Survey: The prognosis for makers of bakery equipment is getting better
Kansas City In the BEMA Intel member pulse poll for the first quarter of 2021, the manufacturers of bakery equipment gave better assessments of both the local and worldwide business outlooks, albeit lowering their assessments of their own chances for the following six months. As the difficulties posed by COVID-19 lessened, members’ concerns about the escalating cost of transportation and raw materials also coincided with that dynamic.
In the quarter that concluded on March 31, 95% of equipment manufacturers had a favorable outlook for business in the United States. This was a significant improvement from 76% in the second quarter of 2020 and up from 92% in the fourth quarter of 2020. In the latter, two percent of respondents had a “very negative” six-month domestic outlook, one full quarter after an outbreak of the novel coronavirus COVID-19 turned into a worldwide pandemic. No participating manufacturer had a “very negative” outlook on domestic business prospects after that point. The percentage of respondents who said they had a “very positive” view for the US increased to 37% from 29% in the second half of 2020, which is another indication of improvement.
Regarding prospects for doing business internationally, 95% of respondents were upbeat about the manufacturing of baking equipment, compared to 91% in the fourth quarter of 2020 and 86% in the July–September 2020 period. While 26% of respondents sounded a “very positive” global tone, unchanged from the previous quarter, more respondents (69%), who were “somewhat positive,” than in the fourth quarter of 2020 (65%). In their six-month global assessment, no manufacturers were rated as “very negative.” However, 2% of respondents maintained that opinion over the latter half of 2020, which was an improvement above 10% who expressed the same opinion during the second quarter of 2020.
Cypress Research produced the quarterly survey results from questionnaires filled out by 61 out of 170 (36%) participating baking equipment manufacturers. Of the top 30 baking equipment manufacturers, 23 or 77% were among the survey respondents in the first quarter. The survey summary is a part of the extensive BEMA Intel data platform, which was developed by BEMA to give members a single source overview of the state and future prospects of the baking and baking equipment industries.
There were differences in the industries’ forward assessments. While this is a decrease from 100% in the fourth quarter, equipment makers’ six-month forecast for their own companies is still 98% positive, which is still significantly higher than the 79% positive in July-September 2020 and the 70% positive in April-June 2020.
This decline was matched by summary data showing shifts in the main issues that businesses were perceived to be experiencing. 54% of business executives mentioned COVID-19 complications in the first quarter of 2021. This signified a sustained decline for the category, which had been at 85% in 2020’s second quarter, 84% in the third, and 70% in the fourth.
Another greater obstacle that was perceived to be present was the rising cost of raw materials. From 18% in April–September 2020 to 48% in the fourth quarter and 54% in the three months that concluded on March 31, 2020, the category’s importance increased. That statistic was supported by other BEMA Intel data. Milling & Baking News’s first-quarter Bakery Ingredient Indexes, which are calculated using weighted ingredient costs according to conventional formulas, were at two-year highs.
The ingredient index for shortbread cookies increased by 10% from the fourth quarter to 190.5 in the first quarter and by 20% from 158.1 in the previous year. With a gain of 17% from a year ago and 8% from the fourth quarter, the cake donut index stood at 1778.8.
The expenses of other inputs kept going higher. According to the Energy Information Administration, diesel prices concluded the year at roughly $3.6219 per gallon, up 35% from a two-year low of $2.372 per gallon on November 6, 2020. The first quarter saw diesel fuel prices close to 11½ higher than they were a year earlier. First-quarter unit labor costs increased 4.4% over the same period in 2020, for the third consecutive quarter that labor costs have increased.
For a fourth consecutive quarter, the proportion of respondents who anticipated higher logistics and transportation expenses climbed as well, rising from 10% in the second quarter of 2020 to 54% in the first quarter of 2021. Though not as sharply, the number of manufacturers citing trade uncertainty and an unfriendly business climate (taxes and regulations, for example) increased in the first quarter. In the first quarter, fewer respondents said that any of the following challenges was a major obstacle: finding and keeping talented employees; growing health care and insurance costs; declining domestic sales to US consumers; slower export growth internationally; or a stronger US dollar compared to other currencies.
The pulse poll, which asked about the business outlook by channel, discovered that BEMA members’ perceptions of doing business with foodservice clients had significantly improved. Regarding foodservice, 70% of equipment manufacturers expressed a good or very positive opinion, which is an increase from 33% in the two previous quarters and a substantial rise from 100% negativity in the second quarter of 2020. Indeed, 10% of respondents had extremely favorable things to say about foodservice, which is a first for the category since the third quarter of 2020.
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Other channel prospects included distributor channel prospects, which eased to 83% positive (though more were “very positive” in the most recent quarter), industrial/commercial prospects, which edged up to 99% positive, and retail prospects, which reached 100% (though no respondents had checked “very positive” since the third quarter of 2020).
The BEMA Intel assessment also outlined the advantages and disadvantages of commercial baked goods dollar sales, which peaked in the second quarter of 2020—during the first phase of the pandemic lockdown—and have stayed largely stable ever then. The year ended March 31st saw an overall 0.6% increase in sales for commercial aisle bakeries. Sales of hamburgers and hot dog buns increased by 1.3% that year, while sales of other buns, rolls, and croissants increased by 7%. Cake sales increased by 4.7%, while sales of pastries and donuts increased by 3.9%, salty snacks by 3.2%, and bakery snacks by 0.6%. In contrast, sales of bread decreased 3.2%, cookies decreased 2.3%, and crackers decreased 7% during the same time period.
The majority of the categories under commercial baked foods peaked in the second or third quarters of 2020 and have decreased gradually ever since, according to a review of dollar sales increases and decreases year over year. The three exceptions were pastry-donut dollar sales, which fluctuated seasonally, hot dog bun dollar sales, and cake dollar sales, which have shown to be more erratic over the last five quarters. For the latter, year-over-year sales fell in the first pandemic quarter, rebounded in the third quarter of 2020, and have since dropped down and turned upward in minor degrees, according to the BEMA Intel summary, which merged commercial aisle with in-store bakery sales.
With one exception, in-store sales in the most recent quarter were lower year over year: bread down by 0.6% (unit sales also decreased by 0.6%), bread-buns-rolls decreased by 3%, and cookies increased by 0.8%. With a 6.9% rise in sales from the previous year, in-store cakes outperformed commercial cakes. Looking over the last five quarters, it can be seen that in-store bakery sales fell off dramatically in the second quarter of 2020 compared to the previous year and have subsequently fluctuated. The sole exception was the in-store bakery bread, buns, and rolls, which had only decreased over the previous five quarters on an annual basis.