Fall in food and drink prices not expected until ‘at least early 2025’

Inflation as measured by the Index decreased for a third consecutive month in August, but remains above 20% year-on-year.

Price increases have slowed in both foodservice and supermarkets in recent months.

However, the rate of easing has been faster in retail, as month-on-month inflation in supermarkets as measured by the Consumer Prices Index stood at just 0.3% in August — compared to 0.8% in the Foodservice Price Index.

All 11 categories of the Index from CGA and Prestige remained in double-digit inflation, though some saw prices drop month-on-month, including fish, fruit and sugars.

Meat prices increased again, by 1.7%, and the vegetables category recorded the highest year-on-year inflation of any category at 33.5%.

“Drops in inflation over the summer have been welcome, but they have been modest and foodservice prices remain under huge pressure — especially by comparison to slower rates in retail,” says James Ashurst, client director at CGA by NIQ.

“Frustratingly, meaningful relief is still some way off, and price will continue to be a major factor in trading conditions in hospitality as we move into the final quarter of 2023.”

Inflation is being fuelled by the high cost of transport and packaging after crude oil prices rose 30% above the levels seen in June.

Import costs remain an issue after sterling fell marginally against the dollar and Euro in August, while wage inflation of 8% has driven up costs further.

Inflationary challenges outweighed a 2.1% drop in the price of key food commodities in August that was recorded by the UN FAO Food Commodity Index.

“The outlook for kitchen-door food prices is becoming more positive because inflation will continue to ease, but we expect this slowing of inflation to take effect more slowly than in retail,” says Shaun Allen, CEO of Prestige Purchasing.

“A fall in prices (deflation) on the full basket of food and drink is unlikely until at least early 2025.”