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big rise Families warned to prepare for increase in grocery costs as ‘perfect storm’ of price pressures builds in food sector

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Tom Keogh, owner and managing director of luxury crisp brand Keogh. Photo: Kyran O'Brien

Tom Keogh, owner and managing director of luxury crisp brand Keogh. Photo: Kyran O'Brien

Tom Keogh, owner and managing director of luxury crisp brand Keogh. Photo: Kyran O'Brien

Families should prepare for a big rise in the cost of groceries as disruption linked to the pandemic puts increasing pressure on prices.

The price of bread has been rising steadily since April, while other ordinary items such as yoghurt, ready meals and baby food are also now seeing increases.

And sweet treats like chocolate and crisps are two products that are expected to see a hike in the new year as producers and retailers struggle with skyrocketing production costs.

A number of factors are combining to drive up prices, including changes to consumer habits throughout the Covid-19 crisis.

A shortage of cardboard and other packaging is adding to the surging cost of ingredients, transport and labour.

“The cost of packaging is going through the roof,” said Dave Whelan, owner of Barnhill Stores in Dalkey, Co ­Dublin.

“It was born out of the pandemic. Suddenly everyone became a takeaway. Now a pub that does a meal is a takeaway.”

Food prices rose by 3.5pc compared to September 2020, according to the OECD.

And that figure masks larger spikes for certain products.

The price of bread jumped 4.4pc in September alone, compared to the same month in 2020, according to the CSO’s most recent consumer price index.

Yoghurt has been getting more expensive throughout the pandemic, as consumers opted for healthier snacks, with prices rising 4.9pc in September.

On the other side of the spectrum crisp prices have been rising 1-2pc per month since March, with people seeking to treat themselves while they were stuck at home during successive lockdowns.

Fertiliser prices are set to double next year, according to Tom Keogh, owner and managing director of luxury crisp brand Keogh’s, while the price of sunflower oil is up 40pc.

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“We have been swallowing a lot of this,” Mr Keogh said. “The last thing I want to do is to put a price [increase] on the consumer. It’s an extremely competitive market.”

Paul Kelly, director of Food Drink Ireland – the Ibec group representing the agri-food industry, said there is a “perfect storm” of price pressures building.

“There is an inevitability that we are going to see more food inflation,” he said. “It is being driven by a number of factors, including the stop-start of Covid and a shift in consumption patterns.”

AIB’s most recent survey of purchasing managers showed input costs for the services industry rising to a 21-year high.

The cost of renting a shipping container has increased from around €1,500 to well over €10,000 a trip.

The cost of foil trays for use in the ready meal market has jumped by at least 10-15pc. Hygiene equipment has surged in price as a result of the pandemic.

The cost of a box of vinyl gloves, used by deli counter staff to handle food, has seen a tenfold increase.

Natalie Keane, the co-founder of Bean and Goose chocolates, said “every” input cost has gone up.

“Everything from our ingredients, our packaging, our delivery and transport costs, I’d say by an average of 25pc.

“What we are trying to do is absorb it. But I suppose there will come a point where we won’t be able to. We probably will have to review it at some point next year.”

The OECD said this week that food price inflation in the 38-country zone shot up to 4.5pc in September, largely because of a spike in the US.

Dave Whelan, of Barnhill Stores, said he has been stockpiling one particular Spanish crisp brand after consumers developed an expensive “habit” for it.

“There probably has been some inflation in the crisp category over the last couple of months,” said Tom Keogh. “It’s not coming from us. But there definitely is pressure in the background.”

The good news is that rice, pasta, tea and breakfast cereals have been coming down in price over the last year.

The Financial Times reported this week that the cost of food commodities that make up a typical breakfast – including coffee, milk, sugar, wheat, oats and orange juice – has shot up 63pc since 2019, its highest point in a decade, under the strain of bad weather and supply-chain crunches.

That will hit people’s pockets this winter and next year, adding to the burden of soaring energy prices. Irish consumers are facing an added €700 and €800 on their annual utility bills due to rising electricity and gas prices.

Inflation is expected to come in at 5.1pc for the month of October, according to a flash estimate from the EU’s statistics agency, Eurostat – well above the eurozone average of 4.1pc. The European Central Bank expects inflation to start dropping back from spring next year, although that might not be the case for all countries.

Kieran McQuinn, a research professor with the Economic and Social Research Institute, said Irish inflation is running higher because of stronger growth in the economy, which is set for double-digit growth this year.

“We recovered stronger and more robustly than other economies in the euro area,” he said. “We could have higher inflation here than a lot of other countries over the short-term.”

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