Spiralling food costs pack pressure on hospitality

By Amelie Maurice-Jones

- Last updated on GMT

Struggling sector: Hospitality tackles a perfect storm (Credit: Getty/Art Event ET)
Struggling sector: Hospitality tackles a perfect storm (Credit: Getty/Art Event ET)

Related tags Food Finance Gastropub

Ongoing hikes in food and drinks prices are piling the pressure on hospitality operators, as supply chain fragility continues to hit the industry hard, a new report from Fourth has revealed.

The research has shown that hospitality is still grappling with the fallout from the pandemic and the war in Ukraine.

It revealed that the price of daily essential items rose at historic levels between May 2022 and 2023, with milk up 36%, bread up 22%, flour up 19% and eggs up by 17%.

This compares to overall food inflation of 19.1% in the 12 months to March 2023 – a 40-year high that outstrips consumer price inflation of 10.1%.

Meat prices have also risen sharply in the past year – with chicken up 15% and beef up 6%.

Drinks prices have proven to be more robust, with lager and red wine up by 4%, and white wine by 5%.

New research

Fourth managing director EMEA Sebastian Sepierre said: The data in Fourth’s latest report reveals the extent of the challenges hospitality businesses continue to endure. However, there is hope on the horizon with energy prices and inflation both forecast to head south this year.

“Hospitality executives must also continue to examine every aspect of their business to futureproof their operations. This is where embracing technology in the form of data-driven inventory management plays a significant role. It provides the most efficient way of comparing and changing suppliers, checking product availability and knowing exactly when stock needs to be replenished.2

“Food price inflation is undoubtedly one of the most pressing issues the industry faces, and it is essential to have the right tools at hand to tackle it head on. Technology can play a vital supporting role in helping businesses navigate the various challenges that continue to plight the hospitality landscape.”

Rising prices

The report is based on data from pubs, bars, restaurants and hotels with more than 1,500 sites collectively and a combined spend of £750m with 200 suppliers.

The result has had an inevitable impact on profitability with operators reporting that the Cost of Goods Sold (COGS) was 27.3% in February – an increase of more than 5% in less than two years.

The gap between what operators are anticipating they will spend on food and the actual price they pay is also growing, Theoretical COGS has risen sharply 18.2% in May 2021 to 22% in February this year.

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