Kieran Conroy
Country Manager, Nestlé Ireland & Chair of the Prepared Consumer Foods Council, Food Drink Ireland
Few sectors of the economy have escaped the turbulence of high inflation and the cost of living crisis. Ireland’s food and drink sector continues to weather the storm that formed in the aftermath of the Covid-19 pandemic.
Today, consumers and businesses are coming to terms with the likelihood that the era of low interest rates has come to an end. Coupled with high energy prices, this could put pressure on the positive performance of the economy.
Rapid price increases in food and drink sector
The prepared consumer foods sector has seen input business costs rise significantly in the past year. These include rising energy bills, packaging costs and raw materials, which have forced businesses to pass on the costs to the consumer. This has created further challenges to the cost of living pressures facing the economy.
According to the most recent Consumer Price Index, prices were approximately 8.5% higher in February 2023 compared with February 2022. Food and non-alcoholic beverage prices increased by 13.1% in the year. These price increases are due to higher prices across a range of products such as meat, bread, milk, eggs and vegetables.
Prices were approximately 8.5% higher in February 2023 compared with February 2022.
Downward trend in some commodities
Further evidence of the ongoing cost of living challenges is illustrated in retail sales. Overall volume retail sales decreased by 1.0% during the three-month moving average (from November 2022 to January 2023) while the value of sales increased by 6.1%.
However, some inflationary pressures may stabilise this year. There was a decrease in the price of wholesale electricity in January 2023 by 19.5% compared to January 2022. The FAO Food Price Index (a measure of the monthly change in international prices of a basket of food commodities) averaged 126.9 points in March 2023, down 2.1% since February and a 20.5% decline since it peaked 12 months ago.
Inflationary impact of food and drink sector
These are tentative signs of the stopping — or at least slowing — of rising inflation. Government support schemes, particularly for small businesses, are welcome. However, future potential new regulations on labelling, packaging and reformulation could result in additional costs to both indigenous Irish and multinational food businesses.
The industry hopes that government takes note of the cost of living crisis as it implements such measures in the near future. If so, I am confident that the food and drink sector will be in a better position to grow, innovate and be a stimulus to make a positive difference in society.