In positive news for the hospitality sector, January marked the 19th consecutive month of decelerating year-on-year inflation, according to the CGA Prestige Foodservice Price Index (FPI).
However, with global trade tensions rising, there are warnings that potential disruption to supply chains could create further price volatility and have unpredictable knock-on consequences for the foodservice sector.
“Nineteen months of downward movement in inflation has been welcome respite for businesses in the foodservice chain besieged by cost pressures,” says Reuben Pullan, senior insight consultant at CGA by NIQ.
“However, there is no room for complacency, especially as global trade tensions rise.
“While there are positive signs, the outlook for hospitality remains cautious given the ongoing global trade tensions and rising costs.
“With other costs like labour and energy rising and many consumers still hesitant about spending, the trading environment will be difficult for some time to come.”
Monthly inflation in the total basket of items measured by the FPI stood at 1.8% in January, while month-on-month inflation was flat at 0.0%.
Of the Index’s 10 categories, only fish recorded year-on-year deflation and just three delivered month-on-month deflation.
Beef prices have continued to surge to record levels, driven by projections of strong demand and lower production in 2025.
There are some pockets of relief, including the start of a decrease in olive oil prices after record highs in recent years.
The Index notes that other persisting pressures on global commodity markets are likely to impact food and drink prices.
Notably, aluminium prices have surged 17.9% over the six months to January 2025, following increased demand from China, rising energy costs, supply chain disruptions and escalating fears of a global trade war.
The recent imposition of a 25% US import tariff on aluminium adds further uncertainty.
Crude oil prices also saw a substantial 11.4% month-on-month increase, driven by geopolitical tensions, delays in OPEC+ production increases and heightened demand. Natural gas prices also continued their upward trend, rising 4.7% month-on-month.
“While the overall Foodservice Price Index indicates a continued low level of inflation, the pressure on some key commodities such as beef, energy and crude oil together with the pending cost impacts from the national minimum wage increases and employer National Insurance contribution changes are likely to see inflation rise up again over the coming months,” says Shaun Allen, CEO of Prestige Purchasing.
“Operators should ensure they have robust procurement strategies and mitigation plans in place where possible to navigate the challenges ahead.”