Food inflation: lower peak, longer pressure
24 June 2026Food inflation may peak at 5% in late 2026, but cost pressures are set to last longer. We explain what has changed.
Key takeaway
The biggest change in IGD's latest forecast is not the peak level of food inflation, but how long inflation is expected to remain elevated. Retail food and drink inflation is forecast to average 3.3–4.3% in 2026 and 3.1–4.1% in 2027, before easing gradually through 2028.
Why has the forecast changed?
The outlook has shifted from a relatively short-lived inflation shock to a longer period of cost pressure. Although the new US-Iran deal has reduced the immediate risk of escalation, earlier disruption to energy markets and supply chains continues to feed through the food system. At the same time, businesses are facing continued pressure from labour costs, regulation and policy changes.
Is this another 2022-style inflation crisis?
No. Inflation is expected to remain well below the levels seen during the 2022-23 food inflation surge. However, many current pressures are proving more persistent than initially expected. For food businesses, this means managing an extended period of cost pressure rather than responding to a single shock event.
What are the biggest inflation drivers?
Several factors are combining to keep inflation elevated:
Energy markets remain vulnerable to geopolitical disruption.
Labour costs continue to rise.
Policy-related costs are building across the food system
Weather-related risks could affect agricultural production and commodity markets.
Supply chain pressures are beginning to rebuild
Which categories are most exposed?
Inflation is expected to be broad-based but uneven. We expect the strongest pressure over the next 12-18 months to be in areas such as meat and produce, where labour costs, weather risks and supply chain factors are likely to have the greatest impact.
What should food businesses focus on now?
The question is no longer whether food inflation will rise. The key challenge is understanding how long current pressures persist and how unevenly they pass through the food system.
Businesses should consider:
Which categories are most exposed?
How resilient are sourcing and supply chains?
Where are the biggest cost risks?
How flexible are pricing and promotional plans?
What assumptions underpin plans for 2027 and beyond?
Those that build resilience and adapt quickly are likely to be better positioned than those waiting for greater certainty.