​A Closer Look at Food Price Inflation: Hospitality Versus Retail

The latest report from the CGA Prestige Foodservice Price Index highlights a persistent gap in food price inflation between the hospitality sector and retail. As of March 2023, both sectors experienced a brief alignment at a 19% inflation rate. However, this parity was short-lived. Retail inflation, as gauged by the Consumer Price Index (CPI), has since decreased to 5%. In contrast, the Foodservice Price Index, which measures wholesale price inflation for hospitality operators, shows a reduction to only 12%. This discrepancy means the hospitality sector is facing an inflation rate that is 2.4 times higher than that of retail.

James Ashurst, a client director at CGA by NIQ, expressed both relief and frustration at these figures. "The gradual decrease in foodservice price inflation is a positive development for the hospitality industry. Yet, it's disappointing that it remains significantly higher than retail inflation," he commented. The higher costs have led to increased menu prices, impacting consumer spending within the hospitality sector.

The report explains that supermarkets often experience a quicker reduction in food inflation. Their ability to rapidly pass on savings from decreased energy and commodity prices to consumers is a key factor. This is facilitated by their streamlined supply chains and the ability to adjust prices swiftly in response to market shifts and governmental pressure. Hospitality suppliers, with their more complex and fragmented operational models, struggle to mirror these cost savings as quickly.

On a brighter note, the latest Foodservice Price Index indicates a month-on-month deflation for only the second time in 28 months, the first occurrence being in October 2023. This may signal a move towards greater market stability, though it's too early to confirm a trend. Inflation remains in double digits in eight out of ten categories within the Index, with oils and fats being the exception.

Shaun Allen, CEO of Prestige Purchasing, emphasised the importance of vigilance. "It's encouraging to see a reduction in inflation, and the recent decrease in food prices across five categories is a positive sign. Businesses must continue to monitor price changes closely to ensure their food costs accurately reflect market fluctuations."

We invite your thoughts and observations on this issue. How do you see the disparity in food price inflation between hospitality and retail impacting the broader economy? Please share your views in the comments below.