The rate of cost inflation in the food and drink sector continues to rise across all the main inputs and it is now increasingly accompanied by supply shortages, according to Food Drink Ireland (FDI).
A survey of food and drink businesses conducted by FDI this month has shown that inflationary pressures on raw materials and input costs have worsened since July 2021 when the majority of companies were already experiencing price hikes.
FDI director Paul Kelly said: “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.”
Kelly said cost inflation for the sector is “expected to continue”.
A number of input costs for food and drink businesses have continued to rise over the past 12 months.
Some 42% of companies (compared with 15% in July) have experienced 20% or greater cost increases in raw materials.
Similar to the challenges experienced in many sectors, 69% (22% in July) of companies have seen their energy costs grow by 20% or more.
Fifty-one per cent (11% in July) say packaging is now at least 20% more expensive and 39% (26% in July) say transport or shipping costs have jumped by 20% or more.
All businesses surveyed now consider global supply chain constraints as “very relevant” or “relevant” to cost increases. Ninety-six per cent consider raw material shortages and COVID-19 impacts in the same way.
Concerns around the impact of Brexit have reduced since July with 84% now (100% in July) considering the EU and UK fallout as “very relevant” or “relevant” to cost inflation.
Looking ahead to the next six to 12 months, the businesses surveyed by FDI most commonly cited packaging as the input where further cost inflation will continue to occur.
However, the rising cost trajectory for all inputs is expected to continue.
Kelly said: “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.”