Overview
Inflation continues to dominate the hospitality industry, with the latest data reporting food inflation for February dropping slightly from the record high in December of 22.9% to 20.6% YoY.
Whilst the major elements contributing to food prices are now more stable than throughout 2022 (oil, exchange rates & commodity markets) there are some notable ‘staple foods’that are still exhibiting very high YoY increases [Source ONS].
- Cheese +49%
- Milk +40%
- Broccoli +32%
- Granulated Sugar +32%
- Eggs +28%
- Chicken +25%
- White Bread +21%
Category Insight
Fresh Meat & Poultry
Beef
Beef prices in the UK have continued to rise throughout 2022, and with herd numbers reducing, it is likely that prices will continue to rise until plateauing by the end of the Summer. Recently, the prices of less expensive cuts (beef cheeks & shins) have increased the most as the industry seeks to reengineer menus. In the coming months, all steak cuts and manufacturing beef (for burgers) are expected to exhibit increases in costs.
Lamb
Lamb has not experienced the same dramatic increases as beef, poultry & pork, following the usual seasonal fluctuations, although there was a spike late March of around 15%. It is expected that lamb prices remain steady and follow historical trends.
Pork
The war in the Ukraine has caused pork prices to increase due to increased costs of feed, energy, transport, and labour, with many European farmers deciding to stop producing pigs as they were losing money. Many pork producers have been forced to reduce working hours as the availability of pigs for slaughter is at an all-time low and prices unaffordable. Overall, pork prices are around 20% higher year-on-year.
Poultry
High incidences of avian flu across the UK and mainland Europe reduced flocks towards the end of 2022, coupled with increased costs of feed, energy, transport, and labour. Although there has been a slight downward turn in poultry prices recently, prices are expected to remain firm as supply remains tight across all poultry species.
Eggs & Dairy
Milk, Cream & Butter
During the course of 2022, the farmgate price paid to farmers increased by over 54% y-o-y. This had an obvious effect on prices of all liquid products, resulting in many operators seeking alternatives for cream & butter. That being said, the industry is now faced with a surplus of ‘dairy fats’, resulting in price decreases on butter and creams in the past couple of months.
Eggs
A reduction in the number of laying birds due to avian flu and producers cutting back because of rising production cost has led to supply chain problems which has seen many wholesalers experiencing out of stocks for all sizes of eggs and retailers limiting consumers purchases. As the whole ‘chicken and egg’ cycle takes time to reinstate, supply cannot simply be turned up therefore shortages and higher than previous prices are expected to remain for the remainder of 2023.
Fish & Seafood
Salmon
Reduced exports volumes from Norway (down 11%), coupled with disease meaning that whole fish are in short supply has pushed salmon pricing higher, reaching a peak in March. Low fish placements during the pandemic and the lice infestation in Norway is expected to keep prices firm until at least the end of the Summer. Many operators are switching to smoked trout and chunky cod fillets for banqueting alternatives.
White Fish
Fish landings have been steady during Q1, giving some stability for pricing and availability. Increases in quotas for some Atlantic species has also helped in keeping prices more stable than the increases immediately following the Russian invasion in February 2022, although sanctions remain in force for Russian owned vessels and fishing in Russian territorial waters.
Oils
Olive Oil
Summer 2022 saw the olive oil-producing regions experiencing droughts and heatwaves, resulting in reduced supply of raw materials. A decrease in the availability of sunflower oil due to the ongoing war in the Ukraine has led to a shift to other oils, including olive oil which, coupled with a reduced harvest has firmed prices. As an example of the scale of these increases, Italian Extra Virgin Olive Oil has increased by 27% in the past two years.
Vegetable & Rapeseed Oils
With exports from Ukraine re-established and a build-up of stocks in Romania and Poland, the EU is expected to have a surplus stock of rapeseed by the end of the season. With the inevitable shift to rapeseed oil as prices reduce, the prices of vegetable & soya are expected to fall in the mid to longer term.
Other Commodity Key Products
Tomatoes
With 2022 harvests in Italy (third largest global processor) down around 10-12% vs 2021, coupled with high costs of processing (energy) prices of processed tomatoes in 2023 are expected to remain high throughout 2023.
Potatoes & Potato Products
Farmers turning their backs on planting potatoes in favour of more lucrative rapeseed, is expected to push the raw material costs up by around 10% in 2023. Many operators are turning to other protein alternatives such as rice, couscous and, as Summer approaches, salads. Frozen potato products are also expected to increase over the coming months as 2022 crops filter into the finished product supply chain.
Sugar
An increased beet price negotiated between the NFU Sugar and British Sugar of £40 per tonne for 2023/24 last year to consider the rising costs of production and encourage famers to continue to grow sugar beet rather than move to crops that are less costly to grow is now affecting the supply chain.
Beverage
Beers
Price increases in late 2022/early 2023 from most brands pushed prices up by as much as 13-15%. The increased energy required to produce glass and cans may mean that further increases will hit the industry later this year.
Wine
The record temperatures experienced in Europe last Summer has had a mixed impact on vineyards, with some grape varieties benefiting from the high temperatures. The upcoming changes to duty announced by HM Treasury based around ABV values will add up to 53p per bottle in August 2023 and any operators looking to change wine menus may wish to consider the ABV % before choosing their final selections; suggestions could include investing in stock pre-August 2023 (speak to your supplier to ensure availability) and moving to 11% ABV core wines where possible.