Food price drops will ‘maximise margins’ for operators

By Alice Leader

- Last updated on GMT

Contrasting costs: despite fruit price rises, vegetables came at a lower expense
Contrasting costs: despite fruit price rises, vegetables came at a lower expense

Related tags Cga Food

New research reveals the foodservice sector shows no sign of inflation thereby offering operators the chance to grow sales and margins this year.

According to the latest edition of the Foodservice Price Index from CGA and Prestige, prices across the foodservice sector fell four index points (which measure the actual cost) since August last year, marking overall prices at their lowest since April 2019.

CGA client director food and retail Fiona Speakman said: “After an extended period of turbulence in foodservice prices, the signs of stability revealed in the latest index are a relief.

“It’s particularly pleasing to see an easing of inflation in the vegetable category, but rising fruit prices and the imminence of Brexit are reminders of the need to stay vigilant on trends and purchasing strategies in 2020.”

Contrasting trends

The price of seasonal vegetables, such as onions and potatoes, has fallen both month on month and year on year, but the fruit category has recorded price increases. Therefore, the index advises operators to carefully monitor these contrasting trends.

It is good growing conditions for seasonal vegetables that resulted in price drops because crops were more abundant.

But the boost large price increases in the fruit category was a result of the previous overproduction in Spanish citrus crops leading to low tree energy in 2019 and yields for farmers that were down 60 to 80%.

This forced prices upwards and left the category with year-on-year inflation of 16.2% in November.

A welcomed opportunity

However, the new report forecasts more price falls in the next few months, providing operators with a welcome opportunity to reduce their costs and improve margins or cut menu prices to incentivise trade.

A greater level of certainty around Brexit should also further help businesses to focus more closely on footfall and sales during a traditionally challenging period for the sector.

Prestige Purchasing chief operating officer Phil McGuinness said: “The slowing of inflation should provide some reassurance to purchasers for the year ahead.

“With 2020 looking likely to bring [price] falls in multiple categories, along with certainty around Brexit bringing 12 months of stability, we are likely to see further reductions within the index, which can be used to maximise margin or drive sales.”

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