From cocoa in west Africa and oranges in Brazil to olives in southern Europe and coffee in Vietnam, extreme heat, droughts and floods are proving disastrous for crop production, reducing fruit and vegetable yields, squeezing supply chains and driving up food prices.
With almost half of food consumed in the UK imported from overseas, British retailers and consumers are highly vulnerable to these climate shocks. But domestic farmers also face similar challenges. In 2023, storms and floods ruined thousands of acres of crops, slashing UK vegetable production by 12%.
What is climateflation?
Climateflation is a term coined by Isabel Schnabel of the European Central Bank’s executive board to describe how climate change is disrupting food and commodity production and creating inflationary pressures.
Britain faces a climateflation crisis, with food prices projected to rise by more than a third (34%) in the next 25 years, according to a new report by The Autonomy Institute, a think-tank. The warning comes as inflation rose to 3.6% in June, fuelled largely by food and fuel costs.
Globally, annual food inflation could rise by up to 3.2 percentage points per year in the next decade due to higher temperatures, according to a study from the European Central Bank and the Potsdam Institute for Climate Impact Research.
For food and drink businesses, climateflation means higher costs, growing volatility across supply chains and shifting consumer habits. Indeed, the 2025 Global Consumer Survey on Grocery Inflation found that 86% of UK consumers are concerned about the impact inflation will have on grocery prices, with 66% buying less as a result.
Restock, reroute and relabel
Retailers, manufacturers and food service providers are planning for greater price uncertainty. They’re rethinking sourcing strategies and paying closer attention to stock management in order to stay resilient to climateflation.
Bruno Zoccola is the owner of Valentina Deli and Restaurants, a London-based delicatessen that sells Mediterranean food. Climate pressures are reshaping the shop’s supply chains for essential ingredients, including olive oil, pasta, tomatoes and nuts, says Zoccola.
“Our customers expect high-quality produce so there is pressure to deliver that,” Zoccola says. “We’re working closely with suppliers we’ve known for decades to secure stock and explore new food options. Those strong relationships have helped us manage supply chain pressures, providing more stability and flexibility in what we can offer.”
Valentina Deli is overcoming supply shortages by encouraging customers to adapt. “We offer recipes that use more ambient ingredients and are encouraging our customers to focus on seasonality so we are no longer overly reliant on a single region or harvest,” Zoccola says. “As an independent retailer, we can’t always absorb rising costs, but we can add value by staying true to our Italian roots and helping people make the most of what’s available.”
Crop shortages are forcing retailers to swap ingredients or reformulate products, which can create new allergen risks. “Keeping customers safe depends on updating labels quickly and accurately,” says Jim Bureau, chief executive of Loftware, a product-identification and supply chain company.
Meanwhile, extreme weather events means companies sometimes must reroute suppliers or logistics at short notice. Bureau recommends that businesses ensure all trading partners, including suppliers, co-packers and manufacturers, work from the same data system. “This enables companies to keep products moving, labels accurate and consumers protected, no matter what the climate throws at them,” he says. “It reduces errors, prevents costly recalls and helps companies maintain margins.”
Climate change is shifting tax liabilities
One of the nation’s most cherished tipples is also under threat as climate change reshapes tax liabilities for winemakers.
Grapes ripened under blistering temperatures often turn sugary, resulting in wines with a much higher alcohol content. This is unintentionally pushing bottles into higher duty bands under the UK’s reformed alcohol tax regime.
In August 2023, the government announced plans to tax wine by strength rather than category as part of a public health campaign to encourage drinkers to cut back. Ministers acknowledged the burden this would inflict on winemakers and introduced an 18-month easement period, which ended in February 2025. Stronger wines now attract higher levies, with duty on 14.5% ABV bottles reaching £3.09.
Longer periods of hotter weather in regions such as California and southern France are making wine boozier. Gone are the days of the ‘luncheon claret’ at 12%. Today, the average bottle of Bordeaux is closer to 14%. With the UK’s new alcohol duty, the average price of a bottle of 14.5% ABV red wine has increased 80%, according to the UK’s Wine & Spirit Trade Association. Conversely, wine from cooler climates are becoming more competitively priced owning to their lower ABV.
To cope, some growers are planting trees and hedgerows to create microclimates that protect their vines from heatwaves. Others are adjusting their marketing efforts to pursuade drinkers that their bottles merit higher prices. Tweaking the fermentation process is one way to lower the alcohol content of wine – and therefore avoid higher tax – although this risks altering the taste.
As an independent retailer, we can’t always absorb rising costs
Tax strategy has become as critical as terroir. “Winemakers face heightened levels of stress and uncertainty, while the extra costs are eroding their margins,” says Alex Baulf, vice-president of indirect tax and e-invoicing at Avalara. Smaller, family-run vineyards are especially exposed, as they often lack the resources and advisers that larger players rely on, he adds.
There are steps winemakers can take to avoid costly tax missteps. Firstly, classifying goods correctly will ensure the right duty is applied at the border. Secondly, for those expanding into international markets via direct-to-consumer channels, Baulf recommends using integrated tax engines at checkout to automatically calculate customs duties. This reduces the risk not only of overpayment, but underpayment and fines, too. “Customers avoid unwelcome surprises on delivery and sellers protect their profit margins by building costs into the final price from the start,” Baulf says.
Climateflation seems destined to be an ongoing concern. Temperatures are more extreme, with hot- and cold-weather records frequently being broken. Rerouting supply chains, relabelling jars and rejigging recipes may keep stock on the shelves, but there’s only so much that can be achieved with these tactics. Consumers may soon discover that the real luxury is not a top-shelf bottle of their favourite plonk, but a steady, affordable supply of everyday food and drink.
From cocoa in west Africa and oranges in Brazil to olives in southern Europe and coffee in Vietnam, extreme heat, droughts and floods are proving disastrous for crop production, reducing fruit and vegetable yields, squeezing supply chains and driving up food prices.
With almost half of food consumed in the UK imported from overseas, British retailers and consumers are highly vulnerable to these climate shocks. But domestic farmers also face similar challenges. In 2023, storms and floods ruined thousands of acres of crops, slashing UK vegetable production by 12%.
