The annual ifac Food and Agribusiness report for 2026, the ninth edition of the publication, highlights the challenges and opportunities facing companies operating in the sector. There was a drop in the share of companies reporting an optimistic outlook about the next 12 months to 65%, driven largely by concerns around the cost of doing business.

The report found that 91% of businesses surveyed said that their costs had risen over the last year, the highest proportion in the history of the publication. Despite this, almost 80% of those same businesses said that they intend to grow over the next 12 months, and 38% said that they will employ more people.

The effect of increased costs can be seen in the tightening of margins across the year. While 58% of businesses increased their revenue, only 38% saw a rise in net profit. When it comes to growth potential, 63% of food businesses cited launching a new product as the top growth opportunity over the coming 12 months.

Exports

Around six in 10 of the businesses surveyed currently export, with almost a third of those generating more than half of their turnover abroad. Exporting to new markets was cited by 42% of businesses as their expected driver of growth.

The big change for exporters over the last year revealed in the survey is the drop in uncertainty caused by changing tariff regimes.

Only 23% of exporters cited it among the biggest challenges facing the sector, down from 38% a year ago.

The biggest barrier to increasing exports in this year’s survey was market entry and distribution, with logistics and supply chain challenges in second place.

Uncertainty around trade tariffs dropped to seventh place on the list of concerns.

Andrew Brolly, fractional CFO at ifac, said that for many businesses getting exports right is about capability, which he said was identifying the right route to market, finding a buyer or distributor, moving the product efficiently and pricing it at a sustainable margin.

While the number of businesses exporting at all remained broadly stable at 61%, the share of exporters earning more than half their turnover abroad rose from 24% to 32%.

The key destination for exports remains the UK, with the European Union in a close second place. Only 14% of exporters saw any decrease in sales over the past year, while 50% saw sales either increase or increase significantly.

Costs

Probably the least surprising finding from the report is that businesses faced higher operating costs in the last 12 months. However, the scale of those cost increases, and the effect on the bottom line is certainly stark (see Figure 1).

While costs were the biggest challenge facing business in last year’s report, the proportion of those who cited it as a drag on growth rose by 16 percentage points to 76%. More than nine in 10 businesses reported an increase in their costs over the last year.

There are a number of factors contributing to a higher cost base, including energy, labour, compliance and transport and logistics. With many businesses now carrying extra stock due to lessons learned during previous periods of supply chain disruption, there are also new costs involved in storage, insurance and risk of obsolescence or waste. With interest rates rising again, the cost of tying up working capital in stocks is also a headwind for profitability.

James Farrell, head of SME at ifac, said that when costs rise businesses can be slow to pass them on, particularly where there is concern about how customers will respond to price increases.

However, he cautions that absorbing higher costs for too long can quickly erode margins. Pricing decisions need to reflect the current cost base, not historic margins.

Shifting consumer behaviour

With 63% of food businesses saying that launching new products is the top growth opportunity over the coming year, it is critical for those companies to have the right strategy in place.

New products are also being used as a cost-control measure, with reformulation, new formats and other product changes being used to protect margins while not relying solely on price increases.

Maura O’Callaghan, ifac food and agribusiness director, highlighted the opportunities available from changing consumer preferences driven by the influence of GLP-1 weight control drugs. She gave some practical solutions for businesses, including doing more research into understanding the potential implications on categories that the business serves from the change in consumer behaviour. There is also a need to understand if there is an opportunity to introduce smaller portions, or different pack formats, to meet shopper requirements. Calling out the key functional benefits of products on packaging could also help target more customers.

It is also important to keep in touch with how multinationals are behaving in market categories Irish food businesses serve. If they decide to reduce focus on certain areas, it could leave space for smaller operators to fill the gap.

Comment

It is often difficult to understand how small and medium agribusiness keep going, considering the amount of pressure they face from factors over which they usually have little or no control.

Now in its ninth year, the ifac Food and Agribusiness report, and the survey it is based on, does a great job of outlined the sources of the pressure on those businesses.

But it also shows how robust, dynamic and optimistic those companies are.

In the face of the most difficult cost environment seen for many years, more than six in 10 businesses intend to expand over the next year. That certainly is a triumph of optimism. It would be churlish, however, to suggest that it is the triumph of optimism over experience.

Looking back over the last decade, it is clear that the trend towards ever increasing food and agribusiness exports remains in place. This has not happened by accident.

Businesses don’t get a chance to wait for conditions to improve before they have to make an investment decision. They have to constantly adapt, invest and move forward.

As John Donoghue, CEO of ifac said in his foreword to the report: “Having a vision for the future matters. Building it starts with what you do today.”