Food and Drink Federation greets inflation drop, yet warns of agriculture and labelling challenges

The UK’s Food and Drink Federation (FDF) has welcomed a further inflation drop to 4% in February, though warned that unstable weather conditions within many agricultural sectors around the world could pose further significant challenges, reports Neill Barston.

While the sector has greeted the continued downward trend for inflation – it still remains double the UK government target of 2%, which has caused particular industry concern amid the ongoing cost of living crisis that has impacted consumer confidence and demand.

Inflation within the retail sector had experienced price hikes of around 20% in some categories, including confectionery, which has dented sales of premium product ranges in particular, as shoppers have sought out cheaper alternatives.

Notably, the Food and Drink Federation renewed its concerns over UK government plans for labelling reforms that would see the creation of “Not for the EU” tabs on many food items, including within the confectionery and snacks sectors, which many industry analysts have said will further negatively impact the industry through creating additional regulatory burdens, costs and effectively act as a disincentive to investment in the broader sector.

Furthermore, as revealed by Which Report findings last December, Christmas confectionery ranges saw major 50% spikes in confectionery costs in the wake of spiralling ingredients costs within sugar, as well as cocoa – which has endured nominal Futures market record trading highs of $10,000 a tonne, which manufacturers have passed on to consumers. This was again felt with the recent Easter season that saw prices ramp-up further amid ongoing cocoa supply shortages impacted by weather, crop disease and heightened investor activity including hedge fund management contributing to additional price spikes.

As for the wider market, Karen Betts, CEO, The Food and Drink Federation, welcomed the broader reduction in inflation, but sounded a note of caution as to wider conditions within agricultural markets, as well as challenges over planned labelling changes that could add to costs.

She said: “Food and drink price inflation fell again in March, to 4.0 per cent from 5.0 per cent in February. This corresponds to input price inflation that manufacturers experience, which also continues to ease. This is good news for consumers – with food and drink price inflation rates now much lower than they were a year ago and with some prices in shops falling.

“However, risks remain, including the increasing instance of extreme weather which is impacting agriculture globally. This has been very visible in the UK in recent weeks with this winter’s wet weather causing widespread flooding on farmland. Inevitably, lower or poorer crop yields caused by bad weather have the ability to impact food prices.

In this context, we welcome the Prime Minister’s intention to hold another farm to fork summit at No 10 next month. Food security should be a focus of this, and how all parts of the food system work together – and with government – to ensure the UK has a secure supply of good quality food and drink. A central part of this is regulation, and ensuring this fosters investment in the UK, including in innovation and food science.

“Unfortunately, current government plans for ‘not for EU’ labelling will have the opposite effect, as will current government plans for Forest Risk Commodity regulations, where industry want the same outcome as government but current proposals are not well designed and will create unnecessary burdens for supply chains. Both could lead to a disinvestment in UK food and drink over time. We hope the summit will help to resolve problems such as these with forward-looking solutions that are well within our reach.”


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