IN Brief:
- Food and non-alcoholic drink inflation reached 3.7% in March, with manufacturers expecting stronger upward pressure later in 2026.
- Rising energy, freight, packaging, and ingredient costs are feeding into factories first, while supply contracts delay the full effect on shop prices.
- FDF wants time-limited energy support for food and drink manufacturing before autumn contract renewals lift pressure across the sector.
UK food inflation moved higher in March, but manufacturers are contending with a much sharper rise in costs behind the scenes. The annual rate for food and non-alcoholic drinks rose to 3.7%, up from 3.3% in February, as food plants faced renewed pressure from energy, freight, packaging, and ingredients linked to disruption around Iran and the Strait of Hormuz.
The Food and Drink Federation expects those pressures to build through the second half of 2026, and says food inflation could reach 9% to 10% by the end of the year without targeted support for manufacturers. Dr Liliana Danila, Chief Economist at the Food and Drink Federation, said: “The clouds are gathering, but the storm has not yet broken on rising food and drink inflation.” She added that the cost shock was already too large for manufacturers to absorb in full, but that long-term supply arrangements could delay the full effect on retail prices for months.
That pattern is already visible across the sector. Food manufacturers are buying energy, packaging, transport, and ingredients at higher prices, while many continue to supply retailers under contracts that prevent an immediate repricing. Products with shorter supply chains, and those that are less heavily processed, are likely to register higher prices sooner. March’s figures reflected that uneven spread, with beef and veal, whole milk, and confectionery among the fastest-rising categories.
The upstream squeeze is also visible in industrial price data. Producer input prices rose 5.4% year on year in March and 4.4% on the month, with crude oil the main driver, while factory gate prices also accelerated. For food plants, that runs directly through heating, chilling, freezing, drying, steam generation, transport, and plastic packaging, all of which remain exposed to energy and petrochemical markets.
The cost pressure extends beyond fuel. Global food commodity prices also rose in March, with vegetable oils and sugar recording some of the strongest monthly gains. That adds to the burden on processors already dealing with higher bills for edible oils, sweeteners, specialist ingredients, and packaging materials, particularly in categories where margins remain tight.
FDF is calling for a time-limited Food and Drink Energy Support package modelled on the emergency business measures introduced after the invasion of Ukraine. It wants support focused on the most energy-intensive parts of food and drink manufacturing, arguing that assistance during the current pricing cycle would help reduce the scale of later increases on supermarket shelves.
For now, the headline inflation figure remains well below the peaks seen in earlier food price surges. Inside the factory gate, however, the cost base is moving faster. If energy and freight markets remain elevated through the summer, and contract renewals begin to capture the full extent of those increases, the pressure on shelf prices will become harder to contain.
