The food and drink sector expects to increase output but many are worried about the impact rising costs.

A new report from Food Drink Ireland (FDI), the Ibec group representing the food and drink sector highlighted the issue of rising labour costs in the months ahead.

The FDI published their Food and Drink Manufacturing Report 2025, “Appetite for Growth”, which found 58% of businesses rated the manufacturing environment in Ireland as good or very good.

However, it was still lower than the 70% positive response rate across all manufacturing sectors.

Food and drink manufacturers’ are worried about the challenges they face in dealing with rising costs.

The most widely expected cost increases will be in the areas of wage growth (76% of respondents), investment in sustainability (76%) and the cost of raw materials (76%), followed by investment in digitalisation (62%) and cost of transport (62%).

The largest challenge facing businesses in the sector is cost of labour, where there was a similar response rate to the wider manufacturing sector at 71%.

The next two challenges were much more sector specific - the cost of raw materials (62% vs 45% for all manufacturers) and the regulatory environment (62% vs 37% for all manufacturers).

The report also found that food and drink manufacturers are expecting to see increased export sales (52% of respondents), domestic sales (38%) and profitability (43%) in the months ahead.

Improving profitability remains the single greatest priority with greater emphasis on developing new markets in 2025 amongst food & drink enterprises.

More than half, 52%, of food and drink respondents expect an increase in productivity in the coming months.

A further 48% say they are planning to adopt or upgrade existing AI initiatives, primarily with a view to enhancing efficiency and productivity.

Mr Paul Kelly, FDI Director said: “Food and drink manufacturing accounts for half of direct expenditure by the entire manufacturing sector in the Irish economy (payroll, Irish materials and Irish services).

"Its extensive regional footprint means it is directly linked to the performance of the whole economy and is also at the heart of the social fabric of rural Ireland.

"Food and drink exports reached a record value of €17 billion in 2024.

"As deliberations continue on the Programme for Government, it is critical that policy can support the sector address its competitiveness challenges and harness opportunities for further growth”. 

Policies the FDI say they would like to see introduced by the next Government include developing strong talent pipelines by ensuring greater industry engagement as the National Training Fund is unlocked.

To reduce energy costs by developing a new national energy and industrial strategy and in the short term introduce a significant annual subvention to offset system charges and the PSO levy.

The FDI would also like to see companies protected from rising costs by introducing a PRSI rebate for exposed companies.

The body has also called for better regulation at the centre of policy making and a reduction in overall regulatory burden on business.