Foodservice Prices See Marginal Decline Due to Lower Dairy and Vegetable Costs
In May, the hospitality industry experienced a minor decrease in food and drink prices, marking the first decline since April. According to the latest Foodservice Price Index from NIQ and Prestige Purchasing, prices fell by 0.1% month-on-month. This decrease was largely influenced by reduced costs for fresh produce, dairy, and cooking oils.
The drop in vegetable prices was attributed to favorable growing conditions across Europe, which increased the supply of salads, leafy vegetables, and outdoor crops. Dairy products also saw a reduction in prices due to strong milk production in the UK and intense competition in the retail sector, affecting the cost of milk, cheese, and eggs. The global markets for palm and soybean oil showed some relief, contributing to the decrease in oil and fat prices.
However, not all categories followed this downward trend. Prices for soft drinks, jams, syrups, and chocolate rose as the global sugar market faced pressure. Crude oil price hikes and the anticipated diversion of Brazil's sugar cane crop into ethanol production rather than sugar exports continued to drive up costs.
Coffee, tea, and cocoa prices remained high, influenced by adverse weather in key growing regions and low stock levels. The fishing industry continued to struggle with North Atlantic quota restrictions and increased operating costs.
Shaun Allen, CEO of Prestige Purchasing, commented on the situation, stating that the slight 0.1% dip in May offered some relief for hospitality operators. He highlighted the strong local supply and effective forward buying strategies that contributed to deflation in key domestic categories like dairy and vegetables. However, Allen cautioned against complacency, noting that global energy markets remain elevated, impacting sugar and beverage costs.
Reuben Pullan, Senior Insight Consultant at NIQ, added that any signs of stability in food and drink prices are welcome amidst high costs for hospitality. Despite this, many commodities are still at risk of volatility, and sustained deflation seems unlikely. Pullan emphasized the need for targeted industry support as businesses navigate persistent cost burdens.
