Increasing costs are presenting a "major challenge" for Ireland's foodservice sector, according to the latest Bord Bia annual Foodservice Market Insights report.

The report shows that the so-called Irish ‘out of home’ dining sector increased by 5.2% in value this year.

Overall industry turnover surpassed €9.8 billion across both the Republic of Ireland and Northern Ireland.

Although this is the highest level seen within the industry over the past ten years, Bord Bia noted that much of this increase has come about due to inflation and higher menu prices driven by significant cost pressures in the sector.

Commenting on the report, Maureen Gahan, foodservice specialist, Bord Bia said that the Irish foodservice industry has experienced "a great deal of disruption and recovery" in recent years.

“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.

"In addition, the operating environment is increasingly daunting for many restaurants and foodservice operators," she said.

Gahan said that many operators in the foodservice industry have voiced concern about operating costs and margins.

“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 said.

The Bord Bia report states that while many foodservice operators have learned to deal with higher food costs, other costs have "risen significantly".

This is causing increased financial strain, especially for small, independent operators who are more vulnerable to closure.

Bord Bia said that larger operators, including restaurant chains, are financially better positioned to operate in today’s cost environment.

While sustainability initiatives are still important, they are often taking a backseat to cost-cutting measures.

The report shows that the availability of workers has improved, but finding qualified candidates for skilled positions remains difficult.

"This, combined with higher rents and pension costs, has meant many operators are struggling to maintain profitability," the report stated.

A “disappointing” year for overseas visitors has had a knock-on impact on many businesses, including hotels, restaurants and pubs, which are highly dependent on foreign tourists.

Bord Bia noted that while overall spending has slowed, consumers are still willing to invest in ‘experiences’ that are unique or different.

Operators are responding to this by focusing on innovative service models, unique menus, and immersive environments.

The report states that technology such as ordering kiosks and mobile apps can help enhance the customer experience and streamline operations.

However, it warned that "the focus must remain on using technology to enhance staff capabilities and deliver exceptional hospitality experiences, not to replace them".

“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," Gahan said

"Unsurprisingly, there needs to be a continued focus on cost control and delivering value. In addition, suppliers should consider innovation in the context of helping their foodservice customers deliver greater efficiencies and profitability," she added.

Bord Bia’s Foodservice Seminar is taking place at the Johnstown Estate, Enfield, Co. Meath today (November 13) with a theme of ‘Digital Transformation’.