Drought 'latest in long line of global food supply threats'

08-Aug-2022 - Last updated on 08-Aug-2022 at 09:47 GMT

Foodservice inflation: rates reach double-digit percentage for fifth consecutive month (Credit: Getty/neiljlangan)

Inflation in the foodservice sector rocketed to 11.5% in June in the fifth consecutive month of double-digit percentage inflation with drought outside of the UK posing the latest threat to supply, the latest edition of the CGA Prestige Foodservice Index has revealed.

While all 10 of the food and drinks categories detailed in the Index showed year-on-year growth, fruit, dairy and oils and fats recorded the highest levels of inflation of more than 20%.

However, several categories have surged month-on-month as the impacts on key commodities from Russia’s invasion of Ukraine continue to mount.

Volatile environment

Prestige Purchasing CEO Shaun Allen 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. Doing so in a timely manner can eliminate even these high levels of inflation.”

This comes as April and May saw inflation within the foodservice sector top 10%, with rates unlikely to fall below 7% before 2023, according to CGA and Prestige data.

Furthermore, concerns have grown regarding drought conditions in the UK following recent heatwaves, with strategies from the National Drought Group to deal with very dry weather potentially seeing a ban on farmers watering crops in August and September, putting root vegetables such as potatoes under threat.

Long line of threats

Shortages of seasonal labour has also added to growers’ problems by obstructing ability to get products to market, while poor grass growth has impacted dairy and livestock yields.

Beyond the UK, drought has already caused problems in Italy, with crops including tomatoes and durum wheat already affected, as conditions across the rest of the EU have also caused concern.

CGA by NielsenIQ client director James Ashurst said: “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.”