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Mounting food prices hits hospitality, while softs recover

Published:  08 July, 2021

Wholesale food prices heading to the hospitality sector reached their highest ever level in May 2021, while soft drinks saw the complete opposite trend.

The view from CGA’s Prestige Foodservice Price Index shows varying pressures on food and drinks prices being bought wholesale by hospitality operators.

Harpers can reveal that mineral waters, soft drinks and juices all saw a “surprising decline” of 5% in wholesale prices in May, according to CGA, thanks to back-log of stock forcing down prices.

“During the recent lockdowns, many wholesalers and distributors found themselves with large stocks of soft drinks they were unable to sell due to low demand. As a result, many of these products, which would usually have long life, became close to their expiry dates. This meant that as hospitality began to re-open, many wholesales were left with little choice but to discount the producers to avoid wastage,” the CGA Index’s May 2021 Snapshot Report said.

Food tells a different story. Food prices in the hospitality and foodservice sectors reached their highest ever level in May 2021, with wholesale costs up by 2.5% on the previous month, higher than at any time since the Index began in January 2015

Price increases were evident in seven out of 10 food categories, including milk, cheese, eggs, vegetables and fruit.

The price rises appear to be partly due to a trickle-down effect from rising labour prices, as companies were forced to increase wages to curb severe staff shortages across manufacturing, agriculture, warehousing, wholesale distribution and hospitality.

CGA expects the impact of rising wages to feed through into prices in the months ahead.

A combination of pandemic and Brexit impacts are also causing issues at major ports, slowing down food and drink imports and generating stock-outs in suppliers.

Shaun Allen, CEO of Prestige Purchasing said: “The reopening of hospitality on 17 May proved much more challenging than many suppliers and operators anticipated. Some suppliers have even made decisions to suppress demand by raising minimum order levels and de-selecting some customers. With the sector still to fully reopen after lockdown we expect food and drink supply to be challenging, and inflation to strengthen.”

Leonie-Jade Leigh, client manager at CGA, added: “While it has been great to see hospitality venues opening their doors again, rising food and labour costs and Covid restrictions have created tough market conditions. Supply challenges will hopefully start to ease as we settle into a new normal of trading. But these figures are another reminder that the sector’s crisis is far from over, and businesses need and deserve sustained financial support from government in the months ahead.”

CGA doesn’t currently monitor the prices of wholesale alcohol prices, though anecdotally Harpers has heard of many businesses trying to avoid passing on costs as much as possible.