Inflationary pressures impacting Irish food and drink sector

  • FDI survey finds substantial input costs increases over last 12 months
  • Brexit, Covid, supply chain constraints and raw material shortages all factors in the increases

Irish food and drink businesses are experiencing inflationary pressures across most cost headings due to a combination of macro external factors including Brexit, Covid, supply chain constraints and raw material inputs, according to Food Drink Ireland (FDI) the Ibec group representing the food and drink sector.

FDI 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 including:

Cost increase over last 12 months by input 20% or greater increase 10 – 20% increase 5 – 10% increase 0 – 5% increase No increase Decrease Total
Raw materials 15% 40% 26% 11% 4% 4% 100%
Energy 22% 41% 19% 11% 7% 0% 100%
Packaging 11% 44% 22% 19% 4% 0% 100%
Transport/Shipping 26% 23% 30% 15% 6% 0% 100%
Insurance 15% 15% 12% 38% 20% 0% 100%

 

Lower but still significant increases were experienced for other inputs including 37% experiencing 5-20% cost increases for water/wastewater and 30% experiencing 5-20% cost increases for labour.

Respondents were very clear in the main factors they attributed the input costs to:

  • 100% considered Brexit very relevant or relevant
  • 96% considered Covid impacts very relevant or relevant
  • 96% considered global supply chain constraints very relevant or relevant
  • 81% considered domestic supply chain constraints very relevant or relevant
  • 78% considered raw material inputs very relevant or relevant

All businesses operating throughout the Covid pandemic have had to make significant investments to adjust operations in line with public health guidelines.

Brexit has added significantly to trading costs including transport & logistics and additional administration both for trade with the UK but also for trade with the EU using the land-bridge.  Transport costs have also been affected by the major driver shortage impacting that sector and for international business, the cost of freight containers has exploded since the beginning of the year.

Food businesses are also identifying strong increases in utility costs, in particular energy and also in packaging.

Paul Kelly, FDI Director said respondents expected a continuation of inflationary trends in the months ahead and that this would impact on margins and competitiveness in export markets. He called for a range of measures to offset these impacts including:

  • A rapid roll out to the sector of funding from the Brexit Adjustment Reserve.
  • A renewed focus across Government on reducing the cost of doing business in Ireland.

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