Inflation in foodservice input prices reaches 3.7% in February

Mar 24th 2017

The pattern of increasing input prices in the foodservice sector continued throughout February with inflation in the sector reaching 3.7% year on year.  Many operators will have been feeling the pinch with prices escalating well beyond seasonal norms. 

The CGA Prestige Foodservice Price Index (FPI) reviews 7.8m transactions per month, across 15,000 SKUs in order to build the largest and most comprehensive independent view on the inflation experienced by foodservice operators.  It shows that average pricing rose by 0.6% from January to February, during a period that seasonally sees around 0.2% inflation.

This extra-seasonal increase is being driven by price increases in the meat and fish categories, where prices typically drop by 3-4% in the two months following Christmas.  In the case of fish, the ongoing challenges with salmon will no doubt have had an impact but, that aside, most of the pressure has come from the weakened exchange rate. 

An expected announcement from Theresa May regarding Article 50 this week caused a small variation in the value of the pound but markets had generally priced this in.  Our view is that the devalued pound is likely to be a factor through to the second half of the year at least, and potentially longer depending on the stages of the negotiation process.

The other significant macro contributor is the price of crude oil, which has been dropping for a couple of weeks now.  The Organisation of the Petroleum Exporting Countries (OPEC) decision at the end of last year to run down production does not appear to have made a significant difference in the market and prices have recently dipped under $50 per barrel as production and supplies remain high.  This has a major impact on transport and packaging costs, with a knock-on effect for products imported from countries where the currency is closely linked to oil, for example Norwegian salmon -  where many operators would welcome some price relief. 

Our FPI reporting this month gives a detailed category by category run-down of the inflationary pressures, along with our latest forecasts for pricing over the next 12 months. If you would like to know more, contact Alexis Neil at Alexis.Neil@Prestige-Purchasing.com, or on 01908 222678.