Year-on-year food inflation dropped slightly to 20.6% in February 2023, according to the latest CGA Prestige Foodservice Price Index. This figure is lower than the record high of 22.9% in December 2022, with clear signs of price increases slowing down. The complete basket of food measured by the Index rose by merely 0.7% month-on-month, which is one-third of the average rate observed in the latter part of 2022.
This trend, along with base effects from the previous year, is expected to continue reducing inflation throughout the remainder of 2023. However, prices will rise at a slower pace than in 2022. All categories within the Index still exhibit double-digit inflation, with oils & fats at the highest rate of 37% year-on-year, and the sugars, jams & syrups category at the lowest with 12%.
Key factors affecting food prices, such as oil prices, exchange rates, and commodity markets, are now stable compared to 2022. In February, oil prices remained at $84 per barrel, while the sterling held steady against the euro at €1.13 and slightly declined against the dollar to $1.20.
The UN FAO Food Price Index averaged 129.8 points in February 2023, slightly down by 0.6% from January. This marks the 11th consecutive month of decline, with the index having dropped by 29.9 points (18.7%) since its peak in March 2022. The marginal decrease in February is attributed to significant reductions in vegetable oils and dairy prices, along with marginally lower cereals and meat indices, which outweighed a sharp increase in sugar prices.
Lower consumer demand in the sector is now impacting sales volumes, which should contribute to easing prices. However, energy and labour costs remain significant challenges, meaning the inflation decline rate may be slow for some time.
Prestige Purchasing CEO Shaun Allen remarked, “Despite decreasing inflation, we anticipate the pressure on operators’ margins to intensify during 2023. Although the rate of increase will decelerate, supplier food prices will continue to rise throughout the year—at a time when consumer demand will be tightening and room for increased menu pricing will be restricted. Operators should act now to optimise their supply and protect their margins.”
James Ashurst, Client Director at CGA by NIQ, added, “An easing in foodservice price inflation is a much-needed relief following months of historically high figures. Key indicators suggest further respite as the year progresses, but commodity markets and oil prices remain susceptible to various macro and micro pressures, so there is no room for complacency. Persisting pressure on consumer spending will maintain challenging trading conditions for businesses across the sector.”