Stats from CGA Prestige Foodservice Price Index show a clear rise in most wholesale foods
Stats from CGA Prestige Foodservice Price Index show a clear rise in most wholesale foods

How has Brexit hit the price of food?

1 September 2017

One year on, and the impact of Brexit is making itself clear across the food sector, with the wholesale market recording a year-on-year rise of 8.8% in June 2017, according to the CGA Prestige Foodservice Price Index (FPI)

The FPI tracks the monthly price of food items sold to UK restaurants and caterers – which are exposed to more inflationary pressures than some consumer-side sectors, says the report.

The first 12 months of the graph below from June 2015-16, depict the ebb and flow of prices including seasonal changes, benchmarked against the average price in 2015 for each category. (Click image to expand.)

CGA Prestige Foodservice price index 2015-17

The effect of Brexit in June 2016 is clear, pushing prices upwards. Given that 27% of UK food is imported from the EU, and only 54% is homegrown, according to Department for Environment, Food and Rural Affairs figures.

Sterling exchange

But it is in March 2017 when the increases start to take hold. “This is the point where the Brexit exchange rate really started to kick in,” says Christopher Clare, head of consulting & insight at Prestige Purchasing. The pound to euro rate slumped to a 31-year low straight after the Brexit vote, and while it recovered slightly a few days later, it has remained low since. 

One year on, and fish prices have risen the most since Brexit, ending 20% higher year-on-year. It has also been affected by increasing tuna and cod quota systems constraining catches, and a sea louse epidemic in salmon.

Fruit, with a high proportion of imports, has also taken a hit, increasing 13.6% on June 2016. This has been further exacerbated by poor harvests across the EU and production issues elsewhere for citrus fruits. Prices are expected to continue to rise, says the FPI report. Vegetables, with a stronger domestic element than fruit, were not as badly affected by the EU exchange rate, ending on an 8.2% increase year on year. But impending issues with foreign labour could further affect prices.

Coffee, cocoa and tea stocks all contributed to the 12% increase in hot drink prices, based on a continued demand for coffee, rain in Ghana and Ivory Coast affecting cocoa crops, and tea shortages.

Bread and cereals saw a rise of only 1.3%, but the report stressed that this is likely to be the calm before the storm, as reduction in global wheat production – in Eastern Europe and North America – threatens to cut supply and push up prices. Weather has affected UK crops, forcing the country to increase imports.

Only one category, the sugar, jam, syrups & confectionery category, bucked the trend with prices tumbling following the increased production in Brazil of sugarcane and beet in the EU, and lower cocoa prices. 

Forecast

Uncertainty around Brexit is expected to hold prices high. “Although we are forecasting far lower rates of inflation for this time next year,” says Clare, “the quirk is that we still expect pricing in many categories to be higher than what we are seeing today.”

Graeme Loudon, commercial director at CGA Strategy, says that, as well as oil prices and supply challenges, Brexit is forcing businesses to stay on their toes: “Operators that can optimise their procurement and pricing strategies and mitigate some of the inflationary factors will be
best placed to succeed in the months ahead.”

The full report can be downloaded at: bit.ly/FPIReports_trial

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