Contract catering budget clauses linked to CPI should be reviewed ©maximkabb/123RF
Contract catering budget clauses linked to CPI should be reviewed ©maximkabb/123RF

'Perfect storm' drives food sector price gap

2 December 2016

UK catering companies should urgently review contracts as supply prices rise despite falling consumer prices.

Supply prices for the foodservice sector have risen by 1.9% year on year, while the comparable products in the Consumer Price Index (CPI), upon which some budgets for contract caterers is benchmarked, has fallen by 2.2%.

The growing gap between prices was revealed in the Foodservice Price Index (FPI), by Prestige Purchasing and CGA Strategy, which tracks wholesale prices in 182 food and drink categories.

During the period January to September 2016, the wholesale prices recorded in the FPI showed an increase of 1.9% compared with the same period in 2015. Meanwhile, while the retail prices of equilvalent food and drink products, as recorded by the government’s CPI, fell by 2.2% in the same period.

“Despite what CPI is showing, we’re seeing a noticeable rise in inflation for foodservice operators. While consumers are protected somewhat by the continued supermarket price wars, political and agricultural supply issues have led to a ‘perfect storm’ which are driving prices up,” said David Read, chief executive of Prestige Purchasing.

He warned that in the coming year, the Trump presidency, Article 50, a restriction on oil production and Russian sanctions are just some of the factors that will affect inflation. Contract caterers who have clauses that benchmark budgets to the CPI should review their contracts immediately and link them to the true cost of supply for operators, he added.

Salmon, chocolate and coffee are some of the most affected food categories, largely because of a drop in supply, while avocados are affected by a continued increase in popularity. Alcohol and other products imported to the UK are increasing in price because of the falling value of the pound.

The Consumer Price Index tracks prices and measures change in the price of a basket of consumer goods and services in the UK. While its January to September 2016 figures for food and non-alcoholic beverages showed a fall of 2.2% compared with the previous year, its overall increase on all the products in the basket had increased by 0.9%.

The FPI reports on around 150,000 product codes for its food and drink categories on a monthly basis.

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