Food Drink Ireland (FDI), the Ibec group representing the food and drink sector, has said that "positive momentum" in food and drink manufacturing is "tempered by workforce concerns".

FDI has today (Monday, January 26) released its Food and Drink Manufacturing Report.

According to FDI, while current sentiment "remains broadly positive, the report highlights a growing caution regarding the outlook for the next six months".

Currently, only 7% of manufacturers rate their business as poor, but this figure is expected to double to 14% in the months ahead.

The report identifies a significant focus on rising operational costs.

Workforce-related hurdles

Wage growth is a primary concern, with 79% expecting costs to increase. Beyond direct wages, the sector is grappling with critical workforce-related hurdles.

The next three major challenges identified by food and drink manufacturers are: attracting and retaining a quality workforce (64%); the availability of housing for employees (57%); and the cost of energy (57%).

Despite these pressures, the sector continues to show resilience in long-term growth strategies, according to FDI.

Capital investment

Food and drink manufacturers are "bucking the wider manufacturing trend by showing small but consistent annual increases" in capital investment and research and development (R&D) activity since 2023, according to the report.

Improving profitability remains the single greatest business priority for 2026 (57%), followed by a greater emphasis on introducing or increasing R&D activity (36%).

The report also tracks the sector’s digital and environmental transitions.

While sustainability remains a universal priority (93%), there is a shift toward enhancing and extending existing initiatives (71%) rather than introducing new ones.

Additionally, 57% of businesses plan to adopt artificial intelligence initiatives - driven by the need for improved efficiency and productivity - although this remains lower than the wider manufacturing community.

Regional footprint

Paul Kelly, FDI director, commented: "Food and drink manufacturing accounts for half of direct expenditure by the entire manufacturing sector in the Irish economy, spanning payroll, Irish materials, and Irish services.

"Its extensive regional footprint makes it the heart of the social fabric of rural Ireland.

"As Ireland prepares for the Presidency of the EU, it is critical that policy at both a national and European level supports the sector in addressing its competitiveness challenges, particularly around labour and energy, while safeguarding our export-led growth."

FDI has outlined its priorities for the Irish Presidency of the EU, which include:

Strengthen the single market: Ensure the removal of barriers to trade and the seamless movement of goods across Europe;
Proactive trade policy: Support an outward-looking common trade policy to protect and expand Irish food and drink exports;
Energy costs and decarbonisation: Minimise energy costs for manufacturers and provide robust supports for the transition to carbon neutrality;
Competitive and fair supply chain: Ensure policy frameworks support a fair environment for all participants in the food supply chain;
Research and development: Provide enhanced support for industry investment in R&D.