Food and drink operators struggle to protect margins

A volatile pricing and inflationary environment is hitting margins and diluting profitability across the food and drink sector as companies pass on cost increases to consumers and franchisees, while customers trade down to cheaper alternatives.

The latest food inflation figures from the British Retail Consortium (BRC) and Nielsen Food show the extent of price rises flowing through the sector as companies try to protect profits. In August, food inflation reached 9.3 per cent and fresh food inflation moved up to 10.5 per cent – the highest rates since 2008. Shop price annual inflation grew to 5.1 per cent, a record since the BRC’s index began in 2005.