14 Sep, 2022

Optimism levels at a 5-year low for Irish Food & Agribusiness SMEs

This week we published our fifth annual Food and Agribusiness Report 2022 titled ‘The big SME squeeze’ – the only report focused exclusively on the pulse of Irish food and agribusiness SMEs.

The report, conducted once again by Amarach Research during June and July 2022, includes the views of those that run some of the most innovative agtech companies and many of the food brands that Irish consumers love – all a vital part of our rural and regional economies. 

After living through a global pandemic and following the onset of a war in Ukraine, resulting in the highest levels of inflation for nearly 40 years, the level of optimism among Irish food and agribusiness SMEs has plummeted to a five-year low. This is a drop of 23 percentage points and a significant departure from last year's findings, which showed a marked rebound in optimism levels in 2021 to a 4-year high of 77%. 

The findings of this report cement what businesses and consumers are now feeling – that the coming year will be much more difficult. There are several key factors why Irish food and agribusiness SMEs are disillusioned including 36% of businesses have experienced a 21% or higher increase in input costs (84% reported an increase in costs this year). In addition, the cost of stock management has risen dramatically because of disrupted supply chains. Also, salary expectations are increasingly becoming a barrier, with 2 in 3 businesses finding it difficult to recruit the right people. And, Brexit continues to impact with travel disruption, tariffs, regulatory changes and reduced access to raw materials from the UK, as well as lead times and cost increases. 

Despite the vast list of challenges, the report also tells the story of the responsiveness and resilience of many of our food and agribusinesses, as 82% of companies have maintained or increased their turnover in the past 12 months. Many companies focused on the future and the huge potential for the sector are proactively managing these turbulent times by taking cost-saving steps, implementing price increases, managing contracts with both buyers and suppliers and actively focusing on cash flow management.

Other key findings include: 

  • 63% of respondents cited rising costs of raw materials as the biggest threat to growth. 

  • 75% of businesses are examining ways to cut costs while 65% are planning price increases. 

  • 1 in 4 businesses have tried to access bank finance in the past 12 months; 90% were successful. 

  • 88% of SMEs, across all sizes and types, are taking climate actions with the management of waste and by-products, sustainable packaging, and energy-saving initiatives top of the list. 

  • 46% of businesses do not invest in formal Research & Development. 

  • The top trends impacting Irish food businesses’ planning and development are eco-friendly behaviours, health benefits and local provenance. 

  • Only 26% have a written strategic plan in place. 

  • 69% don’t have a personal finance or wealth plan in place. 

  • Succession is off the agenda for 50% of business owners; not giving it thought, no interest from the next generation and no clear successor are all barriers. While 40% of business owners are without a Will.

David Leydon, Head of Food & Agribusiness said:

“This is a tough time for Irish food and agribusiness SMEs following a global pandemic. One of the biggest challenges is rising input costs and for many to maintain margins this means implementing challenging price increases. Another significant concern on the minds of business owners is rising salary costs coupled with recruiting difficulties - 67% of business owners have experienced difficulty when recruiting and for the fifth consecutive year availability of skills is the main reason why businesses are struggling to hire. 

“With obvious competition from more immediate challenges, the importance of Environmental, Social and Governance (ESG) factors has slipped this year but it’s encouraging to see that almost 90% of Irish food and agribusinesses - across all sizes and types (micro, small, medium, family-owned, and non-family owned) - continue to engage with initiatives to tackle climate change. 

“Given all the uncertainties businesses are facing this year, the importance of strategic planning shouldn’t be overlooked; 35% of business owners say their organisation’s strategy is in their head. At ifac, we have always advised SMEs that planning is key to their long-term sustainability and to support growth. We have many more ways to help food and agribusiness during these turbulent times and some are documented within this year’s report. Ultimately we share the goal of SMEs across the sector – to ensure that Irish and international consumers alike can enjoy the very best products Ireland has to offer.”