Business Briefing - 2022 ended with record high 24% food inflation but what is in store for 2023?

Food inflation is now a common and ongoing concern for businesses and consumers alike. December 2022 marked the 11th consecutive month of double-digit inflation after a year of intense inflationary pressures for foodservice businesses.

Accoring to the CGA Prestige Foodservice Price Index (FPI), the year-on-year inflation in the food basket of the Index—excluding beverages—was even higher at 24%.

All 10 categories of the Index recorded inflation of at least 10% in December, with more than half topping 20%. The oils & fats category led the surge, with year-on-year inflation surging to a spectacular high of 47%.

But what are we to expect as we look ahead into 2023 and the possibility of a shallow recession?

According to CGA and Prestige, there are mixed signals from supply markets on future pricing. Oil and exchange rates, the two leading upstream influencers on food prices, are more benign than during most of 2022, and the UN’s FAO Food Price Index fell by 1.9% in December 2022—a ninth consecutive month of decline to take it to 1% below its value a year ago.

However, energy costs continue at extremely high levels against a background of tightening government support, while higher labour costs across supply chains show few signs of relief. With a significant easing in prices only likely to begin with an end to conflict in Ukraine, the outlook for 2023 therefore remains volatile.

Prestige Purchasing CEO Shaun Allen said: “The next step on our inflation journey will be when the current 2% to 4% month-on-month increases start to slow down. We expect this to start to happen in the months ahead, but we are likely to experience an extended period where prices continue to go up, but just more slowly. These market conditions provide an opportunity for some suppliers to increase prices ahead of market, and buyers should seek hard data to verify and benchmark any increases during 2023.”

James Ashurst, client director at CGA by NielsenIQ, said: “Businesses up and down the foodservice supply chain were besieged by inflation in 2022, and as we enter 2023 there is little respite in sight. Alongside the cost of living crisis for consumers, soaring food and drink prices are piling enormous pressures on hospitality, and sustained government support is needed to protect businesses and jobs in this vital sector of the UK economy.”