Foodservice prices 'under severe pressure' as sharp cost increases predicted over winter

The return of schools and increasing volumes from hospitality, business and industry drove a further surge in volumes in the supply chain in September, leading to a sharp increase in product shortages. While problems eased slightly over the month and into October, in-bound supply to wholesalers remains under deep stress.

The supply chain has also faced major issues including a chronic shortage of HGV drivers, pickers and manufacturing and production staff. This has left insufficient stocks in key areas, with post-Brexit difficulties in the importation of goods adding to the shortages.

While the latest edition of the CGA Prestige Foodservice Price Index reports that prices remained flat year-on-year in September, it predicts inflation is likely to rise throughout the remainder of 2021 and into 2022. With operators and suppliers reporting significant price rises in October, the rate of climb is expected to increase sharply in the months ahead.

“From a flat September, we expect prices to be up between 3% and 6% year-on-year by the New Year, with an even higher peak thereafter," says Shaun Allen, CEO of Prestige Purchasing.

"Operators would be well advised to focus particularly on the weeks commencing 29 November and 6 December, as these are peak volume weeks for our suppliers.”

It comes as figures from the Office for National Statistics reveal that UK inflation jumped to the highest level in a decade last month, in part driven by higher prices in restaurants and hotels.

The consumer prices index measure of annual inflation rose to 4.2% in October, up from 3.1% in September – the highest rate since November 2011.

"Inflation rose steeply in October," says Grant Fitzner, chief economist at the ONS.

"This was driven by increased household energy bills due to the price cap hike, a rise in the cost of second-hand cars and fuel as well as higher prices in restaurants and hotels.

"Costs of goods produced by factories and the price of raw materials have also risen substantially and are now at their highest rates for at least 10 years."

Reacting to the latest Index figures, CGA client director James Ashurst predicts that this autumn may prove to be the calm before the storm in foodservice price inflation.

"Rising demand, falling supply and distribution issues are straining many areas of the market, and prices will inevitably rise in the months ahead," he says.

"It is an unwelcome trend for hospitality businesses that are already facing severe operational challenges, and highlights the sector’s need for sustained government support in the months ahead.”