Foodservice inflation 'may yet rise further' as it hits double digits for fourth successive month

All 10 of the Index’s food and drink categories recorded both year-on-year and quarter-on-quarter inflation in the month. The oils and fats (+3.7%) and dairy and fruit categories are seeing the highest rates of year-on-year increases. 
The report from CGA and Prestige highlights the key factors driving inflation, including Russia’s invasion of Ukraine and the mounting costs of energy and supply.

War in Ukraine has severely disrupted the supply of food staples including grains and oils, and pushed up the costs of production and distribution via higher crude oil prices and restricted gas supply.

Additionally, foodservice is also facing increased wage bills, with UK job vacancies reaching 1.3 million in May, while various micro supply and demand issues continue to affect prices in many areas.

“High levels of inflation are clearly around for the long haul,” says Shaun Allen, CEO at Prestige Purchasing.

“Our analysis shows that the delta between operators with average versus good market pricing is now over 9%, which is about three percentage points of gross margin. Operators would be well advised to invest in skills and resource to manage this volatile environment.”

With most observers now expecting a long war in Ukraine, the report predicts there is little chance that inflation will fall below 7% until at least the second quarter of 2023—and may yet rise further over the remaining months of 2022.

“Inflation now hasn’t been below double digits since January, and the relentless pressure on prices is squeezing businesses across the food and drink sector,” says James Ashurst, client director at CGA by NielsenIQ.

“With the war in Ukraine and consumers’ cost-of-living crisis mounting, we must expect challenges to get worse before they get better.”