Summer 2024 Market Report

by | Jun 19, 2024

Overview

Since the start of 2024, the rate of food inflation has been in decline from a high of 7% in January to 2.9% in May [Source ONS]. Whilst this is welcome news for the hospitality industry, Spring 2024 has brought additional pressures on some sectors of the industry which could mean that the decline experienced in the first half of the year may not continue. Wet conditions in the UK in Autumn 2023 and Spring 2024 (the Met Office recorded the wettest February on record for England & Wales) have had a devasting impact of UK farmers, causing prices to remain firm of key menu ingredients. The increase in the National Living Wage in April has also impacted on supplier profitability, suggesting that not all deflationary factors are being passed down through the supply chain.

Ongoing unrest in the Red Sea has forced products from the Far East to be routed via the Cape of Good Hope, adding around 9,000 nautical miles onto the distance sailed, thus impacting not only price but shelf life on many fresh produce lines.

Food Trends

New cuisines that are on trend in 2024, with growing popularity of East & West African flavours along with continuing interest in Middle Eastern & Levantine food offering exciting flavours that can be incorporated into plant-based menu options.

British food is also seeing a resurgence in popularity, with emphasis placed on home-grown ingredients and prevenance featuring high in consumers priorities when dining out. Whilst never been out of favour, Italian dishes are proving to be popular choices with authenticity and regional specialities key to adding a point of difference away from the usual spag bol! Elevate your dishes with wild mushrooms and premium oils to compliment ingredient-led dishes

Finally, the good old US of A still provides a vast array of influential cuisines with slow-cooked meats a firm favourite; fast food too is also seeing a resurgence in smash -burgers on trend and good quality hotdogs ever popular for on the go dining

Category Insights

Fresh Fruit & Vegetables

Unseasonal weather in both Europe & the UK has affected many of the popular crops used in the UK hospitality industry. Prices remain firm with some products experiencing double digit increases because of poor planting conditions in 2023 and poor harvesting conditions in 2024 (potatoes). Labour costs in this category are also contributing to pricing. Domestic crops of UK staples (carrots, parsnips) are not expected to be able to fulfil demand and reliance on imports from Israel and mainland Europe is likely to begin earlier this year. Other key kitchen ingredients facing supply issues include onions (global shortage), garlic (80% of world production comes from China), beans, peas & tender stem broccoli (droughts in Kenya & Egypt).

Dairy

Historically low milk output, resulting in lower fat production is proving to add pressure on contract prices. To add to this pressure, increased prices in mainland Europe of butter & Cream has resulted in UK exports to Europe more attractive, further reducing supply and maintaining firm prices. Market indications also report that the Farmgate price paid to farmers for liquid milk is expected to increase by 2/3ppl, which will be carried throughout the manufacturing process.

Demand for UK eggs has stabilised somewhat however, reports that many UK egg & poultry producers are considering exiting the industry due to significant increases in costs of production and the ever present risk of Avian Flu; this may put additional pressures on an industry finely balanced at the moment.

Meat & Poultry

Despite increased beef imports into the UK, farmgate pricing for livestock remains firm and with beef production forecast to reduce by 1% across the whole of Europe, pricing is expected to remain so for the remainder of 2024.

Poultry markets are showing stability after a rocky H2 last year and, with feed costs not experiencing the inflationary pressures of last year, the market is expected to remain stable.

Pig numbers are down in the UK and across Europe, with EU production at its lowest for 10 years last year. The combined impact of lower production and stable demand has resulted in a net impact of a 22% increase in the average deadweight pig pricing across UK & European markets.

A six percent reduction in sheep production last year, coupled with Easter and Eid Mubarak and a stable demand for UK lamb in mainland Europe is expected to keep pricing firm. Imports from New Zealand and Australia may be affected by the ongoing Red Sea unrest.

Fish & Seafood

The ongoing sanctions imposed on Russian caught/produced fish is still influencing worldwide supply chains and consequently pricing. US bans extending to salmon, cod pollock and crab are expected to keep pricing firm for domestic markets as pressures are put on fish from Norwegian fleets. In the UK, Tesco has already followed the US and, if others follow suit prices are expected to increase over the summer months. With cod stocks restricted, haddock (particularly larger sizes) is expected to face increases as consumers move from cod to haddock as an alternative. Salmon pricing is not expected to exhibit the ‘normal’ reduction in price in June, and many chefs are turning mor and more to trout as an alternative to salmon for centreplate.

Oils

Following a disastrous few months in the olive oil market last year, forecasts are suggesting that the 2024/2025 harvest (due in October) will see production levels return to near normal, although pricing for current olive oil is expected to remain high throughout the summer months.

Pricing for vegetable, soya and rapeseed oils are returning to near normal levels from the highs experienced in the aftermath of the Russian invasion of Ukraine.

Cocoa & Chocolate

Weather and disease in the main cocoa producing regions have contributed to increases in the cost of raw materials of around $400,000 per tonne [Source Bloomberg]. Producers of chocolate and cocoa products work on a ‘cost-plus’ basis meaning that any increase in raw material costs is passed up through the supply chain. Although prices are anticipated to stabilise lower than today but significantly higher than six months ago.

Fresh Juices

The ongoing supply problems due to citrus greening in orange plantations is still having a huge impact on orange juice pricing and availability. Consumers are rapidly turning to other fruit juices as alternatives, which unfortunately means pricing across all fruit juices is increasing, particularly in the NFC sector of this market.

Beverage

Ongoing pressures on household incomes continue to affect the frequency and habits of consumers visiting On Premise venues with 38% of consumers surveyed saying that they are typically going out less frequently than a year ago [Source CGA Cost of Living Consumer Pulse] and expect to spend around 4% more than a year ago.

When category spend is analysed more closely, consumers are moving away from more expensive drinks (cocktails, wine & spirits) in favour of soft drinks (including low/no-alcohol) and beer/cider. Within the beer/lager category (+7.4% YoY), World Lagers (+20.5%), NAB/LAB (+53.9%), Stout (+27.5%) are all exhibiting the strongest increases and driving the category.

Spirits remain a firm favourite at 30% of all wet sales in Scotland, with Vodka (29.2%) and Gin (17.3%) remaining the most popular drinks in this category; Cream Liqueurs, Dark Rum and Malt Whiskies are all reporting increases in share of sales.

Wine sales (although down in volume YoY, is showing a slight increase in value of sales (0.5%), with Rose wine in Scotland seeing the biggest sub-category increase at the expense of both red (-6.5%) and white (-0.3%) wines. In terms of regionality, Italian wines are still the most popular (36.1% of total sales) and have experienced a slight growth YoY (+0.7%).