Ireland’s food and beverage sector is facing a more challenging trading environment, with export growth easing and cost pressures persisting, according to the latest Food and Beverage Sector Insights and Outlook report from Bank of Ireland. The report found that food and beverage exports were valued at €9.1bn during the first six months of 2026, representing a 3% decline compared with the exceptionally strong performance recorded in 2025.
Despite the softer export performance, inflationary pressures have moderated, with food inflation standing at 0.6% in Ireland in June, compared with 1.7% in the UK and 1% across the EU. However, rising operating costs and weather-related challenges continue to place pressure on businesses throughout the supply chain, said Lucy Ryan, Head of Food & Beverage Sector at Bank of Ireland.
The report highlighted research showing that 91% of food businesses experienced an increase in the cost of doing business during 2025, while 85% expect costs to rise further during 2026. Extreme heat and low rainfall across Western Europe this summer have also raised concerns about harvest yields and the availability of raw materials, with implications for food and beverage production costs in the months ahead.
Diversification Key Strategy
Geopolitical uncertainty is also influencing business strategy, with trade tensions between major economic blocs encouraging exporters to seek new international markets and reduce dependence on individual destinations. According to the report, diversification is becoming an increasingly important component of long-term growth strategies for Irish producers. They are seeking to expand their market reach to mitigate risks associated with trade uncertainty.
Businesses are investing in technology to improve productivity and manage labour shortages. The growing adoption of automation, robotics, and integrated production systems is strengthening operational efficiency. Artificial intelligence is being used across quality control, predictive maintenance, production planning, and supply chain management, moving beyond experimentation.
The sector is adapting to an evolving regulatory environment, with new EU packaging regulations introducing additional recyclability, labelling, and reporting requirements. The EU Deforestation Regulation will bring greater traceability obligations for companies selling commodities such as cattle, cocoa, coffee, and soy into European markets from December. This regulatory change will impact businesses operating in the sector.
Investment and Resilience
Merger and acquisition activity remains active, with notable transactions including Swedish poultry group Scandi Standard’s €127m acquisition of Glenhaven Foods in Co Wicklow and the €75m acquisition of Irish functional drinks brand VITHIT by London-listed Nichols plc. Looking ahead to the remainder of 2026, businesses are expected to maintain a cautious approach to investment while continuing to prioritise productivity, sustainability, and resilience.
According to findings from a joint Love Irish Food and Bank of Ireland survey conducted in the second quarter, 62% of food and beverage operators said they remained positive about business opportunities despite broader economic uncertainty. The report identified several priorities for operators over the coming months, including tighter cost control, investment in automation and AI, advancing sustainability initiatives, diversifying export markets, and strengthening supply chain resilience. These priorities will be key to maintaining competitiveness and supporting future growth.
Retail performance has remained encouraging, with grocery sales increasing by 6.3% during the four weeks to 12 July, supported by warm weather and major sporting events that encouraged at-home celebrations. Lidl recorded sales growth of 10.8%, increasing its market share to 14%, while Dunnes Stores remained the country’s largest retailer with a 23.7% share of the market.