Ireland’s food and drink manufacturing sector is facing continuing challenges as global and domestic price indicators point to a "worsening" inflationary environment.

This is according to Food Drink Ireland (FDI), the Ibec group representing the food and drink sector, which has published its latest business monitor.

The FDI business monitor brings insights into the retail, economic, and consumer trends shaping Ireland’s food and drink sector.

The underlying cost base for Irish food processors remains elevated, driven by "persistent volatility in global commodity markets, escalating energy costs, and sustained pressure on agricultural inputs", FDI said.

The latest data from the UN Food and Agriculture Organization (FAO) shows that the overall FAO Food Price Index has reached its highest level since early 2023.

Cost pressures

Paul Kelly, director of FDI, said that cost pressures facing manufacturers included elevated input costs for raw materials, energy and transport and continued volatility in packaging inputs.

Kelly also highlighted lag effects between input cost increases and wholesale price adjustments.

Commenting on the current environment, he said: “The reality for food and drink manufacturers is one of escalating costs and pressure on margins.

"Global commodity markets continue to be volatile, agricultural inputs remain elevated, consumer sentiment is dropping, and businesses are operating in a highly competitive international environment.

"Ensuring that Ireland’s food processing sector remains competitive will require a continued focus on managing input costs and supporting investment across the supply chain."

Price fluctuations

Linda Stuart-Trainor, deputy director of FDI, said that the ongoing conflict in the Middle East has "triggered a sharp spike in global fuel costs, necessitating reactive shifts in government policy".

"The immediate operational toll of these escalating energy costs was starkly highlighted by April’s nationwide protests, which caused critical disruptions to networks, supply chains and deliveries across the country," Stuart-Trainor said.

"While the full impact is not yet clear, and as highlighted in this edition, we can already observe a decrease in overall consumer sentiment to 2023 levels, and an increase in inflation to 3.7%."

FDI said it continues to engage with government bodies and key stakeholders to ensure that Ireland's food and drink sector is "robustly represented in all policy discussions, actively working to mitigate these internal and external impacts and safeguard our industry’s competitiveness".