Foodservice inflation dips but more volatility on the horizon

Food and drink prices in the foodservice sector recorded a minor month-on-month decline of 0.2% in February, according to the latest Foodservice Price Index from NIQ and Prestige Purchasing.

The slight easing builds on a stabilisation of prices in January, bringing respite to hospitality after inflationary spikes in late 2025.

Downward movement in February was driven by significant cooling in major categories, including milk, cheese and eggs, where prices fell month-on-month after improved European milk availability and softer demand for cheese. The oils and fats category also continued to moderate, while coffee, tea and cocoa prices were reduced by the unwinding of extreme cocoa price inflation, as global supply expectations and market surpluses rose.

Other categories of the Foodservice Price Index, including mineral water, soft drinks and juices, and meat and poultry, remained broadly flat in February. Stable packaging costs and softer global sugar inputs helped to offset significant upward movement in beverage prices, while the meat sector balanced tight domestic beef availability against softer global pork values.

However, NIQ and Prestige Purchasing believed that short-term relief in inflation will be overshadowed by the escalating global geopolitical situation. The recent Strait of Hormuz closure triggered a sharp rise in crude oil prices, generating significant concern for future inflation. The sudden spike in energy costs threatens to rapidly drive up costs of manufacturing, packaging and distribution across the entire supply chain, potentially reversing the recent easing of prices recorded by the Index.

More upward pressures remain elsewhere, such as in the bread and cereal category, which rose as global wheat markets reacted to frost damage and winterkill risks across parts of Europe and the US.

Fresh produce also remained challenged, with vegetables ticking up due to crop-transition gaps in key growing regions such as Spain and Morocco, while the fish category inflated as strict Barents Sea cod quotas kept whitefish prices at historic highs.

Shaun Allen, chief executive of Prestige Purchasing, said: “A month-on-month drop of 0.2% is a positive signal for the hospitality sector, demonstrating that the severe cost pressures in categories like dairy and cooking oils are beginning to ease. Furthermore, the bursting of the cocoa inflation bubble is providing much-needed relief to supply chains.

“However, operators must stay on high alert. The escalating geopolitical crisis and the closure of the Strait of Hormuz pose a severe risk to this fragile stability. As oil prices surge, the knock-on effects on freight and production costs will be unavoidable. Agile and forward-looking procurement strategies are essential to navigate this impending volatility.”

Reuben Pullan, senior insight consultant at NIQ, added: “After inflationary pressures across the board for hospitality in 2025, the recent easing of food and drink prices has been a rare and welcome cause for optimism.

“However, that optimism is being tempered by heightened geopolitical uncertainty and the knock-on impact of higher energy-driven inputs. For hospitality, this makes it more important than ever to stay close to costs and remain flexible in planning.”

Meanwhile, Lynx Purchasing has forecasted that stormy weather at the start of the year could push up food prices, especially for root vegetables, soft fruit and salad items.