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.
Labour issues
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.
It is surprising how many water brands are owned by food and beverage giants
Published: The Irish Times 18/06/19 Written by Rose Costello.
Water must surely be every marketers’ dream. The basic product costs little and we are repeatedly being told we need to drink more. Up to two litres a day is considered advisable for the average person, according to the World Health Organisation (WHO).
Where that water comes from is up to you. Most of Ireland has access to tap water that is believed to be clean and safe, though it does not always taste great.
All of us also have access to a variety of bottled waters from places as far away as Fiji. What distinguishes one from the other generally comes down to marketing budget.
Take Smartwater, which was launched on to the Irish market last year with a campaign fronted by Jennifer Aniston, its brand ambassador since 2007. There are no published figures as to how much she is paid by Coca-Cola, which owns the brand, but it won’t be peanuts.
Smartwater is described as “vapour distilled spring water with added electrolytes”. So it is creating by boiling water and adding minerals to “create a crisp, clean taste”.
In other words it tastes like water.
According to the label it is “bottled in Northumberland” in England. A green logo on the front identifies this as a “plant bottle”. According to Coca-Cola, this means that some of the plastic is made from polyethylene terephthalate (PET), which comes from fossil fuels, but some of it is from plants.
It doesn’t say how much, which plants, or how that works when it comes to recycling. It’s hard to see how such a bottle could be put with the plastic recycling, but Coca-Cola is not giving away its secrets. That’s the science bit.
Evian, the “natural mineral water”, lists the composition of its product rather than ingredients. That’s because it is bottled at source in the French town of Evian for its owner Danone. If the bottle looks a bit hazy that’s because it is made from 50 per cent recycled plastic. Compare the labels on Volvic, another mineral water brand owned by Danone and bottled in France, to see how the mineral content varies depending on the source. This will affect the taste.
Behemoths
It’s surprising how many water brands are owned by food and beverage behemoths. San Pellegrino, the sparkling mineral water bottled in Italy, does not mention on the label that the brand is owned by Nestlé.
This bottle also lists minerals on the front because the water comes replete with those picked up on its subterranean journey through Alpine rocks. It has some natural carbonation but carbon-dioxide is added to make the spa water more palatable. That’s the difference between still and sparkling water.
It’s hard to know how to categorise Ballygowan. Ever since the brand was launched in the 1980s, the water has been bottled at source in Newcastle West.
The owners claim it has gone through a 750-year journey through mineral-rich limestone and into the aquifer before being captured in Limerick. The business is owned by Britvic, a soft drinks company, with operations in Britain, France and Brazil as well as Ireland.
The bottle has what looks like an eye symbol over the words NSAI certified. This indicates that National Standards Authority of Ireland gave its stamp of approval to the process.
The green heart logo stamped with Love Irish food seems appropriate given that this has come out of the earth here.
Dunnes Stores Irish Spring water does not have that symbol even though it is bottled at source in Monaghan.
Deep River Rock, which is bottled by Coca-Cola, does not get to use the Love Irish Food symbol either, though its plant is on the island of Ireland in Co Antrim. Its label has “PET” inside a circle with two arrows, which is to indicate the plastic is recyclable. A set of simpler symbols could really help shoppers.
Expensive
Bottled water is expensive, but sometimes that is the point as with the Spanish brand Solan de Cabras Natural Mineral Water, which comes in a blue glass bottle and costs twice the price of many others.
At other times health is a concern. Many Irish households are still living with “boil water” notices, and unsafe levels of lead have been found in supplies around the country. The answer may not lie in bottled water, however, given that an analysis of some of the most popular brands showed some contained tiny pieces of plastic. The WHO is to conduct a review into the potential risks of plastics in drinking water.
The Smartwater bottle says it best: “Sometimes the answer is right under your nose, and other times it’s floating above your head.”
Irish Food SMEs expect revenue growth in year ahead
Author: John Kennedy
Date: April 27 2021
75pc of Irish food SMEs expect revenue growth in the year ahead as investment is set to intensify, according to the Love Irish Food/PwC 2021 Irish SME Food Barometer.
Irish food SMEs are positive about the year ahead and many plan to invest, emphasising the continued importance of the UK market.
The 2021 Irish SME Food Barometer by Love Irish Food and PwC Ireland of close to 70 Irish food SMEs found that 69pc of respondents do not intend delaying investment in the year ahead, compared to 62pc who did delay investment over the last 12 months due to pandemic uncertainty.
More than a quarter (26pc) score the UK as their most important export market, with 69pc considering the Republic of Ireland their most important territory for growth.
Close to two-thirds (60pc) state the importance of environmental sustainability has increased in 2021.
65pc of companies are confident the economy will improve over the next 12 months, despite challenges related to COVID-19 and Brexit, up from just 16pc in late 2019. However, some caution is in the air as these positive economic growth forecasts are tempered by 22pc of companies who believe economic growth will decline in the year ahead.
“With the prospects of the re-opening for our economy over the coming months, the research reveals cautious optimism for business prospects for Irish food SMEs,” said Owen McFeely, Director, PwC Retail & Consumer Practice.
“These organisations have seen major disruption in their businesses for more than a year and, with plans for investment, they are now looking forward to turning a corner.”
Food for thought
Separately, the positive sentiment expressed in the new research findings on what is one of Ireland’s largest and most important indigenous industries indicates that there will be a significant uplift in the levels of capital investment made by food and beverage companies, following a significant stall during the pandemic.
Underlining the growth agenda for Irish food SMEs, 69pc of respondents stated that they will not delay investment over the coming 12 months, compared to 62pc who said they did delay such investment in the last 12 months, representing a dramatic turnaround.
Furthermore, 20pc of respondents confirmed that they are planning to launch new products or services to drive business growth in 2021. A total of 11pc will enter new markets. Other activities to drive business growth include implementing operational efficiencies (19pc) with a further (11pc) aiming to achieve growth by investing in digital strategies.
Almost one in ten (8pc) will seek price increases, up from 6pc last year, highlighting the ongoing challenge for many Irish companies who are grappling with tight margins and cost competitiveness. The growth of volume at the expense of value continues to place huge pressure on the food manufacturing sector.
The impact of Covid-19 (58pc) is the greatest threat for the food and beverage sector, according to the SMEs surveyed, fuelled by economic uncertainty, and associated labour issues.
Volatile commodity prices (43pc) are also a significant threat for food and drink SMEs. This is likely a reflection of uncertainties in global and local supply chains. Almost one in four (24pc) are concerned about Brexit.
Meanwhile, despite the varied challenges posed to the sector by Brexit, the UK is the most important export market for Irish food SMEs, followed by the European Union. 26pc of respondents said that the UK continues to be their most important market. Notably, almost a quarter (24pc) stated that more than one-fifth of their company’s revenues in 2021 will come from trade with the UK compared to 19pc in 2019. 69pc consider the Republic of Ireland their most important territory for growth.
“Notwithstanding a difficult trading environment, it is encouraging to see evidence of optimism amongst food sector SMEs regarding the potential for their own company’s performance in the sector, reflecting factors they feel a greater degree of control over,” said Kieran Rumley, executive director, Love Irish Food.
“As anticipated, Covid-19 related issues remain the greatest concern for companies operating in the food and drinks industry.
“However, volatile commodity prices now clearly pose a new and significant threat to companies, especially in the context of Covid-19 related costs imposed on such businesses more recently.
“It is unlikely that SMEs will be able to shoulder the burden of these additional costs for long and may eventually be forced to pass these on as consumer price increases. Love Irish Food is working to increase the support offered to companies throughout 2021, with greater retailer support in the interface with the retail grocery sector, as part of its mission to advance the future of Irish food and drink brands.”
The sizzle on sustainability
Environmental sustainability remains high on the agenda for Irish food and drink SMEs with 60pc of those surveyed stating that the importance of having an environmental sustainability strategy in place has increased this year.
In addition, over half (57pc) of companies confirmed that they have a sustainability plan in place to make improvements throughout 2021. Key areas of investment include energy consumption (22pc), packaging reduction (18pc) and water usage (16pc).
McFeely said that developing a sustainability strategy is critical as consumers have clearly indicated their willingness to engage with brands that promote their sustainable credentials. This is in line with recent PwC global research indicating that 55pc of consumers agreed that they buy from companies that are conscious of protecting the planet, and 54pc agreed that they buy products with eco-friendly packaging.
For grocery shopping, in particular, consumers across the board say that they’re willing to pay a price premium for healthier options (55pc), local produce (50pc) and sustainable packaging (46pc), regardless of shopping online or in-store.
“A key opportunity for the sector is the area of sustainability. Consumers have become far more sophisticated when it comes to sustainable choices. Irish Food SMEs are and will be dealing with customers who want to know what they are doing to play their part to protect our environment. Building a sustainable business is not a passing fad. Knowing what consumers now value and changing the business model will define their long-term sustainability and growth.”
Pictured at top (from left): Emily MacDonnell, Senior Associate, PwC Ireland Retail & Consumer Practice; Kieran Rumley, Executive Director, Love Irish Food; and Owen McFeely, Director, PwC Ireland Retail & Consumer Practice
