'Food inflation to be 2 per cent in 2015'

Will Green is news editor of Supply Management
3 December 2014

Food inflation in a year’s time is predicted to be just over 2 per cent following a sharp drop in 2014.

Prestige Purchasing said food and drink went into deflation for the first time in 14 years in 2014, it is currently at minus 1.5 per cent, driven down by factors including good weather, an oil price drop and a strengthening of the pound against the euro.

Shaun Allen, purchasing operations director at Prestige Purchasing, said: “In 14 years this will be the first time we have seen deflation compared to the year before. Do we expect that to become the norm? No, I think we are in a rare year.”

In its Food Inflation Report, Prestige said it expects deflation to continue until mid 2015 and then prices will pick up. The company predicts soft drink inflation will be 1.48 per cent and for alcoholic beverages it will be 1.9 per cent.

The firm expects dairy, wheat and maize prices to remain low for much of 2015 before rising, while pasta is predicted to rise in price sooner due to durum wheat crops being hit by heavy rains.

Supermarket price wars have also contributed to the inflation drop, coming against a backdrop of diminishing dominance of the major supermarkets.

David Read, CEO at Prestige, said the market share of the “big four” was expected to fall from 42 per cent to 34 per cent by 2019. “The big four have got to adjust their market position to protect themselves from that predicted drop from 42 per cent to 34 per cent, because if that happens they will have to close a number of their stores,” he said.

Population growth, climate change and water shortages are among the long-term threats to food security, according to the consultancy, and it recommends measures including the development of agricultural infrastructure in developing countries and investment in efficiencies.

Read also said GM foods offered a solution. “It’s almost a dirty subject in the UK and there should be more debate about it,” he said.

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