Bakers anticipate higher packaging and digital transformation costs.
Bakers are concentrating on growing their businesses through leaner operations when it comes to investment in 2021. That’s one of the conclusions drawn from Baking & Snack’s yearly Capital Spending Survey, which is sponsored by BEMA and carried out by Cypress Research.
According to 43% of respondents in 2021, the primary driver of equipment-related capital spending is still the upkeep of current production lines and equipment, followed by line additions or upgrades (28% and 27%, respectively).
To be more precise, 96% of respondents said they would use their 2021 capital budget for upkeep and replacement parts, with 81% citing system enhancements like enterprise resource planning platforms. In contrast, 61% of respondents in 2013 and 78% of respondents in the 2017 study stated they had invested in system-related improvements.
“Investment has stepped up over the last several years, and digital transformation is still a conversation,” stated Marjorie Hellmer, president of Cypress Research, based in Kansas City, Missouri.
Technology breakthroughs like wireless communications, data-gathering sensors, programmable controls, improved servo motors, and material reporting systems, she continued, are pushing operational efficiency to unprecedented heights.
They’re also part of an ongoing effort to reduce the need for skilled labor as bakers push for a fully automated, lights-out bakery with fewer or no employees.
Ms. Hellmer added that 2021 investments in upgrading facilities (68% of those surveyed) and facility expansion (47%) are likely driven, in part, by coronavirus (COVID-19) protocols.
“We’ve seen a lot of plants operating at capacity this year,” she said. “They can’t get product out fast enough if they’re selling into those busy channels.”
Among the top 2021 equipment needs, an overwhelming 85% of executives plan to invest in packaging followed by material handling (66%) and mixing (63%). Today, the greatest amount of labor is still required in packaging departments, which have had to respond to foodservice, in-store bakeries and other customers’ requests that most products be individually wrapped or packaged for food safety.
Finally, the pandemic also seems to be driving the top budgetary goals for capital spending in 2021 that include increasing capacity for existing products (68% of respondents); decreasing labor costs (65%); improving product quality, consistency and accuracy (65%), and improving food safety/sanitation (60%).
Investing for new products slipped in importance for 2021, which may not come as a surprise. In the United States, total new food and beverage product launches for the first 10 months of 2020 fell 14.9% compared to the same period in 2019, according to the latest data by Innova Market Insights.
Tom Vierhile, vice president of strategic insights, North America, for Innova, said, “If anything, the trend toward SKU rationalization seemed to gain ground as the year went on, so it appears that will continue for a while, though it looks like panic buying may be something that we can avoid in 2021.” “That being said, if some of the 2020 launch plans materialize, we might witness a significant uptick in new product activity in 2021.”
Though there is hope for 2021, a lot of unanswered questions remain. What percentage of employees will continue to work from home, and when will they return to their offices? How have long-term changes in consumer shopping patterns affected them fundamentally?
“I’m interested to see how much of the online shopping sticks,” said Alpha Baking Co. president Larry Marcucci, who is based in Chicago.
“Social media is already manipulating some people, and they might not appreciate their’regular orders of food.'” He continued, “I believe there will be a backlash against this social dilemma soon.
In addition, when will entertainment, business travel, and foodservice all resume?
“We lost a lot of restaurants, but I hope more will slowly come back,” Mr. Marcucci remarked. “I’m also curious to see what transpires in terms of hospitality and travel. It will be interesting to see whether or not people learn how to do business through Zoom, as many people have done.
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In the end, perhaps it’s about speed — warp speed and the distribution of vaccines — that maps out a clear direction as the industry races into the future.
Baking & Snack has partnered with BEMA, which sponsored the industry study and provided an additional layer of equipment-based expertise for this annual industry-benchmarking survey.
Baking & Snack has partnered with BEMA, which sponsored the industry study and provided an additional layer of equipment-based expertise for this annual industry-benchmarking survey.
Kerwin Brown, BEMA’s president and chief executive officer, called it a “natural fit.”
The association introduced its BEMA Intel platform last year with the goal of gathering extensive data that regularly assists suppliers and bakery manufacturers in understanding the state of the US baking industry. The capital spending study, according to Mr. Brown, fits in well with this larger project.
To learn more about BEMA Intel and the capital spending survey, go to www.BEMA.org.
This piece is taken from Baking & Snack’s February 2021 issue. Click here to view the capital spending survey feature in its entirety.