AI critical to cutting food and drink labour costs

Labour shortages and costs can only be tackled effectively if the food and drink industry bolsters its use of and investment in AI and robotics.

The food system will become less resilient unless emerging technologies are adopted at a more rapid pace, a new report from the UK’s Institute of Grocery Distribution (IGD) has argued.

“Mounting labour costs, climate change, tariffs and an increasing population are putting immense pressure on the food system’s resilience,” says IGD chief economist James Walton.

A “perfect storm” is brewing in the global food system, though the sector is remaining reactive instead of proactive, which would see it investing in and focusing on future tech.

Food retail prices on the rise“This combination of factors is leading to a highly volatile and uncertain environment, impacting both consumer and business confidence and affecting operations across the food system,” explains Walton.

Food retail prices in the UK would rise by 3.4% and out-of-home prices by 5.2% this year as a result of rising labour costs alone, the How to Respond to Rising Labour Costs in 2025 report highlights.

This is on the back of reduced financial confidence in the sector, with just 23% of business leaders believing better things will come in the next 12 months.

There are 200,000 fewer people working in UK food manufacture since the 1980s, dropping from over 613,000 in 1980 to just under 416,000 last year.

This is despite an overall population increase of 13m in the UK over the period, but a result of more efficient food manufacturing systems and technologies.

However, organic advancements as seen in the past won’t cut it for the future success of the sector, highlights the report.

The UK population is set to grow by a further seven million over the next 20 years, meaning the food and drink industry will need to feed more people alongside rising labour and input costs.

Growing food systems“The UK food system must grow and improve, not shrink,“ says IGD head of economic and consumer insight Michael Freedman.

”We need to embrace the next wave of technological advancements, particularly in AI and robotics, to meet these challenges. The necessary technology is now available, and the current pressures make this the perfect time to adopt these innovations.”

Retailers in the country are already utilising technology to increase productivity and cut costs, which are offsetting rising labour costs.

“The food industry is at a critical juncture. By leveraging technology and innovative solutions, we can transform the sector, ensuring sustainability and growth,” says Retail Futures senior partner Toby Pickard.

“It’s not just about reducing headcount; it’s about creating a resilient and efficient food system that can weather these challenges and emerge stronger.”