Food prices likely to rise as sector reopens

By Joe Lutrario

- Last updated on GMT

Foodservice inflation likely to rise as sector reopens says CGA

Related tags Cga Procurement Restaurants Fish Shellfish

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

Figures for the February 2021 Index show the total ‘food basket’ price falling by 2.6% on January 2021, though it was up 2.2% on a year-on-year basis.

There were notable dips in dairy and fish and seafood prices, caused by Brexit-related falls in export volumes.

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 2021. 

The Foodservice Price Index suggests that a repeat of the considerable firming of prices experienced during the sector’s unlocking in Summer 2020 can now be expected, and is recommending that operators attempt to 'lock in' prices with suppliers.

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

“We expect prices to rebound as volumes recover, probably to above 2020 levels by later in the year," says Prestige Purchasing CEO Shaun Allen.

"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.” 

“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," says CGA Client Director – Food Fiona Speakman. 

"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. All businesses will need to stay alert to pricing issues if they are to make a positive start to the recovery journey.”

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