Freight costs have 'exploded' as inflation rise reported in food and drink sector

Food and Drink Ireland's director is calling for a quick rollout of the EU's Brexit Adjustment Reserve

Container ship Jork Ruler performs a 180-degree turning manoeuvre on the River Lee after arriving from Rotterdam at Tivoli docks in Cork City. Picture; David Creedon

Brexit, global supply chain constraints, Covid-19, and the rising price of raw materials are all fueling "substantial" inflationary increases in the Food and Drink sector in Ireland. 

That's according to Food Drink Ireland, the Ibec employers group representing the sector that is calling for renewed focus from the government on reducing the costs of business in Ireland. 

Across a range of inputs, businesses have reported "substantial increases" with transport and shipping a standout area experiencing inflation. 

Port of Cork has reported a busy year despite ongoing challenges. Logistic costs have surged amid the fallout of Brexit and the Covid-19 pandemic. Picture: Larry Cummins

Just over a quarter of the surveyed businesses said they had experienced an increase in transport and shipping costs of 20% or more and said the cost of freight containers "has exploded since the beginning of the year".

A driver shortage is also impacting the sector that has already seen additional trading costs imposed by extra post-Brexit administration and the use of the UK land bridge to trade with the EU. 

Utility costs surge

In addition, a fifth of businesses in the sector said energy costs have swollen by 22% and other utility costs like packaging have increased by more than 11%. 

More than two-fifths of businesses reported a rise in the price of raw materials of about 10-20% while insurance prices have also seen increases-with 15% of businesses reporting premium increases of 20% or more. 

Significant increases in other areas included the cost of labour rising between 5-20% for 30% of businesses. 

Water/wastewater costs rose between 5-20% for nearly 40% of businesses. 

100% of surveyed businesses attributed Brexit as a factor in their cost increases along with the Covid-19 pandemic at 96%.

Other factors reported as "very relevant or relevant" in the survey included: 

• Global supply chain restraints at 96%
• Domestic supply chain restraints at 81%
• And raw material price increases at 78%

Market competition

Food and Drink Ireland's director Paul Kelly said these inflation increases could affect competitiveness in export markets and impact profit margins. 

He said respondents expect this inflationary trend to continue for the foreseeable future and that government intervention is necessary.  

As well as a renewed focus on reducing business costs, Mr Kelly said funding from the EU's Brexit Adjustment Reserve must be rolled out quickly for the sector.