Small and medium-sized food companies in Ireland are being hit by a rise in the cost of inputs of nearly 30%, according to research from representative group Love Irish Food.
Companies said costs were rising across the board, but the most significant increases were in transportation, followed by raw material and energy prices.
Transport price increases are mainly related to the cost of exporting goods, but the cost of transport within Ireland has also increased.
Companies report that their insurance costs are rising, but to a lesser degree than other categories.
Three-quarters of companies surveyed by Love Irish Food attributed the rising cost to supply chain problems arising from the pandemic.
Other major contributing factors included Brexit and increased global demand.
Although the rate of inflation exceeds 5% in Ireland, according to the latest CSO figures, food prices have been rising at an even lower rate of 0.6% year-on-year.
These cost pressures are likely to eventually pass to consumers, said Kieran Rumley, CEO of Love Irish Food.
« We will see movement in terms of rising food prices in the coming months. That is certainly the case, » he said.
Mr. Rumley said food companies should first look at improving efficiency, cutting costs and reducing support budgets before moving on to increasing their prices for retailers.
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« Retailers are also facing increased costs from the pandemic, » he said.
Food companies are also concerned about the impact of the labor shortage across the broader economy.
4 out of 5 small and medium businesses surveyed by Love Irish Food said they expect challenges in recruiting qualified and trained employees next year.
A similar proportion anticipates that retaining existing employees will be a challenge.
Many companies reported that they have to prioritize basic ranges of goods in an effort to offset employment problems.
“The twin challenges of rising input costs and a significant labor shortage are likely to cause serious disruption to the food and beverage industry in 2022,” said Kieran Rumley.
He noted that pandemic unemployment payments have been a barrier to employment.
« If we can see PLP people back in the labor force, it will significantly de-escalate the situation, » he said.
Meanwhile, a survey by Food and Drink Ireland (FDI) found that 42% of food and beverage producers have seen the cost of raw materials rise 20% or more over the past year, compared to 15% in July.
69% have seen a rise in energy cost of 20% or more in the past 12 months, while 51% said packaging costs have increased by a fifth or more.
39% said transportation and freight costs have risen 20% or more over the past year, up from 26% in July.
“Cost inflation in the sector continues to rise across all major inputs, and is now increasingly accompanied by a supply shortage of these inputs,” said Paul Kelly, Director of Foreign Direct Investment.
“Our survey results show that cost inflation and shortages of key inputs are exacerbating. As food and beverage manufacturers work tirelessly to absorb increases in their business, rising commodity inflation can quickly erode producers’ profit margins if they aim to keep consumer prices under . »
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