Lakeland Dairies warns of significantly higher food prices in coming months

Cavan-based Lakeland Dairies has warned consumers to brace themselves for significant food-price inflation in the coming months as input costs continue to soar. The warning came as the cross-Border co-op reported record revenues of €1.3 billion for last year on the back of a surge in global dairy prices .

Lakeland said higher input costs in the form of the three Fs – fertiliser, feed and fuel – now posed a major challenge to farmers and processors and would result in higher food prices. The business is also concerned about energy availability, its chief executive Michael Hanley said.

Food price inflation, coming on the back of surging energy costs, is threatening to place an even sharper squeeze on household budgets.

“Food price inflation is getting worse on a monthly basis and will continue to increase into the third quarter,” Mr Hanley said. “The costs of all inputs are subject to inflationary pressure.”

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He was speaking as Lakeland reported record revenues and profits for 2021. Headline revenue rose by 20 per cent to €1.3 billion while operating profits rose 8 per cent to €28.2 million.

Despite the increase in costs, the group benefited from a worldwide shortage in dairy, triggered by the weather and pandemic-related issues in 2021, which drove butter and milk powder prices to near record levels.

Lakeland, which exports products to more than 80 countries, said sales increased across its four main divisions – food ingredients, food service, consumer foods and agribusiness.

The group’s food ingredients division, its largest, saw revenues rise by 20 per cent to €831.5 million on the back of “consistently strong demand” for powders, proteins and dairy fats, it said. Food-service revenues increased by 23 per cent to €223.9 million while sales across the consumer foods division rose by 16 per cent to €170.2 million.

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Lakeland, which took over rival LacPatrick in 2019, warned that rising input costs now posed a significant challenge to operators.

“We expect relatively stable dairy market conditions through 2022 albeit there are significant challenges in our operating environment, including inflationary pressure on all costs, as economic uncertainty in light of the pandemic and geopolitical issues persist,” Mr Hanley said.

While the cost of energy was already rising last year, Russia's invasion of Ukraine had greatly aggravated the situation and was now threatening an energy supply shock, he said.

"Despite the higher cost, the one worry we'd have is the continued availability of energy," he said. "No matter which way you look at it, Ireland is at the end of the line in Europe, " he said. "The industry will have a good year provided we have the energy supply," he said.

The farmer-owned co-op collected a record two billion litres of milk from 3,200 farm families across 16 counties in the North and the Republic in 2021. It said it closed the year with a strong balance sheet including shareholders’ funds of €230.9 million.