Rising costs remain a major challenge to foodservice sector

The challenges to Ireland’s foodservice sector have been laid bare in Bord Bia’s annual Foodservice Market Insights report.

Released last Wednesday, it shows that the Irish ‘out of home’ sector increased by 5.2% in value and overall industry turnover surpassed €9.8 billion across the island of Ireland.

While this is the highest level seen within the industry over the past ten years, much of this increase has come about due to inflation and higher menu prices driven by cost pressures.

Maureen Gahan, Foodservice Specialist, Bord Bia said: “Since 2021, the industry has risen in value every year, based on a combination of greater footfall and annual increases in menu prices to the consumer.

“There remains steady consumer demand for dining out-of-home; however higher menu prices have started to deter some people from eating out. In addition, the operating environment is increasingly daunting for many restaurants and foodservice operators,” she said.

“The industry remains challenged from an operating cost and margin perspective – and this is the concern voiced by many. It is clear that suppliers, distributors and operators need to have a more targeted business strategy when looking ahead to the next 12-18 months. An ongoing focus on cost reduction will be critical,” she added.

Foodservice challenges

The most pressing challenges outlined in the report are:

Cost structure - while they have learned to deal with higher food costs, other costs have risen significantly leading to increased financial strain, especially for small, independent operators who are more vulnerable to closure. Larger operators, including restaurant chains, are financially better positioned to operate in today’s cost environment.

Labour costs - although the availability of workers has improved, finding qualified candidates for skilled positions remains difficult. Rising minimum wages have increased labour costs significantly, impacting operators' profitability. This, combined with higher rents and pension costs, has meant many operators are struggling to maintain profitability.

Tourism - 2024 has been a ‘disappointing’ year for overseas visitors to Ireland. This has had a knock-on impact on many businesses that are highly dependent on foreign tourists.

Foodservice

opportunities

The report also highlights a number of opportunities. These include:

Consumer experiences, innovation and building customer loyalty - while overall spending has slowed, consumers are still willing to invest in ‘experiences’ that are unique or different. Operators are responding by focusing on innovative service models, unique menus, and immersive environments. Building customer loyalty remains crucial.

Menu engineering - given the food and labour cost situation, many operators continue to engineer their menu for the best impact on profit. This has involved taking higher cost items off the menu and shrinking menus to focus on core items.

Ms Gahan continued: “Today’s report identifies a number of key considerations for Irish food and beverage suppliers to familarise themselves with in order to future-proof their own businesses and remain relevant to industry and consumer needs. Unsurprisingly, there needs to be a continued focus on cost control and delivering value.”

Foodservice supports

Bord Bia provides a range of supports to the Irish foodservice industry including market updates and insights, networking and collaboration opportunities, and an annual Foodservice Directory containing over 100 detailed profiles of foodservice operators and distributors.