Food and drink prices in the hospitality sector recorded a minor month-on-month decrease of 0.1% in May, bringing the Foodservice Price Index to 150.5, NIQ and Prestige Purchasing reveal. This slight deflationary movement offers a measure of stability following the inflationary tick upwards seen in April, demonstrating the continued resilience of UK supply chains in absorbing mixed global commodity signals.
The most significant downward movements were seen across fresh produce, dairy, and oils. The vegetables category continued its deflationary trend, benefiting from an influx of seasonal availability as the transition into peak European growing conditions improved supply volumes for salads, leafy crops, and outdoor produce. The milk, cheese, and eggs category also experienced price easing, driven by robust domestic farmgate milk production and intense retail competition, which successfully anchored costs despite fluctuations in global dairy demand. Similarly, the oils and fats category recorded a modest decline, reflecting a notable softening in international palm and soybean oil markets due to weaker global import demand.
However, inflationary pressures remained stubborn in several other areas of the basket. The mineral water, soft drinks, and juices category, alongside the sugar, jam, syrups, and chocolate category, both faced upward pressure stemming from global sugar markets. These increases were heavily influenced by firmer crude oil prices, which continue to drive expectations that a larger proportion of Brazil’s sugarcane crop will be diverted towards ethanol production rather than sugar exports. The coffee, tea, and cocoa category also continued to inflate as irregular rainfall patterns and low stock levels sustained elevated pricing for coffee out of Brazil and Vietnam. Furthermore, the fish category remained structurally inflationary due to strict North Atlantic quota restrictions and the ongoing high operational costs associated with capture fisheries and aquaculture.
Shaun Allen, CEO of Prestige Purchasing, said: “A month-on-month drop of 0.1% in May provides a welcome, albeit slight, reprieve for hospitality operators. The deflation we are seeing in key domestic categories like dairy and vegetables is a testament to strong local supply and the effectiveness of forward buying strategies. However, operators cannot afford to be complacent. The global energy markets remain elevated, directly impacting sugar and beverage costs through ethanol diversion, while structural supply issues continue to plague fish and coffee. As we head into the crucial summer trading period, extreme weather events across major growing regions remain the most significant risk factor. Procurement teams must remain vigilant, leveraging this period of relative stability to secure supply lines against potential climate-driven volatility in the second half of the year.”
Reuben Pullan, senior insight consultant at NIQ, said: “At a time of exceptionally high costs for hospitality, any signs of stability in food and drink prices are welcome. However, many commodities remain at risk of volatility, and sustained deflation seems unlikely. Businesses across the sector are working relentlessly to sustain sales and profits at the moment, with thousands now very fragile.”
