Away From Home inflation to reach 5.2% in 2025
This is driven by rising labour costs.
Inflation for the Away From Home (AFH) market is expected to surpass prior estimates for 2025, with the average rate projected at 5.2% for the year, according to IGD’s economic forecast.
This significant increase is primarily driven by rising labour costs, which are expected to disproportionately impact service-driven businesses employing a younger, lower-paid workforce, such as those within the AFH market.
Retail food prices could climb by 3.4% on average this year, whilst AFH prices may jump 5.2% as businesses face these rising labour costs.
Operators in the AFH market are facing rising labour costs at the same time business rate relief is being cut, from 75% to 40% starting in April. The relief is capped at £110,000, meaning smaller businesses are likely to feel the impact the most.
Additionally, they will need to absorb the rising labour costs and increasing expenses for fuel and raw materials related to the manufacture of their purchased menu ingredients.
The British Beer and Pub Association (BBPA) has estimated a net impact on the pub sector of £650m due to these increased costs.
“It is crucial for businesses to adopt a mix of pricing strategies, cost-cutting measures, and operational shifts to stay competitive and maintain profitability in this evolving landscape,” said Nichola Gallagher, senior analyst at IGD.
IGD anticipates that operators will implement gradual price hikes throughout 2025 to manage customer price sensitivities and avoid a steep drop in footfall.
To minimise the impact on the customer experience, many operators will also look for cost-saving measures, such as reducing head office staff, reformulating menu items to enhance margins on dishes, and integrating automation where possible.
Additionally, some pubs are adjusting their operating models by reducing opening hours or outsourcing their kitchen operations.
For larger hospitality businesses, diversifying into retail offers a potential pathway for growth.
