Food inflation to strengthen in 2027 as cost pressures build, IGD forecasts

IGD (Institute of Grocery Distribution) has released its latest food inflation forecasts, putting average inflation at between 2.9 - 3.9% for 2026, rising to 5.6 - 6.6% in 2027 and 5.3 - 6.3% in 2028. Plentiful food stocks at the start of the year, hedging and moderate demand have helped retailers absorb costs to protect shoppers this year, but those buffers are expected to weaken as the effects intensify from disruption in the Middle East, input costs and extreme weather from El Niño.   

The higher inflation that was expected in 2026 has not disappeared. Instead, the timing of price pressure has shifted back, with higher inflation now expected to build through 2027 and remain elevated into 2028.  

One of the biggest risks is El Niño, previously identified by IGD as a high-severity risk and now affecting major producing regions. Evidence indicates an extremely severe event, with effects on yields, quality and availability likely to persist well into 2027 and beyond.  

James Walton, Chief Economist at IGD, said: “Food inflation’s current weakness will not last. ​Stock buffers and hedging ​have delayed, not removed, ​the pressure building from ​disrupted energy markets ​and extreme weather.​ Shoppers have already adapted to repeated periods of high food price inflation. Many have changed how and where they shop, switched products or reduced discretionary spend, leaving fewer options available to absorb any further price rises.  

“For businesses, this reinforces the need to look beyond short-term mitigation and focus on strengthening the resilience of the food system. Greater productive capacity, ideally domestically where appropriate, would help improve resilience across the food system. Combined with stronger productivity, this could support the industry’s contribution to UK economic growth and help drive more stable pricing over time.”   

From a category perspective, fruit and vegetables are expected to make the largest contribution to higher food inflation, reflecting their shorter production cycles and high sensitivity to weather. Other foods and non-alcoholic drinks are also expected to make significant contributions, with most grocery products exposed to inflationary forces such as energy costs, regulatory change and supply chain disruption.  

The full inflation forecast report: ‘IGD Viewpoint: Food inflation ​pressures ahead’ is available to download.    

 

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