Brexit, COVID-19 and supply chain headwinds causing inflationary pressures, says Irish F&B sector

09 Aug 2021 --- Irish food and drink businesses are experiencing inflationary pressures across most cost headings due to a combination of external macro factors, including Brexit, COVID-19 pressures, supply chain constraints and raw material inputs. This is according to new analysis by Food Drink Ireland (FDI), the Ibec group representing the food and drink sector.

FDI surveyed member companies last month 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.

Lower but significant increases were experienced, including 37 percent experiencing 5 to 20 percent cost increases for water/wastewater and 30 percent experiencing 5 to 20 percent cost increases for labor.

Respondents attributed the input costs to:

• One-hundred percent considered Brexit very relevant or relevant.
• Ninety-six percent considered COVID-19 impacts very relevant or relevant.
• Ninety-six percent considered global supply chain constraints very relevant or relevant.
• Eighty-one percent considered domestic supply chain constraints very relevant or relevant.
• Seventy-eight percent considered raw material inputs very relevant or relevant.
• All businesses operating throughout the pandemic have had to make significant investments to adjust operations according to public health guidelines.

The FDI survey found that a majority of F&B companies experienced substantial increases across a range of inputs in the last 12 months.Trading hurdles
Brexit has added significantly to trading costs, including transport and logistics and additional administration for trade with the UK and trade with the EU.

Transport costs have also been affected by the significant driver shortage impacting that sector. For international business, the cost of freight containers has exploded since the beginning of the year.

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

Paul Kelly, FDI director, says respondents expected a continuation of inflationary trends in the months ahead and would impact margins and competitiveness in export markets.

He called for a range of measures to offset these impacts, including:

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

Last month, Ireland’s new Food Vision 2030 strategy for Ireland’s food sector was outlined by Charlie McConalogue, Ireland’s Minister for Agriculture, Food and the Marine. 

Meanwhile, the Irish agri-food sector stands to receive over €1 billion (US$1.18 billion) from the EU Brexit fund in 2021. However, local industry stakeholders under FDI have called for targeted support measures to help businesses stay buoyant during the transitional period. 

Green solutions
Among recent developments, Glanbia Ireland recently pledged to achieve a 30 percent absolute reduction in carbon emissions from its processing sites by 2030. It will work with its dairy farmers toward a similar cut in carbon intensity from milk production.

With plant-based meat analogs widely acknowledged as a sustainable solution to lowering the carbon impact of food systems, Ireland’s taste and nutrition company Ireland-based Kerry has been focused on beefing up its savory taste solutions. The company recently brought VegTec to market, a flavor delivery system that provides a juicy and succulent mouthfeel in plant-based products.

Edited by Elizabeth Green