Foodservice price inflation slowly easing but remains above 20%

Year-on-year food inflation fell slightly to 20.6% in February 2023, the latest CGA Prestige Foodservice Price Index reveals.

The figure is below the record high of 22.9% in December 2022, and CGA said there was "clear evidence" of price increases beginning to slow. The full basket of food measured by the Index increased by only 0.7% month-on-month, one third of the average rate recorded in the latter part of 2022.

The report said that this pattern, combined with prior year base effects, should continue to push down inflation during the remainder of 2023, with prices rising but at a slower rate than in 2022. However, all categories of the Index remained in double-digit inflation, with oils and fats achieving the highest rate of 37% year-on-year, and the sugars, jams and syrups category lowest at 12%.

Prestige Purchasing chief executive Shaun Allen said: "In spite of falling inflation we expect the pressure on margins for operators to increase during 2023. Although the rate of increase will slow, supplier food prices will continue to increase during the year—at a time when consumer demand will be tightening and scope for increased menu pricing will be limited. Operators should take action now to optimise their supply to preserve margin."

James Ashurst, client director at CGA by NIQ, said: "News of an easing in foodservice price inflation is very welcome after months of historically high numbers. Key indicators point to further respite as the year goes on, but commodity markets and oil prices remain vulnerable to various macro and micro pressures, so there is no room for complacency. With pressure on consumers' spending continuing, trading conditions will remain very challenging for businesses across the sector."

With sustained inflation showing no meaningful sign of abating, UKHospitality has urged energy regulator Ofgem to force suppliers to engage in automatic renegotiations for businesses paying the highest costs, and asked suppliers to offer the option of spreading payments over a longer period of time, to help cashflow.

UKHospitality chief executive Kate Nicholls said: "It's becoming ever more clear that this level of inflation is simply not going to budge for a significant period of time and, while there have been extremely marginal reductions, there appears to be no end in sight for businesses.

"The 20% level of inflation in food service we're seeing confirmed once again today, alongside the £7.3b per annum in rising energy costs as a result of the reduction in government support, is unsustainable. We have already seen 150 pubs lost for good so far this year and that really will be the tip of the iceberg if nothing is done.

"Energy costs, food price inflation and staffing shortages are a triple whammy that are dragging businesses to failure. Something has to be done or hospitality will look like a shell of itself in a year's time."

Operators have warned of "mass closures" with "harder times than Covid ahead" following a cut in energy bill support earlier this month.