Experts are warning that food prices in the UK will return to 2% inflation in 2015, after a year of falling prices.
Prestige Purchasing has warned the food service industry that food prices are set to rise again next year as food inflation is forecast to hit 2.03%. This follows a year in which food inflation fell to -1.5%, the first time in 14 years that food inflation has reversed its trend.
The fall in food inflation was due to consistent good weather; a significant drop in the price of crude oil and ranging economic factors, including the strengthening of the Pound against the Euro.
However, longer term factors including global population growth, water scarcity and an unstable international political environment will mean that this trend reversal is expected to be short term as Prestige Purchasing forecasts food inflation to return next year.
However, it’s not all bad news. Different categories will rise and fall at different rates.
Milk – as well as milk powder, butter and whey powder have dropped in price and are expected to stay low; this is due to a combination of increased production, coupled with a reduction in demand
Chocolate Cocoa consumption is growing faster than production. Attempts to avoid higher costs could result in manufacturers using alternatives such as vegetable oil and flavourings to reduce the demand for cocoa. Prices have also been impacted by the threat of the Ebola virus hitting cocoa-producing countries, Ghana and the Ivory Coast
Beer – The House of Commons recently voted against the Pub Beer Tie, which currently allows large pub companies to tie their tenants into deals where they are forced to buy beer from their landlord. If passed, this would allow pub tenants to agree deals with their landlords that allow them to buy beer on the open market leading to price volatility
Chicken – a new bird flu strain has recently been found in the UK. If it spreads, this will pose a significant risk to the poultry sector. The effects of this on pricing can counteract one another to some degree. On one hand, supply is reduced, as there are physically less birds, leading to higher costs. However, extensive media coverage can increase the level of fear among consumers, meaning that demand could drop.
In order to help consumers minimise the impact of food inflation, Prestige Purchasing has created the following tips for families to eat on a budget:
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