Inflation outlook and foodservice market update - Jan
2 January, 2025
The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to November 2024, up from 2.3% in October, but well below its recent peak of 11.1% in October 2022.
Nine of the eleven food and non-alcoholic beverage classes have seen upward movement to the change in the annual rate of inflation between October and November 2024. Oils and Fats, Milk, Cheese and Eggs saw the largest increases. Downward movement came from Fish and Food products.
On a monthly basis, CPI rose by 0.1% in November 2024, compared with a fall of 0.2% in November 2023. The largest upward movement to the monthly change in the CPI annual rate came from transport.
Market movers:
LABOUR
In April 2025, the national living wage for those aged 21 and over will increase by 6.7% (77p per hour) from its current rate of £11.44 per hour. Labour intensive supplier contracts such as those in Facilities Management (FM) and Temporary Labour will be the most heavily impacted by the increase, as well as categories such as Bakery, where skilled labour is often required.
COCOA
Cocoa prices remain significantly elevated, showing a 161% year-on-year increase and a 28% month-on-month increase. Concerns over the harvest in the Ivory Coast, driven by dry weather conditions, are exacerbating the situation.
In November, rainfall was only 25% of the normal levels, further raising fears of supply shortages in 2025.
BAKERY
Butter prices have significantly impacted suppliers, with a 28% year-on-year increase being seen in France. However, forecasts indicate a more positive forward outlook, with prices expected to stabilise and potentially reduce as supply and demand levels balance out.
The rise in butter costs has also contributed to cost increases in Pastries and similar products.
SUGAR
In November 2024, global Sugar prices trended downward. The main reason for the decline in price was the expectation of a bumper crop in Brazil. It is projected to produce a record-high 43.1m tons of sugar in 2024/25, primarily because mills are prioritising sugar over ethanol because of the higher margins.
The high sugar price encouraged investment in sugar production capacity, especially in mills in Central-South Brazil, which increased their crystallisation capacity to increase sugar output. This raised global sugar production capacity to more than 200m tonnes, enough to meet requirements for several years ahead.
DAIRY
Cream prices hit a record high in October of £3,300 per tonne, although this has been easing as milk production has increased. However, prices remain high, especially as we exit the busy seasonal Christmas/New Year period when cream usage typically rises.
Farmers are responding to the highest farmgate prices seen this year by increasing Milk production, evident in a 3.8% year-on-year volume increase.
Cream prices are forecasted to soften as we approach spring as people look to eat fewer fatty products after Christmas.
UK KEY MARKET MOVERS (CPI)
The Consumer Prices Index (CPI) is a key measure of inflation in the UK. Movements in CPI give a high-level overview of the key categories experiencing inflation. Below is a monthly snapshot of the top food commodity price inflation movements impacting the UK. The data is from Office for National Statistics (ONS).
Percentage change over 12 months:
Milk, cheese and eggs: 1.9%
Oils and fats: 9.6%
Breads & cereals: 1.4%
Vegetables: 2.8%
Meat: 0.1%
Sugar, jam, syrups, chocolate and confectionery: 5.6%
Fish: -3.4%
Fruit: 2.4%
FINAL WORD
Regency continue to proactively mitigate availability issues and supply risk, putting solutions in place to reduce impact, such as product switches and recipe re-engineering.
When it comes to labour increases, we are working with our key suppliers, to isolate the attributing labour element of the total product cost where possible, ensuring costs being passed through are only proportionate to labour.
When analysing the affects that inflation has on your businesses purchasing, it's important to understand that inflation affects not only the price of goods, but also the quality and availability - this is something that our team of procurement experts can assess in detail, to ensure our members are always achieving the best outcomes in all areas. To find out more about ways in which we can help save your business time and money, get in touch.
Sources: Foodbuy.
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