In March 2023, the level of food inflation in hospitality and retail briefly converged at 19%. However, while inflation in retail as measured by the Consumer Price Index (CPI) has eased since then to 5%, wholesale price inflation for hospitality operators as measured by the Foodservice Price Index has only fallen to 12%.
This means inflation in hospitality is currently 2.4 times higher than in retail.
“While the steady relaxation of foodservice price inflation has been very welcome for hospitality businesses, it is frustrating to see it still hovering so far above the rate of their counterparts in retail,” says James Ashurst, client director at CGA by NIQ.
“Hospitality has dealt well with the inflation crisis but has inevitably had to pass on higher costs to menus, which in turn compromises consumer spending. We will hopefully see more easing over the spring and summer, but for now the trading environment remains challenging.”
Supermarket food inflation typically falls faster than in the hospitality sector due to big retailers’ ability to swiftly pass on reductions in energy and commodity costs to consumers, the Index notes.
These businesses often have more streamlined supply chains and can adjust prices quickly in response to market changes and government pressure to keep food prices stable — especially during economic downturns, which can accelerate the deflation process. In contrast, hospitality suppliers, with more fragmented and complex operational models, may not be able to reflect cost savings so rapidly.
In more positive news for hospitality businesses, the latest Foodservice Price Index reports month-on-month deflation for only the second time in 28 months, and the first time since October 2023.
This signals a welcome steadying of markets, but whether it marks the start of much-needed longer-term stability remains to be seen. Year-on-year inflation remains in double digits in eight of the 10 categories of the Index, with oils and fats the only one in deflation.
“It is positive to see inflation continuing to fall, and it will be encouraging for operators to see that after two years of sharp increases, food prices have fallen month-on-month in five categories,” says Shaun Allen, CEO of Prestige Purchasing.
“It is vital for businesses to remain vigilant to all price movements, both up and down, ensuring food costs accurately reflect the changes in the market.”
