Food inflation continues to rise

Food inflation in the UK is continuing to spiral, according to several recent reports, with commentators raising concerns about the uncertainty over Brexit, the value of sterling and the continued rise in food prices.

According to the CGA Prestige Foodservice Price Index, inflation rose to 5.1% in December 2017.

The report said that, in fish, strengthening of the Norwegian krone and uncertainty over the UK’s future fishing quotas were all contributing to “substantial inflation”.

It added that increasing global demand and the effect of the La Niña weather phenomenon were driving up prices in the oils and fats category, while avian influenza was triggering uncertainty about the supply of poultry.

Pressure on UK meat supply

Pressure on UK meat supply had also been exacerbated by the recent Russell Hume controversy, it added, while pricing in the soft drinks sector was experiencing turbulence ahead of the introduction of the new ‘sugar tax’ in April.

Combined with the uncertainty over Brexit and the future of migrant labour in sectors such as fruit and vegetables, relief from inflation was “unlikely in the immediate future”, it concluded.

CGA client director of food Fiona Speakman said: “With many important areas of the market facing sector-specific challenges and the value of sterling still low, the Index confirms that any lull in inflation is likely to be short-lived.”

Rising food prices

The British Retail Consortium (BRC)–KPMG’s Retail Sales Monitor also pointed to rising food prices.

The report said that, in the three months to January 2018, food sales had increased 2.9% on a like-for-like basis and 4.1% on a total basis. This remained above the 12-month total average growth of 3.7% and was the highest since November 2012.

Helen Dickinson, chief executive of the BRC, said: “Rising food prices continued to inflate sales growth and absorb the lion’s share of shoppers’ squeezed budgets.”

This view was reinforced by the latest grocery market share figures from research firm Kantar Worldpanel, published for the 12 weeks to January 28 2018, which noted that grocery sales had increased in value by 3.4% compared with this time last year.

Meanwhile, Mintec market analyst Jara Zicha agreed that food inflation had gone up “mainly as a result of weaker sterling”.

However, he added: “But when it comes to raw material prices, not everything went up in price in 2017.

“When you look at coffee, tea and cocoa, for example, the inflation rate for this group was up 9.5% in December, but prices for all these three commodities fell in 2017.”