Foodservice Price Inflation hits 9%

Jun 26th 2017

Foodservice Price Inflation (FPI) is at 9.0% for May 2017, up from the 5.8% reported last month and is a significant move up from the 2.9% we saw at the start of the year. While the inflationary movement in FPI from April to May is significant, the widening gap in food inflation between FPI and CPI has become more prominent.

Prices remain higher year-on-year across all categories, with notable jumps for fruit and dairy products.  While FPI currently reports food inflation close to double digits at 9.0%, the last time we experienced inflation higher than this was in August 2008 when CPI reported food inflation at 14.5%.

Dairy FPI for May is 9.9%, a significant increase compared to last month - farmgate prices for milk have continued to increase for many months, and those increases are now being felt in foodservice.  Processed dairy products such as cream, butter and cheese have continued to increase in price significantly above that of milk itself, driven by high global demand especially from Chinese importers, and low stocks.  Whilst some shifts from branded to own brand products may have helped to keep the level of inflation down, the additional sharp rises in dairy products during the past couple of months have now come through.

Fruit FPI for May now sits at 12.7% - as a majority-imported category, the cumulative effects of the weakened pound have taken its toll especially when compared to the much stronger pound in May 2016. Disease and poor weather have not helped either, with “greening” on citrus fruit production in Florida and Valencia, and the effects of the unfavourable weather in key growing regions across Europe and the UK during previous months which is also affecting supplies.  Under such trying conditions, it’s no wonder that imports of fruit continue to cost more compared to last year.

There are numerous factors that are continuing to affect food and drink prices both globally, from OPEC’s diminished control over oil prices, the effect of an unpredictable new US president, down to more local issues such as sea lice infections driving up Scottish salmon prices, the uncertainty caused by the General Election here, as well as the ongoing Brexit negotiations, therefore food businesses will need to be more informed and active than ever in managing their costs.