In contrast to supermarkets, where prices increased by just 0.4% during June, month-on-month inflation in the Index was more than five times higher at 2.2%. Hospitality buys primarily through multiple wholesalers, which dissipates scale, creates diverse ranging and has less contractual price protection.
Retail food markets are more consolidated than hospitality, with the top ten supermarkets owning 75% of the market, and they are able to exploit their scale with sophisticated contracting and controlled distribution. The Government has also threatened supermarkets with price caps if inflation does not fall.
Shaun Allen, chief executive of Prestige Purchasing, said: “Food prices in the UK hospitality sector continue to increase at around 2% per month. This rate of increase is likely to be close to a tipping point, where deflationary factors should start to compensate for the currently dominant inflationary pressures.
“The exact timing of this tipping point though remains uncertain whilst the factors described above remain volatile. We strongly advise operators to ensure that buying skills, levels of resource and quality market data feature heavily in their operational plans for the foreseeable future.”
Costs of global food commodities continued their downward trend in June, averaging 23.4% below the peak reached in March 2022. Climate vulnerability on imported foods, rising interest rates and additional costs of post-Brexit trade all continue to feed through into prices.
James Ashurst, client director at CGA by NIQ, added: “Hospitality has been besieged by food and drink price inflation for many months now, and it’s frustrating to see another jump at a time when retail price rises are slowing.
“Alongside relentless pressure on energy bills, labour costs and consumers’ discretionary spending, it leaves some businesses extremely vulnerable through no fault of their own. Sales remain solid and people remain eager to eat and drink out when they can, but trading conditions are going to be tough for some time to come.”