Welcome to the Market Report

By Graham Coles Procurement Director Avendra Europe

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This report aims to provide you with information on what’s happening in the marketplace and the key factors affecting supply and product availability. We look at key commodity price trends and provide recommendations on ways to mitigate price increases and we provide insight to what produce is in season, guiding you to what’s best right now We hope you find this report helpful.

Market Conditions

Financial Situation

The financial worries of 2022 seemed to be with us every month in one form or another and it feels like this is continuing into the New Year. 2023 has begun with talks of a cost-ofliving crisis as homes and businesses struggle to pay for leases, bills and goods.

There were some financial assistance packages brought in last year that were designed to help people pay for the costs of energy after seeing the huge price increases to the cost of gas and electricity. These schemes come to an end in March and whilst there is some expectation that the domestic and household assistance will continue in some form, the Chancellor has announced that the business support will stop in March due to the expected costs of the programme. Without this additional support, many smaller businesses, particularly in the hospitality sector, are concerned they will not be able to keep up with costs and that without the ability to raise prices any more they will struggle to keep trading. Quoted as being too expensive for the taxpayer, the business support scheme will be replaced by another scheme from April onwards and it’s expected that this relief will be roughly half of the value but will last into 2024 providing prolonged reliable support.

Some good news is that the value of the pound stabilised in the last part of 2022 and the financial statements and plans coming out of the latest Government have been largely positively received by both UK business and global interests. This consistency means we have a better idea of the value of imports and exports allowing companies to plan their trade much better. This was supported by some improvement and growth in the UK GDP over the last 3 months of the year with an improved performance during October and November largely attributed to the World Cup.

With more sensible fiscal policy, the aim of this Government is to reduce the inflation rate back to its 2% target and we saw the first indications of this during November, with the inflation rate coming down from 11.1% to 10.7%. Whilst this is only a small reduction, it is hopefully the start of a trend in reductions.

Cost of Living

It is expected that consumers will continue to “tighten their belts” this year and become more conscious of their spending habits. Decreases in petrol and diesels costs will help, not only is this reduction good for business in terms of lower transportation, heating and processing costs but it also favours the end consumer, allowing them to spend the money elsewhere, hopefully within the hospitality sector.

Early indicators are that spending over the Christmas period in nonfood outlets reduced by 22% against the previous year, and 2021 wasn’t a record-breaking year in terms of spend. This reduced spending, along with a negative consumer confidence score for the UK, suggests that any savings that are found are being saved or used to purchase other necessities rather than a treat, gift, or evening out. One positive is the reported spending in the supermarkets. Almost all the main chains have announced a positive return from the weeks leading up to Christmas, part of this will be the effects of inflation as prices are at a higher point but additionally there is evidence to suggest that people spent more on food this year as a way of treating guests and family just before the start of a particularly tough year.

One source of relief for a lot of consumers is the help and assistance many businesses have begun offering to their employees. Some companies, including us here at Pelican, have found ways to offer employees free or subsidised meal choices to reduce the costs of work lunches. The most recognisable form of employee assistance is extra pay and there has been a lot of discussions around one-off payments and bonuses, with some businesses taking extra steps such as providing subsidised transport, childcare assistance and more flexible working hours or environments to reduce the cost and stress of travelling. All or some of these measures can be put in place to look after employees and financial security will often lead to more positive buying behaviours.

Industrial Action

One of the biggest talking points of 2022 and one that is likely to continue into 2023 is that of industrial strike action. We have seen one of the worst years for public sector strikes since the Winter of Discontent in 1979 Many of the trade unions that have successfully voted for strikes, go slows and other industrial action are the usual ones; RMT for trains, Unite for Bus services and the Royal Mail all announced further strikes and days of no service over the Christmas period and into January.

We have experienced travel delays and short services before, but the issues with the trains are being compounded by all the other services seeking similar resolutions to the RMT and feeling that now is the time to act. It’s difficult to measure how much of a direct impact these altered travel schedules have on shopping, eating out and the hospitality sector in general but it’s not hard to see that a lack of direct and affordable transport going into towns and city centres is something that will negatively impacts revenue and footfall.

More recently and arguably more concerning is all the emergency and healthcare services that have announced plans and intentions to strike. There is planned action in January from Nurses, Ambulance and Fire Services with polls indicating the public are still in favour of the strikes, at least for now. It’s going to be important for this government to stem the tide of strike action and provide the public sector with some of the things it is asking for, otherwise it will likely continue to affect the wider UK economy.

Global Markets

It has been almost a year since Russia’s assault on Ukraine Some of the impact has now been mitigated; the fuel and feed crisis that was initially started by the war has slowed somewhat after the opening of the Black Sea Grain Agreement. The consistent supply of good quality produce has meant the prices for these staple cereals have seen a huge reduction when compared with the prices quoted in May/June of last year. With Wheat decreasing by 19% and Corn by 32% in the last quarter, this has meant that farmers can now feed their animals for a more manageable cost. This reduction will also eventually filter its way through the supply chain to those products made from these base raw materials.

One of the region’s most important exports is vegetable and cooking oil, particularly Sunflower Oil In March we saw the price of this commodity increase by more than 100% in a matter of days and this had a huge impact on the pricing and availability of other types of cooking oil. Thankfully, this market has resolved itself and we are seeing prices for cooking oil return to normal, but it is an indicator at just how fragile our global markets are to external pressures.

Reduction in the cost of Wheat

Outside of the Russia/Ukraine conflict, we have also seen dramatic weather conditions impact crop yields and shipping routes across the globe. Here in the UK, we had the hottest ever year in 2022 and expectation is that this trend will continue. This heatwave had a negative impact on many of the domestic and native crops that we grow here but it wasn’t just the UK that suffered. Pakistan saw millions of casualties as a third of the entire country was flooded and left underwater, ruining many rice and wheat crops. Droughts in Spain and other agrarian parts of the EU decimated fruit and vegetables that are heavily imported, especially into the UK, continuing to push prices up even further.