Contract catering inflation in 2023: adapting and mitigating
The new year for many businesses offers an opportunity to ‘go again’. Whether this is a new budget with fresh targets to beat or the passing of a frenetic Christmas period. January provides a chance for teams to rebuild, refresh and return with a renewed sense of purpose. For procurement teams this involves identifying new initiatives to deliver efficiencies and value. But this year, in the short term, it will be a continued focus to mitigate and reduce the impact of rampant inflation. Inflation dominated in 2022 and will again in early 2023.
Many reasons for high inflation
It’s not straightforward to unravel why we’ve experienced high inflation over the past 12 months. Whilst Brexit commenced with a whimper, it was the pandemic that began to unsettle supply and demand. It also contributed to the upheaval and changes in the labour market. The situation in the Ukraine has added to global supply chain challenges. The underlying problems of low capacity and productivity were deep issues inherent in the UK economy. An ageing workforce, under investment and delicate supply chains have placed us at the mercy of prolonged disruption to the supply of goods. It’s been a challenging few years. We also have some more unfashionable causes of inflation. It was the hottest UK summer for decades. Extreme weather in Europe had a devastating impact on crops. Industrial relations crises, a throwback to the 1970’s and 1980’s, have also reared their head both here and abroad.
The start of 2023 hasn’t offered much respite either. It’s likely we will have further disruption. Brexit border rules haven’t yet been fully implemented. China’s volte-face in the face of Covid-19 and the likelihood of more severe geo-political manoeuvres by global powers could add to our woes.
A case for optimism
Despite this rather bleak picture, there are some glimmers of hope. Supply chains have adapted and evolved. The experience gained in the last three years has created higher levels of resilience. Procurement teams have come to the fore. They are on the front line and no longer a support function. They support operational colleagues and look for alternative ways to create and add value. This could be through more effective digital solutions or sharing data to inform better decision making. Commodity markets too are beginning to relax as supply and demand settles. Following the stop-start during the pandemic finally, it seems that inflation has likely peaked in the UK. But it is predicted that it’s decline will be long and protracted.
Within our business the steps we have taken over the past 12 months will stand us in good stead. Our key supplier contracts have been renegotiated. They are structured to reflect both the shape of the business as well as rewarding sites for being more efficient. This includes;
- Less deliveries
- Optimum pack sizes
- Longer lead times.
We have also strengthened links with our operational colleagues and culinary teams. This enables us to source products and cultivate supplier relationships that are commercially and environmentally beneficial. We are developing more direct to source relationships and focussing on provenance and quality. We know this is important to our customers. The key focus for us, as cost pressures ease, will be to capture immediate savings. This will be challenging but vital for us to deliver superior quality, and value for our customers.
Time to ‘go again’
We expect the first few months of 2023 are likely to be rocky. However, a more positive outlook, the recovery of the business and returning customers all offer great opportunities. We intend to continue to reinvent supply chains, build more resilience and lead with new, innovative, and inspirational products and services.