F&B sector “quietly optimistic” despite cost challenges for 2022

Significant challenges remain of course. It’s hard to remember a time before Brexit was part of the discussion, replaced in recent months by concerns around the implementation of the Northern Ireland Protocol.

The issue will continue to loom large, not to mention the ongoing impact of the coronavirus pandemic. As we move into a period where the historic governmental supports to business will no longer be there, restrictions, especially for the hospitality sector, will be more penal.

Coronavirus has of course resulted in labour shortages, in hospitality most markedly, as businesses seek to comply with restrictions.

For the agri-food sector more generally, access to skills remains a major concern due to the industry’s historic reliance on European labour, no longer as readily available. The rising cost of production, both in terms of raw materials and energy will also continue to be a factor. Meanwhile, businesses are actively looking at automated solutions to mitigate labour shortage and increase capacity for expansion.

A sense of optimism is there to be found, however, with strong prospects for growth remaining in some subsectors. For example, a new generation of consumer, poor in time but rich in disposable income, is fuelling expansion of home delivery services.

There also remains a healthy level of mergers and acquisition activity, which continues to tell a story of consolidation.

Moves to diversify from major players such as Cranswick, which recently purchased vegan cuisine specialist Ramona’s Kitchen are of particular interest and point to a wider trend in the sector.

The source of funding for investment is also changing in the wider UK market and will have implications locally. The latest Grant Thornton M&A sector report indicated that 44% of food deals completed in the third quarter of 2021 involved private equity.

This is, in part, fuelling a renewed focus on sustainability as investors seek to support companies that can display strong Environmental, Social and Governance credentials. Expect ESG to be front and centre of conversations with customers, suppliers and funders.

Whatever 2022 has in store, sustainability of supply will be key, and on that measure the Northern Ireland food and drink sector has never been found wanting. Continued local and national policy support from government remains critical. Here’s to a plentiful 12 months ahead.

* originally published in Ulster Grocer magazine