Cost of Living Crisis: Three UK hospitality talking points from April

Egg Soldiers addresses three cost-of-living crisis topics for UK hospitality, with FPI food and drink inflation, OOH vs retail sales realities, and the price of fish all on the menu
Diners in a restaurant
The UK cost-of-living crisis remains headline news, and rightly so. However, the majority of the mainstream coverage of late, we've found, has been focused on the plight of individuals and families, with the ongoing struggles of the UK hospitality sector becoming harder to come by on a monthly basis.

Perhaps it's a Google algorithm thing. Still, here at Egg Soldiers, we're constantly developing dynamic operational strategies to help foodservice operators navigate the evolving challenges brought about by the ongoing cost-of-living crisis. There are a plethora of evolving topics to be examined from the perspective of UK hospitality, and we're keen to talk about them.

And so, starting this month, we thought we would share and discuss cost-of-living talking points with a focus on UK foodservice, with FPI food and drink inflation, OOH vs retail sales realities, and the price of fish all on the menu for April.

FPI inflation rate slowing?
On April 17th, our friends at Prestige Purchasing revealed that UK food inflation, as measured by its CGA Prestige Foodservice Price Index (FPI), fell slightly to 20.6% year-on-year in February, just below the record high of 22.9% reached in December 2022.

There is, they say, now "clear evidence" of the level of price increases beginning to slow, with the FPI 'full basket' of categories, including beverages, increasing only 0.7% month-on-month, which is one-third of the average rate experienced in the latter part of 2022.

Currently, all categories within FPI remain in double-digit inflation, with Oils & Fats continuing to lead the way at 37% year-on-year, and Sugars/Jams/Syrups at the lowest level of increase at 12%.

Prestige Purchasing CEO Shaun Allen said: “In spite of falling inflation we expect the pressure on margins for operators to increase during 2023. Although the rate of increase will slow, supplier food prices will continue to increase during the year – at a time when consumer demand will be tightening and scope for increased menu pricing will be limited. Operators should take action now to optimise their supply to preserve margin.”

The Guardian recently delved into the Consumer Price Index (CPI) of food and drink inflation, which hit 19.1% in March (following its fastest rise since 1977), with sugar (+42.1%); sauces, condiments, salt, spices and herbs (+33.7%); and milk, cheese and eggs (+29.7%) the three biggest risers, year-on-year.
  • Toph Ford
    Co-Founder & Creative Director, Egg Soldiers
    "While the news of an easing in foodservice price inflation is certainly welcome, UK hospitality is far from out of the woods in terms of the challenges brought about by increasing supplier food costs, with consumer reaction to menu price hikes a key concern across the board.

    "Innovating around menu trade-ups, such as exciting sides and premium dish additions, remains a viable avenue for meeting diners in the middle, without compromising on entry-price dishes.

    "Broadly speaking, our advice is to ensure fleet-footed reactions to day-to-day operational obstacles. Strategy is now very much a daily concern for foodservice operators all around the country and, as hospitality consultants, Egg Soldiers has become more nimble than perhaps ever before to keep our clients thriving.

    "Indeed, Egg Soldiers and Prestige Purchasing often work in tandem on projects - our own experts tackling customer facing menus, F&B offers and kitchen operations, and Prestige addressing supply chain and ingredient costs. Our work meets in the kitchen where we help operators make big decisions on what to make in-house, what to buy in, and how to balance labour and food costs effectively.

    "We relish a challenge, and our door is always open for inquiries."
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The realities of eating out vs staying in
On April 11th, Barclays dropped its latest consumer spending trends report, claiming that 62% of consumers are attempting to cut down on eating out in full-service establishments to save money as the cost-of-living crisis bites. The British Retail Consortium (BRC) also released data that showed a total UK retail sales increase of 5.1% in March compared to last year, claiming that this was helped by people looking to entertain at home instead of eating out.

These reports are the latest in what is now a procession of statistical and survey-driven doom and gloom for UK hospitality amid the cost-of-living crisis - but there are some industry names now pushing back, disagreeing with the blanket-style conclusions derived from such reports in parts of the mainstream press.

Peter Martin, founder and executive director of the premium hospitality network, Peach 20/20, is one of these names, recently taking to his LinkedIn to reject the idea that because retail sales are up, out-of-home sales should be down, branding such conclusions as "lazy reporting".

"Let’s get one thing straight," Peter said. "Consumers are still going out to eat in pubs and restaurants, no matter what this story from BBC News might suggest.

"Hard data from CGA by NIQ’s Coffer CGA Tracker shows that spend on eating and drinking out-of-home is consistently up on last year and as good as, if not beating, pre-pandemic levels - even with the cost of living crisis.

"To suggest that just because retail sales are up OOH sales should be down is just plain wrong - and lazy reporting from the BBC and others. This is also a reminder that the retail market, and especially the big grocery multiples, have for a long time been in a PR war with hospitality to make it seem normal to stay in rather than go out.

"Another point is that in this asymmetric market, the cost-of-living crisis isn’t affecting everyone equally. There’s about a third of the public that have been largely unaffected and have carried on much as before - including going out."
  • Kateline Porritt
    Head of Trends, Egg Soldiers
    "Interestingly, the Financial Times recently published an article on British pubs and that their "demise has been greatly exaggerated", tying into Peter Martin's comments on LinkedIn quite nicely.

    "I think it's important to really understand the cost-of-living data and survey results which so regularly come out to play havoc with the hearts of UK hospitality. There are indeed many consumers who are choosing not to eat out as much as perhaps they did previously, but it's not universal.

    "Peter's mention of it being an asymmetric market rings true, and there are plenty still seeking regular moments of escapism via eating-out experiences. Some consumer groups are feeling the impact of the cost-of-living crisis much more than others, to put it simply.

    "Yes, some operators are sadly closing due to rising costs and worsening footfall, but then there are others who are managing to trade very well, converting decent margins by being dynamic in day-to-day operational strategy - 'shapeshifting' to survive.

    "The crisis itself is very real, but the associated consumer trends are not as clear. Ensuring your strategies are flexible and that your business is active, rather than passive, is essential. Do get in touch with us to find out how an external, expert, fresh-eyes view of your hospitality business can boost performance amid the cost-of-living crisis."

Shark attack to ease fish & chip shop strife?
On 1 April, commercial fishermen were given permission to catch north-east Atlantic spurdog in UK waters, five years after it was placed on the prohibited list in the UK and EU due to sustainability issues, with the small shark species set for a timely return to menus at fish and chip shops and restaurants across the country.

The wholesale price of cod fillets increased from £9 per kg to almost £12 per kg between 2021 and 2023, according to the National Federation of Fish Friers, with the UK government's 35% tariff on Russian whitefish imports putting huge pressure on operators, (for context, Russia accounts for over 40% of global whitefish production).

Andrew Crook, chair of the National Federation of Fish Friers (NFFF), said: "As long as it's sustainable, [spurdog] is going to be a good thing. It only really affects the south coast and southeast as there's not a big market for it elsewhere, but it's going to be a good thing for local fishermen.

“We’ve been looking at all sorts of alternatives, from South African hake to US Pacific hake and cod from Norway, so anything that takes a bit of pressure off supplies."

The shark species, also known as rock salmon or spiny dogfish, has a meatier, firmer texture and a stronger flavour compared to cod or haddock, with 'rock & chips' a classic British dish.
  • Stefan Cosser
    Co-founder & Managing Director, Egg Soldiers
    "I remember Sky News saying in February that the price of a fish and chips takeaway is up 21.7% during the last year nationally, with one chain operator saying they were paying 50% more for cod and haddock compared to 2022.

    "It's incredibly tough for fish and chip shops to put prices up, particularly outside of London, as punters expect a fixed price for their Friday fish suppers (although there is still uproar in the capital, with prices often now seen to be between the £15 - £20 mark.)

    "Menu innovation is fairly limited in this space, too, with cod and haddock rarely really unseated in the eyes of diners. However, the return of rock salmon - a traditional fish & chip favourite - should deliver a timely addition to core menus in chippies up and down the country.

    "After the UK government's 35% tariff on Russian whitefish imports last March, sustainable solutions have been few and far between. Now, operators will be able to purchase traditionally well-performing rock salmon locally from UK fishermen - certainly welcome news as we approach the summer.
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