PFG expects food costs to climb again toward June

The distributor said it saw a slight deflation in prices during the end of 2023, but foresees a "very slight" climb toward mid-year.
Case volume was up for both independent and chain restaurants at the end of 2023. | Photo: Shutterstock

From its perch one step up the supply chain, distributor Performance Food Group (PFG) expects the prices of restaurant supplies to continue moderating near term before starting to inch up again toward June.

In analyzing its financial results for the second quarter ended Dec. 30, the industry’s second-largest distributor noted to Wall Steet analysts that food prices eased less than it had expected during the last three months of 2023.

“Looking ahead, we continue to expect foodservice deflation to move toward inflation by the end of the fiscal year,” said CFO Patrick Hatcher. PFG’s fiscal year ends in June.

CEO George Holm characterized the expected upturn as “very slight,” but did not reveal exactly how much of an increase PFG expects.

Hatcher revealed that prices ebbed by just 0.4% during the company’s second quarter, after deflating 2.3% during Q1.

The executives noted that deflation isn’t necessarily a good thing for the distributor, since it tempers sales volumes. The effects in Q2 were offset by increases in the volume of cases they trucked to restaurants during the period.

The increase in demand from independent restaurants was particularly strong, with Q2 volume jumping 8.7% year over year, largely because of pulling business away from competitors, according to Holm.

The increase in shipments to chain restaurants was largely the result of fielding larger orders and the “small contribution” of newly acquired accounts.

Across all of the market sectors that PFG serves, case volume rose 2.1%. Profits per case increased by 29 cents from the prior year.

Overall, the distributor’s Q2 sales rose 2.9% from the year-ago period, to $14.3 billion. Net income increased by 10.1%, to $78.3 million.

In the ranking of restaurant distributors by sales, PFG is significantly behind Sysco but narrowly above US Foods.

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