Labour and materials shortages drive up foodservice price inflation

19-Oct-2021 - Last updated on 19-Oct-2021 at 07:59 GMT

Widespread supply problems and increased demand from the hospitality sector combined to push up prices by 1.2% in August, the new edition of the CGA Prestige Foodservice Price Index reveals.

The report highlights the damaging impacts of acute shortages of labour, and of HGV drivers, pickers and manufacturing and production staff in particular.

UK job vacancies hit a record high in third quarter of 2021, and foodservice has been the hardest hit sector, with nearly six vacancies for every 100 employees at the moment.

“Hospitality is making a robust recovery from the COVID crisis, but these inflation figures threaten to stall the momentum that businesses have achieved," says Andy Hodgson, client manager at CGA.

The labour crisis has led to insufficient manufactured stocks, with problems compounded by post-Brexit difficulties in the imports of goods. Shortages of packaging materials and harvest issues in some parts of the world have further contributed to supply chain problems across the foodservice sector.
August also brought the first full month of restriction-free trading for UK hospitality businesses since March 2020. The sustained return of customers to restaurants, pubs, bars and other premises has increased demand for many food and drink items, and further fuelled price inflation..

"While consumer demand remains strong, the likelihood of steeper inflation puts already vulnerable businesses under renewed pressure," adds Hodgson.

"And it reinforces the case for sustained support from government on tax, labour, supply chain and many more issues.”
Price rises were significantly higher than the 1.2% in some key categories of the Foodservice Price Index with soft drinks rising 8.0%, and breads & cereals up 6.1%. As staff, logistics and import costs continue to rise, the Index predicts continued inflation over the remainder of 2021 and well into 2022, with the rate of rises likely to increase sharply in the short term.

“With Christmas approaching fast it is essential that operators are well in control of their supply chains in advance of what will be a bumpy period for both cost and availability of product," says Shaun Allen, CEO of Prestige Purchasing.

"Good planning and communication will be critical to maintaining supply and profitability in this, the most critical trading period of the year.”