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Foodservice price inflation rose to 5.1% in December 2017, the latest CGA Prestige Foodservice Price Index reveals - a sign of continued volatility in the market despite the easing of some pressures.

It marks an increase in the rate of foodservice price inflation from November, when the Index stood at 3.4%—the lowest point since the start of 2017. It also means inflation in the sector is once more above the wider level of UK inflation recorded by the Consumer Price Index.

The slackening of inflation in November had suggested some respite from major impacts including the weakness of sterling against the Euro and dollar following the UK’s vote to leave the European Union. But December’s increase indicates that instability in foodservice pricing is likely to continue into 2018.

The exclusive Index from CGA and Prestige shows inflation is running high in most of its ten food and beverage categories. In Fish, rising demand, the strengthening of the Norwegian Krone and uncertainty over the UK’s future fishing quotas are all contributing to substantial inflation. Increasing global demand and the effect of the La Nina weather phenomenon are meanwhile driving up prices in the Oils and Fats category, while Avian Influenza is triggering uncertainty about the supply of poultry.

There are doubts about the stability of prices in other categories too. Pressure on UK meat supply has been exacerbated by the recent Russell Hume controversy, while pricing in the soft drinks sector is experiencing turbulence ahead of the introduction of the new ‘sugar tax’ in April. Combined with Brexit-related pressures, including uncertainty over the outcome of negotiations and the future of migrant labour in domestic sectors like fruit and vegetables, relief from inflation is unlikely in the immediate future.

The monthly CGA Prestige Foodservice Price Index contains in-depth analysis of inflation in these and other categories of food and beverages, and helps businesses in the foodservice supply chain keep up to date with trends, challenges and opportunities.

Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said, “While we have seen more reaction from the markets this past month as the government began to clarify its position and desired direction for Brexit it did not prevent the continuing correction from the price peaks that followed the referendum. Some further falls can be expected but these will be balanced against rising oil prices and supply issues in some categories.”

CGA client director of food, Fiona Speakman said, “After relatively modest inflation in November, December’s Foodservice Price Index returned to the trend of substantial pricing pressure that dominated 2017. With many important areas of the market facing sector-specific challenges and the value of sterling still low, the Index confirms that any lull in inflation is likely to be short-lived. For all foodservice businesses, it emphasises the vital importance of staying on top of price trends and setting purchasing strategies accordingly in 2018.”

(source: CGA)