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9th July 2021

Foodservice price inflation rises as supply struggles with reopening

Written by: Edward Waddell
Food and drink prices continued their upward trend in May, with basket costs up 2.5% on April, the latest edition of the CGA Prestige Foodservice Price Index has revealed.

The index recorded month-on-month inflation in seven of its ten categories, reaching the highest point since it began measuring foodservice prices in January 2015. The rising costs are due to a range of factors including restocking, challenges in production and distribution as well as new Brexit-related costs.  

May’s mounting inflation came as the hospitality sector reopened for inside service, placing more pressure on the supply chain. Categories that have been particularly affected include fruit, where prices rose 7.0% month-on-month thanks to poor harvests in parts of Europe as well as import problems.

The vegetables category saw a 3.2% increase, with many UK producers struggling to recruit pickers, while the milk, cheese and eggs category (up 9.9%) was impacted by the jump in demand from foodservice as well as a fall in milk production.

Shaun Allen, chief executive of Prestige Purchasing, said: “The reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated. Some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers. With the sector still to fully reopen after lockdown we expect food and drink supply to be challenging, and inflation to strengthen.”

The latest Foodservice Price Index predicts that inflationary pressures are likely to intensify over the summer.

Leonie-Jade Leigh, client manager at CGA, commented: “While it has been great to see hospitality venues opening their doors again, rising food and labour costs and Covid restrictions have created tough market conditions.

“Supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.”