Food inflation in UK to increase further in 2013, says report

Catering and hospitality operators in the UK need to take measures to lower the impact of the continued rise in food inflation, which is likely to increase further in 2013, according to the annual food inflation report from UK-based procurement specialist Prestige Purchasings.

The report reveals that the rate of inflation for vegetables, including potatoes, reached 5.5% in 2012, and is expected to increase further.

A wider analysis forecasts that the inflation rate across all categories of food and drink will rise from 3.3% in 2012 to 4.5% in 2013.

The rate of food inflation may also reach the peak levels recorded in 2008, when inflation was above 8%, a development which would have a significant impact on the catering and hospitality trade.

Prestige Purchasing chief executive David Read said that single site catering and hospitality operators can enhance their buying by employing tools such as benchmarking and market reports, in order to manage their business to address these changes.

"In addition, multi-site operators can focus on more sophisticated techniques like distribution and sourcing optimisation," Read added.

The report has forecasted the increase in prices for various categories such as vegetables, pork, alcohol and soft drinks, breads and cereals, oils and fats, and milk.

The price of potatoes has surged due to a poor harvest, and this has increased the inflation rate across the vegetable category.

Pork prices are expected to increase steadily during 2013 and possibly beyond, due to factors such as a hike in feed prices and costly EU reforms on pig farming, which will increase inflation rate in the meat category.

The alcoholic and soft drinks category has reached a high inflation rate of 3% to 4%, compared to historical levels of 1% to 3%. This can be attributed to a hike in prices of the commodities used in drinks production triggered by volatile commodity markets and climate change.

In 2012, the inflation rate for breads and cereals was lower than expected, at 1.3%; however, this is likely to increase after the complete impact of a poor 2012 grain harvest becomes visible across the markets.

The fats and oils category, especially rape seed oil, palm oil and soya oil, has recorded a negative inflation rate of -1.1%, and the rate is forecast to fall further due to high oil stocks.

The increase in stock can be partly attributed to the fact that producers have been shifting from high cost grain feed to soy feed, a by-product of which is soya oil.

Milk prices are expected to increase due to a shift in the value chain, as a result of several mergers in the dairy industry, a development which is expected to significantly impact catering and hospitality operators.

Prestige Purchasing offers procurement and supply chain management services for the hospitality, catering, leisure, retail and private healthcare sectors.

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Image: The inflation rate across all categories of food and drink is expected to rise from 3.3% in 2012 to 4.5% in 2013, according to the report. Photo courtesy of Prestige Purchasing.