Foodservice price inflation reaches highest ever level as supply struggles with reopening

The Index recorded month-on-month inflation in seven of its 10 categories, reaching the highest point since it began measuring foodservice prices in January 2015.

A combination of factors including restocking, challenges in production and distribution, and new Brexit-related expenses contributed to the rising costs.
May’s mounting inflation came as the hospitality sector reopened for inside service, placing pressure on the supply chain.

High demand and severe shortages of labour across food manufacturing, agriculture, warehousing, wholesale distribution and hospitality have led many firms to raise pay levels, which can be expected to feed through into prices in the months ahead.

A combination of the pandemic and Brexit impacts are also causing issues at major ports, slowing down food and drink imports and generating stock-outs in suppliers.

Categories that have been particularly affected include fruit, where prices rose 7.0% month-on-month thanks to poor harvests in parts of Europe as well as import problems.

The vegetables category saw a 3.2% increase, with many UK producers struggling to recruit pickers, while the milk, cheese and eggs category (up 9.9%) was impacted by the jump in demand from foodservice as well as a fall in milk production.

 “The reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated," says Shaun Allen, CEO of Prestige Purchasing.

"Some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers.”
With demand rising and supply and labour issues continuing, the latest Foodservice Price Index predicts that inflationary pressures are likely to intensify over the summer.

“While it has been great to see hospitality venues opening their doors again, rising food and labour costs and Covid restrictions have created tough market conditions," says Leonie-Jade Leigh, client manager at CGA.

"Supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.”