Food and drink inflation will ease in 2018 but prices unlikely to fall

By Nikkie Sutton

- Last updated on GMT

On the up: the cost of ingredients looks set to rise
On the up: the cost of ingredients looks set to rise

Related tags: Foodservice price inflation, Inflation

Wholesale food and drink inflation is expected to ease to 3.4% by the end of next year, but the cost of many ingredients will be more, a report has revealed.

Prestige Purchasing's Annual Food and Drink Inflation  Report​ revealed that after hitting a high of 9.3% in August 2017, foodservice price inflation is predicted to ease in 2018, but a number of products will still cost more.

Pub and restaurant operators hoping for a return to normal inflation levels in 2018 will be disappointed, but the very high degree of volatility should reduce in the year ahead according to the company.

Prestige, which alongside its partners CGA publish the monthly foodservice price index, is expecting exchange rates and oil prices to remain broadly in line with 2017, but is concerned by heightened risk from labour costs, weather and several specific ingredients where current supply challenges may intensify.

Kitchen door surge

As a result, Prestige predicts food and drink inflation in foodservice to average 3.6% during 2018 with December 2018 inflation at 3.4%.

Prestige Purchasing head of consulting and insight Christopher Clare said: “In 2017 we have seen inflation at the kitchen door surge ahead of increases in supermarket prices.

“By contrast to foodservice supply, the retail market for food is highly competitive and supermarket operators have both absorbed increases into margin or delayed and refused increases from producers altogether.”

Levels of volatility

Prestige Purchasing chief executive Shaun Allen said: “Looking to 2018, levels of volatility are falling but we still expect challenges in seafood including tuna as well as butter (dairy as a whole), eggs due to Fipronil, and vegetable oils.

“With all the current uncertainty that surrounds our exit from the EU, the year after next (2019) still looks a very high-risk year for the cost of food and drink.”

Meanwhile earlier this year (October) wholesale foodservice price inflation fell for the second month in a row​ from 6.5% to 5.8%, according to the CGA Prestige Foodservice Price Index.

It was the joint-lowest monthly figure recorded by the index since February and an indication that inflationary pressures in the foodservice sector may be starting to ease.

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