Overview – Current Market Conditions
Following successive months of falling inflation leading up to Christmas; down to 2.7% in December 2024 from 2.8% in November [ONS: 15th January 2025], food inflation is expected to experience upward trends in H1 with the Bank of England predicting rates to rise to 3.7% by the end of 2025.
The October 2024 UK Budget changes to the National Minimum Wage, increase employers’ NI contributions and reduction in business rates relief due to be implemented on April 1st (estimated cost increases to the hospitality sector of around £3.4 billion)are forcing manufacturers and suppliers to review pricing to combat the increasing costs; one National supplier has already communicated that a 1% increase across the board will be applied to all customers from 1st March.
Continuing increases in wholesale energy prices will impact on the industry where there is no commercial price cap – food manufacturers that have high energy use will be heavily impacted by increases and coupled with the Budget changes may be pressured into increasing pricing as their costs increase.
Other legislation coming into effect in 2025 that will have an impact on costs and subsequently margins include the February 1st alcohol duty increases based on ABV values – now could be the time to re-evaluate your house wine lists to include lower alcohol options to keep price points down. April 2025 also sees changes in waste collection with the introduction of Simpler Recycling (England only) which may have additional cost implications to hospitality businesses as we are required by law to separate recyclable materials and not send to landfill.
Category Insights
Meat & Poultry
Beef
With increased costs of production (feed, heating, transportation), the farming community has seen an increase in operators leaving the industry. Looking ahead, there are concerns about future beef supply in Great Britain. Data from the British Cattle Movement Service (BCMS) indicates a 4% decrease in the number of cattle aged 0–12 months, suggesting potential constraints on future beef availability.
To exacerbate this decline in domestic supply, challenges faced by global meat exporting countries such as Argentina & Brazil has constrained the global beef supply and European buyers are now looking to UK beef to fill the gap in supply adding further pressures on UK prices.
Price increases of 10%+ have already been implemented by some butchers and market indications are that more increases are expected in Q1.
With many operators looking at new menus for 2025, it is our recommendation that different cuts of beef are considered, along with reducing the weight of steaks served to maintain a competitive price point.
Lamb
After four years of very high prices, sheep meat prices are projected to decline slightly before trending upward again caused by a rise in exports driven by increased demand from the Middle East. [Source: AHDB January 2025].
Pork
Following concerns over intensive pig farming, EU production is expected to decline by around 0.5%, although this decline is not likely to affect pricing as consumption estimates are for a 0.4% reduction driven by environmental concerns & perceived health issues related to the higher fat content of pigmeat. [Source: AHDB January 2025]
With the increases in beef pricing and volatility of poultry pricing arising from ongoing outbreaks of avian flu, pork volumes have grown 5.5% overall, with an 8.3% increase coming from the Dine in/On the go sectors. When creating new menus, reflecting this trend will reduce dish costs and increase margins.
Poultry
Confirmed avian flu cases in birds have been reported in 27 European countries, including the UK, with detections at numerous locations since October. This has led to increased biosecurity measures across England Wales and Scotland, including mandatory housing for birds in specific regions, aimed at controlling the virus’s transmission. The outbreak has significantly impacted egg production, with substantial losses reported at one Shropshire farm, affecting egg availability and prices.
Chicken prices were reported to have increased by 10p per kilo in early February and predictions from Dutch producers are that shortages in supply will lead to higher prices towards the Summer.
Fish & Seafood
White Fish
Expectations for both cod and haddock availability and pricing forecasts remains positive for H1, although hake has been in short supply due to low landings (this is expected to continue throughout Q1).
Salmon
An unusual up turn in demand in December has resulted in prices remaining firm entering 2025 with Norwegian export prices reaching their highest ever level at the start of the year. Low supply numbers are expected to remain throughout Q1, increasing in Q2 when pricing should start to ease. As in previous years, trout is a good alternative and should be considered when menu planning.
Shellfish
During the colder months, shellfish are less active therefore harder to catch, utilise frozen shellfish where possible until the waters begin to warm up in the Spring. Shortages of single frozen cold-water prawns has transferred demand to double frozen prawns, firming pricing across the whole category. Increased freight costs and lack of availability in Vietnam & India is causing prices on warm water prawns to increase – this is unlikely to change until April 2025.
Dairy
Milk & Cream
As more dairy farmers leave the industry, the price of raw material continues to rise with the farmgate price steadily rising from July 2024. Dairy fats pricing exhibited a rising trend in the last quarter of 2024 and have remained high; and all cream remains firmly priced. As during previous period of increasing prices for dairy produce, we suggest that operators utilise UHT creams for soups and sauces to partially mitigate the increased costs of fresh product.
Higher prices obtained on the European market for cream has constricted availability, leading to firm pricing in the UK.
Cheese
Ongoing delays at ports and increased costs to import European cheeses increased in price steadily during 2024. The fantastic range of regional domestic cheeses should be explored when designing menus to keep dish costs from rising and promote provenance.
Lamb prices have been at record levels throughout 2024 and expected to remain significantly higher than 2023. There may be shortages in Q4 as supply of Australian & New Zealand product enter their off-season.
Fresh Produce
Weather patterns throughout the world are having major impacts on fresh fruit and vegetable production and as always, seasonal produce remain the most cost-effective option when planning menus. The ongoing issues with Citrus Greening in the major orange growing countries continues to impact pricing of both raw a material and juices; many operators are looking to move from orange juice to blended options and the sector is seeing more of these blended options become available.
Coffee
Coffee production is expected to be around 10% less than 2023/24 due to dry weather in Brazil & Indonesia, additionally the ongoing risks to shipping in the Red Sea are forcing many exporters to opt for the safer (but longer) Caer of Good Hope route, adding to costs with Arabica prices expected to increase throughout Q1 before falling back a little; Robusta is forecast to rise in Q1 and beyond.
Cocoa
Adverse weather conditions in key producing regions like West Africa have significantly impacted cocoa yields with cocoa prices reaching record highs towards the end of 2024. While world cocoa production is projected to increase by over 11% year over year to around 4.8 million tonnes, this is still below five-year average levels, therefore pricing is expected to remain high in 2025.
Increases of 40%+ for chocolate are being experienced as the supply remains constricted coupled with a demand for premium and organic finished product adds further pressures to the supply chain.
Beverage
The rising trend of low & no alcohol beverages is expected to continue throughout 2025 as consumers seek to reduce alcohol consumption. Following this trend, producers are reducing the ABV on many popular brands in a bid to appeal to this rising demographic and developing 0% alcohol versions of popular brands (Guinness 0%, Heineken 0%).
Duty Changes
The rising trend of low & no alcohol beverages is expected to continue throughout 2025 as consumers seek to reduce alcohol consumption. Following this trend, producers are reducing the ABV on many popular brands in a bid to appeal to this rising demographic and developing 0% alcohol versions of popular brands (Guinness 0%, Heineken 0%).