Foodservice inflation in first fall since 2021

23-Feb-2023 - Last updated on 23-Feb-2023 at 10:27 GMT

Hope on the horizon: fall in food inflation an ‘encouraging reminder’ (credit: Getty/Solstock)

Foodservice price inflation dropped to 22% in January in an “encouraging” start for hospitality, but challenges persist, the new edition of the CGA Prestige Foodservice Price Index has revealed.

While this marks a small change from the index’s record high of 22.9% in December, it’s the first drop in inflation since September 2021.

However, all categories of the index remain in double-digit inflation, with oils and fats recording the highest level of year-on-year increase at 42.2%, while milk, cheese and eggs continued to rise quickly at 37.7%.

Vegetable prices are now feeling inflationary pressures, having risen month-on-month by more than 3.5% for three months in a row.

Slow easing predicted

Prestige Purchasing chief executive Shaun Allen welcomed the fall in inflation, which though small, was an “encouraging reminder” that price increases were beginning to slow.

Allen said: “We expect to see inflation easing slowly over the course of 2023 as commodity pricing and prior year impacts kick in.

“Slowing consumer demand within the sector will also impact hospitality sector sales volumes, which should also help to ease supplier prices. Energy and labour costs remain a significant challenge, however, so the rate of inflation decline may be slow for some time yet.”

The three major upstream influencers on the price of food – oil, exchange rates and commodity markets—are now more stable than in 2022. The UN FAO Food Price Index of food commodities averaged 131.2 points in January 2023 – down by 1.1 points from December, marking a 10th consecutive month of decline.

Battered by inflation

Energy costs remain at very high levels, and higher labour costs within supply chains show few signs of easing.

CGA by NielsenIQ client director James Ashurst said: “The foodservice sector has been battered by inflation for a long time now, and on top of the disruption triggered by Covid it has left some businesses extremely fragile.”

While he believed a month-on-month drop in inflation was an encouraging start to the year, with key costs still so high and consumer spending under severe pressure, Ashurst said it was clear trading conditions would remain tough for the foreseeable future.

This emphasised the need for targeted government support to help sustain businesses through these challenges, he added.