Cost increases being experienced by firms have yet to be passed onto consumers but they will likely make their way through in time
Small and medium sized food companies in Ireland are being hit with input cost rises of almost 30%, according to research from the representative group Love Irish Food.
Companies said costs were rising across the board, but the most significant hikes were being experienced in the areas of transportation, followed by raw materials and energy prices.
The increases in transport prices related mainly to the cost of exporting goods, but the cost of transporting within Ireland also increased.
Companies reported that their insurance costs have been rising, but to a lesser extent that the other categories.
Three quarters of companies surveyed by Love Irish Food attributed the cost increases to supply chain issues arising from the pandemic.
Other key contributing factors included Brexit, and increased worldwide demand.
Those cost increases are likely to make their way through to the prices that consumers pay for their food.
However, although consumer price inflation is running at in excess of 5% in Ireland, according to the latest CSO figures, food prices increased at a more muted rate of 0.6% year-on-year in October.
The bulk of the inflation in the wider economy is accounted for by rising energy and fuel prices.
Food companies are also concerned about the impact of labour shortages across the wider economy.
Four out of five SMEs surveyed by Love Irish Food said they anticipated challenges in recruiting qualified and trained staff next year.
A similar proportion expect that retaining current staff will be a challenge.
Many companies report that they are having to prioritise core ranges of goods in an effort to offset labour problems.
“The twin challenges of rising input costs and significant labour shortages have the potential to cause serious disruption on the food and drink industry in 2022,” Kieran Rumley, Executive Director of Love Irish Food said.
“The global pandemic and Brexit have made the issues facing the sector acute, with many now having to consider range rationalisation to offset labour challenges and decrease costs,” he added.