Operating costs to blame for food price disparities: Report

The gap between food manufacturers' prices and retail prices are due to substantial increases in business operating costs, according to an economic report published today.

The gap between farm gate prices and retail prices is not due to excessive margins among food manufacturers, the report by economists Tansey Webster Stewart & Company adds.

The combined financial results of the main food wholesalers in Ireland and a representative and weighted sample of 50 independent retail grocery outlets were made available to the report's authors.

They then carried out detailed analysis of these results to determine the gross and net margins of the companies.

Among the notable findings of the report was that since 1999, increases in Irish food prices have been less than general inflation here.

It also noted that 56% of all Irish food, drink and tobacco imports originate in the UK and are highly susceptible to euro/sterling/dollar exchange rate fluctuations. In particular weaknesses in the euro - compared to sterling - directly contributed to higher inflation from 1999.

Irish food producers, distributors and retailers, saw hourly earnings increase by 26.6% between 1999 and 2002.

Irish earnings per hour are now closer to Finnish and Belgian levels, well above the prevailing rates in Spain, Italy or France.

Commenting on the report, Ailish Forde, Director General of RGDATA said: "The study nails the lie that the independent retail grocery sector is involved in profiteering and shows that net margins for the wholesale trade are at 1.7%, while margins for the independent retail sector have decreased to 2.65%.

According to Ciaran Fitzgerald, Director of IBEC's Food and Drink Industry Ireland: "Food and drink manufacturers' output prices have risen by the much lower figure of 8% in this period, far below their cost increases and far below the general inflation rate of 13.6%."