Food Drink Ireland (FDI), the Ibec group representing the food and drink sector, has warned that businesses in the sector are facing further increases to input business costs due to the incoming hike in the national minimum wage.
The concern is raised as FDI publishes its Quarter 3 (Q3) Business Monitor which highlights a range of economic factors that are impacting the food and drink sector.
The latest Business Monitor shows that commodity prices in general have stabilised in the summer months.
Energy prices increased in Q3, but overall prices are much lower than the same period last year.
The forthcoming national minimum wage increase from €11.30 to €12.70 will lead to a significant increase in input business costs for small and medium-sized enterprises (SMEs), in particular, FDI has said.
Increased costs for food businesses
The Business Monitor also shows that food and non-alcoholic beverage prices in September increased by 7.8% in the year, but only by 0.4% in the month.
The yearly increases are due to higher prices across a range of products such as vegetables, meat, bread and cereals, sugar, jam, honey, chocolate and confectionery and mineral waters, soft drinks, fruit and vegetable juices, according to the report.
The volume of retail sales (excluding bars and motor) increased by 2% when looking at the three-month moving average (June-August 2023) versus the same months last year, with the value of sales increasing 3.4% over the same period.
Jonathan McDade, deputy director of Food Drink Ireland said: “The challenges associated with high inflation are likely to shift to increased labour costs arising from the forthcoming increase in the national minimum wage in January.
“This will pose a challenge to the food and beverage sector as it tries to manage staff retention with increased input business costs, throughout the supply chain.
“It is also worth noting that many businesses will be managing a significant transition to a ‘Living Wage’, pensions autoenrollment, and other significant labour market changes over the coming years,” he added.
Irish monthly food trade
According to the Business Monitor, exports of food and live animals decreased marginally by €24 million (-1.9%) to €1.2 billion in August 2023, compared with August 2022.
During this period, exports of meat and meat preparations decreased by €19 million (-4.75%) to €381 million, and dairy products and birds’ eggs decreased by €9 million (-2.3%) to €389 million.
Commodity prices
In September 2023, the FAO Food Price Index (FFPI) remained virtually unchanged from August 2023, averaging at 121.5 points.
Decreases in meat, dairy and vegetable oils offset increases in cereals and sugar. This month’s FFPI follows the continuing downward trend, averaging as much as 38.2 points below the peak it reached in March 2022.