Food price outlook and heat map update

Market insight...

Food Price Index

Overview

In December 2023, the Consumer Price Index (CPI) recorded a year-on-year increase of 4%, marking the first uptick since February 2023. Notably, the month on-month increase stood at 0.4%, mirroring the rate recorded in December 2022. One factor driving the increase was the escalated costs of alcohol and tobacco, attributed to the Government’s implementation of higher tobacco duties, as announced in the autumn statement.

Conversely, the year-on-year inflation rate for food and non alcoholic beverages reduced from 9.2% in November 2023 to 8% in December 2023.

Updated heatmap

Report from CPI / PPI figures released in January 2024
By Tom Codling, Buyer

Although this represents the lowest figure since April 2022, a broader perspective spanning the past two years reveals a substantial overall increase of approximately 26% in prices of food and non-alcoholic beverages. Compared with a mere 9% rise over the preceding decade, as reported by the Office for National Statistics (ONS).

The December PPI figure for the prices of imported goods into factories was a record high, which is normally an indicator that the CPI figure will rise over the coming months. The inflation rates for domestic inputs and output prices for food manufacturers also remain
high, with the output figure 15% above the five-year average. While it is too early to accurately forecast food inflation into 2024, we should expect that these increasing costs in the food supply chain will ultimately be passed on to consumers.

Looking at the short term, there is a potential for both the imported and domestic PPI figures to increase further. One of the key contributing factors is the disturbance caused by the Houthi rebels’ attacks in the Red Sea. These incidents led to numerous ships being rerouted around Africa’s Cape of Good Hope to mitigate the risk of attacks, resulting in significant disruptions. The consequential delays and additional costs amounted to up to 10 days and £1.6 million for voyages between Asia and Europe, impacting products such as fruit, meats, seafood, grains, wine, tea, coffee, clothing, palm oil, and more. This is likely to affect product availability and out of stocks – the impact on certain types of pasta has already been anticipated.

Moreover, adverse weather conditions across the UK and Northern Europe are expected to exert further pressure on prices. Farmers in these regions have encountered challenges in cultivating and harvesting their lands, leading to significantly reduced yields for staple produce such as potatoes, carrots and cauliflower. Therefore, it can be expected that the price of these products will rise.

As we look further into 2024, it is highly likely that the year-on-year figure for the rate of inflation will drop, but this is due to the high rates of inflation experienced in 2023, which peaked at 19.2% in March. It should be noted that a slowing in the rate of inflation means just that; prices rising less dramatically, not prices coming down.

allmanhall will continue to work with suppliers to mitigate price increases, but it is advisable to plan for increases whilst also looking to menu engineering and smart procurement strategies to make the best use of budget and to reduce cost to serve. A good starting point would be to undertake a protein analysis to lower costs per head whilst having the additional benefit of reducing carbon usage.

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