Meaty issues in pricing

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For all the talk of rising vegetarianism, the UK still has a very healthy appetite for meat. But while it is a generally positive trend for restaurant and pub operators, companies throughout the foodservice sector are having to deal with fluctuations in meat prices, the new Foodservice Price Index from Prestige Purchasing and CGA Strategy reveals.

Groups like the Vegetarian Society suggest attitudes to eating meat are changing. The eating-out sector tells a different story though. Steakhouses, ‘better burger’ concepts and smokehouse specialists are three of the biggest growth segments of casual dining at the moment, suggesting that claims of a shift away from meat are off the mark. Reports of a better-than-average barbecue season last summer indicate that consumers’ demand for meat remains strong when they eat at home, too.

One of the reasons for this is the keen consumer-side pricing of meat—largely a consequence of intense supermarket competition. But on the wholesale side, pressure on costs is rising. The Foodservice Price Index from Prestige and CGA shows that prices have risen for four of the last five month, and in January was 4.0% higher than in January 2016. That is in contrast to far more moderate trends in food and drink measured by the Consumer Price Index. Consumers have got used to low supermarket prices, and are sensitive to any increases.

Wholesale meat price trends are partly cyclical, and affected by things like festive demand for meat including turkeys. But they are affected by many other factors too, like continued high demand for pork in China, which is keeping exports high and pushing prices up. Transport costs and currency exchanges are other big issues at play.

For now at least, wholesale prices of other meats including chicken, lamb and beef are relatively stable. But the Foodservice Price Index predicts that meat prices in general will continue to rise in 2017—especially if threats of avian flu around Europe continue. Infections have already been reported in some UK locations this year, and the British Poultry Council says it is the most serious series of outbreaks in many years. If culls continue and production levels fall, chicken prices would rise, causing fresh headaches for the foodservice sector.

Avian flu has not brought any food safety threat for consumers, and Defra is working hard to stamp out infections. But the threat is another reminder of the volatility of meat prices, and it will be essential for businesses throughout the supply chain to stay right on top of trends this year.

Graeme Loudon is the commercial director of CGA. Read more about the key findings from the Foodservice Price Index and download an exclusive summary here.