This is the 15th consecutive month F&B inflation has slowed, falling from 17.4% a year ago, and marking the lowest annual rate since October 2021.
Food and non-alcoholic drink prices at a glance
Prices rose by 0.2% in June 2024, compared with a monthly rise of 0.4% a year ago. Overall, prices have been high but stable since early summer 2023, following March 2023’s record-breaking high.
A total of 18 out of the 49 categories reported by the Office for the National Statistics (ONS) were in deflationary territory in June 2024, while inflation was below 5.0% for 20 categories.
Prices fell the fastest for jams and marmalades, whole milk and butter, by 7.7%, 6.8% and 5.2 % respectively.
Meat prices have fallen this year, following their rise in the previous year, seeing their lowest annual rates since October 2021 (0.9%). Fruit prices also fell at a faster rate than 2023 – again seeing their lowest prices since August 2021 (1.6%).
Prices of bread and cereals rose on the month this year, but the increase was at a slower rate than a year ago. The annual rates for these commodities were their lowest since October 2021 at 0.5%.
Olive oil, cocoa and powered chocolate, and edible offal saw the highest rises among the food and drink categories at 43.8%, 18.3% and 13.2% respectively.
Alcohol prices
Overall prices for alcohol fell from 6.8% in June 2023 to 5.1% in June 2024, a drop from 5.9% in the month prior. The outlier is fortified wine, which has seen a steady increase over the year. This has been easing but it remains the highest in the alcohol segment at 17.8%.
Wage pressures
“The fall in food and non-alcoholic beverage annualised inflation from 1.7% in May to 1.5% in June will be a welcome relief to consumers,” Mark Lynch, partner at Oghma Partners told Food Manufacture. “Considering food and beverage inflation peaked at 19.2% in March 2023, the current rate marks a dramatic decline and a return to a more normal pattern of inflation which consumers and the industry were used to pre the Ukrainian conflict.
“Outside of the usual commodity pressures, cost pressure from manufacturers is likely to come from continued general inflation driving a knock-on impact on wages – services and housing costs being central to pressure here. For the food sector, wage pressures will likely drive initiatives to improve productivity vs using the blunt instrument of pricing that we have witnessed over the last 24+ months.”
‘A 149% rise in our chocolate prices’
“The UK food industry has been through a series of shocks over the past four years,” added Edward Bergen, senior analyst for food & nutrition at FutureBridge. “While inflation is finally down, cost pressures remain high at around +10% year on year.
“Beyond costs, there's a palpable sense of unease and uncertainty. We've navigated Brexit, recovered from COVID-19, faced extreme weather challenges, dealt with numerous geopolitical issues, and endured intense regulatory pressures. It's no wonder food industry leaders are focusing on 'core' operations rather than taking risks, especially with declining profits.
“Recent innovations seem more focused on efficiencies, cost-cutting and scalability rather than genuinely new ideas.”.
One bakery in Exeter, Cake or Death reported that the price its paying for chocolate has risen by 149% since its last purchased in May 2023.
According to its founder, Katie Cross, chocolate makes up one third of the business’s ingredients costs, so this rise is going to have a markedly impact on profit margins.
While Cross says Cake or Death managed to purchase two tonnes of chocolate at the 2023 price, when supply runs low in Autumn, she’s anticipating an additional £9,000 per tonne to pay.
Speaking with Food Manufacture, Cross said she refused to comprise on quality but will be looking to make savings elsewhere: “To save money Cake or Death are reducing the amount of chocolate we use by diversifying our product range. Currently we only bake brownies and cookie dough, but we will shortly launch flapjacks, cakes, puddings and sauces, as well a range of merchandise. This will give our customers more choice and these higher profit margin items will support the cost of producing brownies with the high chocolate prices we are experiencing.”
She added: “Support for SMEs to borrow money at cheap rates would be very useful to enable us to purchase large quantities of ingredients or stock before price rises kick in and to access economies of scale. We are currently prevented from doing this by a lack of cash flow.”
Lobbying Labour for help
For Bergen, a new government needs to bring in regulatory relaxation in an effort to help settle high costs: “The 'not for EU' label is a prime example, adding unnecessary costs to the supply chain.”
The overwhelm felt by the sheer number of regulatory changes has been on-going - and was a point raised at last year's Business Leaders' Forum.
He continued: “Government investment and incentives should shift towards the food industry. Companies that have restructured towards leaner and more sustainable models are likely to fare better in terms of valuations and market performance.”
The Food and Drink Federation’s CEO, Karen Betts added that while the overall stabilising of costs will be restoring business confidence, investment is sorely needed.
“Investment in food and drink manufacturing fell between 2019 and 2023 by 30%,” the FDF’s boss pointed out. “Our priority is to work in partnership with the new government to address this, and to ensure that the right incentives are in place, alongside regulation that enables business growth and fosters productivity and innovation.”
In other news, research has indicated the levels of ultra processed foods making up adolescents daily calorie intake.
