Monday, 8 November 2010

Food Inflation Time Bomb

As if the current economic climate isn’t enough of a challenge for foodservice operators to contend with, the relentless inflation of global food prices is adding to the pressure.

The latest United Nations’ Food and Agriculture Organisation’s index of 55 food commodities has jumped 197.1 points to the highest level since 2008.

This is clearly going to hurt the purse strings of households throughout the UK but it will also have a huge impact on the foodservice industry, at a time when the high street is obsessed with discounting and promotions to get customers through the door - surely this is not a sustainable.

When combined with 60% rise in wheat prices over the last 12 months and the BRC warning of further commodity prices, “still in the pipeline” it is likely that food inflation will run ahead of general inflation, which spells difficult times

The challenge for operators will be how to absorb these price rises without compromising on quality or passing it on to cash strapped customers. Part of the solution will be sourcing as much local produce as possible to keep costs down and driving a hard bargain with suppliers, shopping around for the best deals.

Inevitably these increased food prices will have to be passed on to the customer at some point, but given the climate of austerity the country find’s itself, will customers be willing to foot the bill? Or will they simply pop down to M&S and dine in for a tenner or venture into Waitrose to try and recreate the latest gastronomic delights from Heston / Delia?

The foodservice industry and suppliers need to lobby government for an international approach to address the food inflation time bomb that is affecting households and the out of home market. Failure to address the problem could see the UK’s £30bn foodservice industry contract as struggling operators go out of business, resulting in significant loss of revenue to the UK economy. Action is needed and fast!

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