Food and drink prices to rise in 2013

19 December 2012

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19 December 2012 | Anna Reynolds

Food prices went up by 3.3 per cent in 2012 and are expected to increase by 4.5 per cent in 2013, according to Prestige Purchasing's annual food inflation report.

David Read, CEO of Prestige Purchasing, presented the findings to members of the catering and hospitality industry at the Goring Hotel in London last night.

The rate of inflation for vegetables hit 5.5 per cent in 2012, while the price of potatoes, pork and alcohol are expected to rise considerably over the next year. Read said: “Personally, I have really felt the impact of climate change this year - it is having a major impact on food pricing and, if anything, the weather will become more volatile.”

Poor harvests in 2012 led to an increase in the price of vegetables, with potatoes particularly hit due to chip manufacturers competing for the highest quality potatoes to supply to caterers.

The report found the rate of inflation for drinks rose to 4 per cent, partly due to rising commodity costs of some grains and sugars used in alcohol production and also poor grape harvests in France, Italy and Argentina. Over the next six months, wine is expected to rise by 30-40 pence per bottle. The dairy industry has also been hit as the supermarkets drive prices down, which is having a knock-on effect on associated products such as cheese and yogurt. Read said caterers and hospitality operators are expected to feel the biggest impact.

Read added markets are suffering from speculators seeking profits. “People betting on future prices of commodities is a major source of volatility for food prices. Instability is bad for farmers but great for traders,” he told SM.

Population growth is forecast to double in the next 50 years, which will put more pressure on food resources, and increased trade in the third world is also having an impact on prices.

But there was some good news for buyers as the prices of oils and fats are expected to continue to fall as palm oil stocks are high. Producers are also switching to soya for feed because it is cheaper than grain and a by-product is soya oil, which is easing prices in the market.

Read recommended three options for organisations to overcome rising prices; optimising distribution; benchmarking and insight; and source optimisation. Depending on the size of a business and the amount of purchasing power it has, Read said there are four buying options; cash and carry; wholesale; hybrid; and central distribution. He recommended businesses with a low-spend take a cash-and-carry approach while large buyers should buy products direct from the supplier to get the best value.

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