some of the inflationary factors will be best placed to succeed in the months ahead.”

Though there are predictions for lower inflation rates for next year, Prestige Purchasing head of consulting and insight Christopher Clare highlighted that the sector should still expect prices to rise.

He said: “Indexed prices this month (June) are slightly higher than in May 2017, but a bigger increase over the same period last year means a small drop in the rate of inflation reported.

“Although we are forecasting far lower rates of inflation for this time next year, the quirk is that we still expect pricing in many categories to be higher than what we are seeing.”

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