Inflationary pressures worsening in Irish food and drink sector

Inflationary pressures for Irish food and drink businesses have worsened in recent months according to Food Drink Ireland (FDI), the Ibec group representing the food and drink sector.

FDI Director Paul Kelly said: “The rate of cost inflation in the sector continues to rise across all the main inputs and this is now increasingly accompanied by supply shortages of these inputs. Global food commodity prices for example are up 33% year on year according to the FAO Food Price Index. Food Drink Ireland surveyed member companies in July to assess the extent and impact of input cost increases. The survey found that the majority of food and drink companies experienced substantial increases across a range of inputs over the last 12 months. Earlier in November we surveyed members again and the results show that the problem is worsening.”

The survey found the following increases:

• Raw materials - 42% of companies (compared with 15% in July) have experienced 20% or greater cost increase 
• Energy - 69% (22% in July) have experienced 20% or greater cost increase 
• Packaging – 51% (11% in July) have experienced 20% or greater cost increase 
• Transport/Shipping – 39% (26% in July) have experienced 20% or greater cost increase 

Lower but still significant increases were experienced for other inputs including:
• 50% (30% in July) experiencing 5-20% cost increases for labour.
• 46% (37% in July) experiencing 5-20% cost increases for water/wastewater.

There were some changes in the main factors they attributed the input costs to:
• 100% (96% in July) considered global supply chain constraints very relevant or relevant 
• 96%% (78% in July) considered raw material shortages very relevant or relevant 
• 96% (96% in July) considered Covid impacts very relevant or relevant 
• 84% (100% in July) considered Brexit very relevant or relevant 
• 61% (81% in July) considered domestic supply chain constraints very relevant or relevant 

Looking ahead to the next 6-12 months, respondents most commonly cited packaging as the input where further cost inflation was expected but most other input costs were expected to increase too.

Mr. Kelly concluded “Our survey results are showing that cost inflation and also shortages of key inputs are worsening. Whilst food and drink manufacturers work tirelessly to absorb increases within their businesses, rising inflation in commodity prices can quickly erode producers’ margins if they aim at keeping consumer prices down. Whilst general inflation is now over 5%, consumer price inflation for food and beverages is still less than 1% and costs will inevitably have to be passed on.”