Higher food prices in Europe are only a matter of time

The prolonged disruption in the Strait of Hormuz is reshaping energy markets, with oil and gas prices now expected to remain elevated well into 2028. Even with a near-term resolution, recovery will be gradual due to damage to critical infrastructure, keeping supply tight.

Higher energy and packaging costs are now feeding through the food value chain and in some cases already eroding food manufacturers’ margins. While hedging may delay the impact, those higher input costs will ultimately drive a renewed cycle of mid- to high-single-digit food price inflation across Europe in 2027.

Already, the “higher for longer” energy environment is weighing on European economies. Revised forecasts point to slower growth, weaker consumption, and higher overall inflation and unemployment, with the full impact expected in 2027.

This may leave consumers limited room to absorb further food price increases. As a result, they are likely to cut back on discretionary spending and become even more price-sensitive in their grocery purchases.

For all players in the food market, it will be a challenging balancing act between increasing prices, maintaining margins, and protecting volumes.