, UK
Photo from Unsplash by Dan Gold.

Operators to face renewed inflation pressure

This is despite year-on-year inflation holding steady at 1.8%.

Analysts have warned that renewed inflationary pressures are possible in the coming months despite having a steady month in February.

The latest CGA Prestige Foodservice Price Index (FPI) indicates a continued easing of inflationary pressures, with the Index remaining relatively flat in February, falling by a marginal 0.1 point from January 2025.

Year-on-year inflation held steady at 1.8% in February, whilst month-on-month inflation saw a slight decrease of 0.1%. Whilst this reflects a degree of stability for the foodservice sector over the past 12 months, the underlying global economic factors and domestic policy changes present more challenges going forward.

The majority of the Index's categories, six out of 10, experienced month-on-month inflation in February. Conversely, only one category out of 10 showed year-on-year deflation. The highest year-on-year inflation was observed in oils & fats at 5.7% and coffee, tea & cocoa at 6.8%.

After the sharp increases seen in cocoa and coffee prices over the past 12 months, there has been some recent easing but both commodities still remain at nearly double the average price compared to 2023.

Meat and poultry prices are also under significant upward pressure, with beef prices continuing to trade at record highs and price rises in chicken being seen due to the Avian Flu outbreak in Poland.

The impact of recently imposed US tariffs remains a concern, although their full effect has yet to materialise. However, there will undoubtedly be some volatility in the market as some imports and exports to and from the United States will start to seek alternative markets.

Crude oil prices saw a decline of 4.7% both year-on-year and month-on-month, primarily driven by concerns surrounding economic growth linked to potential tariffs from the US and its trade partners.

Shaun Allen, CEO of Prestige Purchasing said that while the overall Foodservice Price Index indicates inflation has been tracking at a relatively low level to date, the upward price pressure on key commodities like beef, chicken, dairy and coffee combined with the impacts from the National Minimum Wage and National Insurance Contribution changes which come into effect in April, means we are likely to see a resurgence of inflation in the coming months.

“Operators should ensure they have robust procurement strategies and mitigation plans in place where possible to navigate the challenges ahead,” Allen said.

Meanwhile, Reuben Pullan, senior insight consultant at CGA by NIQ, said that the inflationary waters in foodservice have been calm lately, but there are several major causes for concern.

“Increases in National Insurance contributions will hit hospitality operators’ margins and are also likely to drive up some prices, whilst tariff wars will inevitably cause more collateral damage across the sector. Confidence amongst both consumers and leaders remains hesitant, and businesses will need to stay laser-focused on cost management and margins in the months ahead,” Pullan said.

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