The warning comes as the latest CGA Prestige Foodservice Price Index (FPI) revealed there were marginal increase in year-on-year inflation in the hospitality sector, rising to 2% in March, up from February’s 1.8%.
However, despite the stable numbers, the FPI issued a note of caution as it predicted future inflation could be hit by supply shocks that are manifesting in the market.
The news comes after last months’ warning from the index that food prices were likely to see a resurgence in inflation as the impact of hikes in National Insurance, National Minimum Wage and upward price pressures on key commodities take hold.
In March 2025, the FPI showed the oils and fats category continued to be the most inflationary category, with a significant 5.8% increase compared to March 2024.
Sugar, jams, syrups and chocolate also remained subject to inflationary pressures, with a 2.4% year-on-year rise—partly due to ongoing volatility in cocoa pricing.
Price increases
It further revealed that various factors are set to contribute to price increases on categories such as vegetables, dairy, meat and poultry.
Instead of the usual price reductions that come into force as the sector approaches summer, various factors have contributed to price increases on key items.
Significant rainfall and flooding in Europe has affected root vegetables, leading to notable surges, particularly in onion prices.
Meanwhile, the dairy sector continued to be impacted by challenges in butter and cream production stemming from adverse weather conditions that affected milk quality and volume last year.
However, CGA said the second quarter of this year offered a more optimistic outlook with the anticipation of improved milk volumes.
Meat and poultry markets are also facing headwinds, including a tightening of cattle supply, with UK beef production forecast to drop 5% in 2025.
It added this fall in production is significantly “influencing prices”, and as the summer BBQ season approaches, increased demand for popular cuts is expected to amplify pressures.
Volatile market
The chicken market remains volatile due to ongoing avian flu outbreaks in key production regions, causing extended disruptions to supply. While price increases may be nearing their peak, any subsequent decrease is anticipated to be slow, the FPI warned.
This issue was highlighted by The Morning Advertiser (The MA) only last month.
The index also said Avian flu remained a key driver behind elevated egg prices due to reduced flock sizes.
Prestige Purchasing CEO Shaun Allen said: “While the latest CGA Prestige Foodservice Price Index offered a glimmer of hope in March, the persistent pressures in key areas like oils and fats, coupled with emerging challenges in produce, dairy, and particularly meat and poultry, underscore the continued need for strategic supply chain management within the hospitality sector.
“Navigating these complexities will be crucial for businesses looking to maintain margins in the coming months.”
CGA by NIQ senior insight consultant Reuben Pullan added March’s uptick in foodservice price inflation, albeit marginal, was more “unwelcome news” for hospitality businesses in an extremely challenging environment.
He continued: “Alongside an increase in labour costs from April, it adds to heavy pressure on menu pricing and margins.
“Underlying demand for hospitality remains strong, but all suppliers and operators will be hoping for calmer waters in pricing as we move towards the crucial summer months.”
