RESEARCH | Staff Reporter, UK

Foodservice inflation likely to rise as hospitality sector reopens: CGA

Recent declines in prices may end, with Brexit and COVID set to remain as key factors.

Consecutive months of falling food and non-alcoholic drinks prices are expected to come to an end as the hospitality industry reopens, according to the latest edition of the Foodservice Price Index from CGA and Prestige Purchasing.

Figures for the February 2021 Index reveal the total food basket price dipped 2.6% on January 2021, though it was up 2.2% on a year-on-year basis. There were notable declines in dairy, fish and other seafood prices, attributed Brexit-related falls in export volumes.

The companies say that the speed of resolution on issues, including “problematic” customs processes and an EU ban on imports of certain UK shellfish, will be a key factor in reducing supply and price volatility during the rest of the year.

The Foodservice Price Index also suggests that a repeat of the considerable firming of prices experienced during the sector’s unlocking in Summer 2020 can now be expected.

The easing of deflationary Brexit pressures and the introduction of new government policies around debt, taxation and inflation gradually may also bolster prices, it added.

“We expect prices to rebound as volumes recover, probably to above 2020 levels by later in the year. Operators would be well advised to seek price holds from suppliers whilst the current inflation levels remain benign. They should also avoid taking a renewal of pre-lockdown supply for granted, as the commercial impacts of the winter lockdown have been harmful to many supplier balance sheets,” Prestige Purchasing CEO Shaun Allen said.

Fiona Speakman, CGA Client Director – Food, added: “After a tumultuous 2020 and early 2021, it is heartening to see the hospitality sector starting to return, and the success of the vaccine rollout raises confidence that consumer spending will bounce back well as the year goes on. However, these figures are reminders that foodservice supply remains volatile, and that the many impacts of both COVID and Brexit will be felt for some time to come.”

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