Bakers expect to spend more on packaging, digital transformation

When it comes to investing in 2021, bakers are focused on making their companies bigger, leaner operations. That’s one of the takeaways from Baking & Snack’s annual Capital Spending Survey, conducted by Cypress Research and sponsored by BEMA.

In 2021, 43% of those surveyed indicated that maintaining existing equipment and production lines remains the main reason for equipment-related capital spending followed by upgrading (28%) or adding (27%) new lines.

Specifically, 96% plan to spend their 2021 capital budget on maintenance and replacement parts followed by 81% pointing to systems improvements such as enterprise resource planning platforms. This compares to 78% of respondents in the 2017 study and 61% in 2013 that reported investing for systems-related improvements.

“Digital transformation continues to be a conversation, and investment has stairstepped up over the last several years,” said Marjorie Hellmer, president of Kansas City, Mo.-based Cypress Research.

She added that advances in technology such as wireless communications, data-gathering sensors, programmable controls, enhanced servo motors and material reporting systems now drive operational efficiency to new levels.

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.

“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 as if panic buying may be something that we can avoid in 2021,” explained Tom Vierhile, vice president of strategic insights, North America, for Innova. “However, we may see a pretty good jump in new product activity in 2021 as some launch efforts delayed from 2020 come to fruition.”

While optimism reigns for 2021, many more questions still linger. How soon will workers return to their offices and how many will remain working from home? How have consumer shopping patterns fundamentally changed in the long run?

“I am very curious to see how much of the online shopping sticks,” noted Larry Marcucci, president of Chicago-based Alpha Baking Co.

“Some people are already feeling manipulated by social media and may not appreciate their ‘regular orders of food.’ I think there is a backlash against this social dilemma coming,” he added.

Moreover, when will foodservice, business travel and entertainment resume?

“I hope that more restaurants will come back slowly, but we lost many of them,” Mr. Marcucci said. “I also am interested to see what happens to travel and hospitality. A lot of people learned how to do business by Zoom, so it will be interesting to see if that sticks.”

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.

Kerwin Brown, BEMA’s president and chief executive officer, called it a “natural fit.”

During the past year, the association launched its BEMA Intel platform aimed at compiling comprehensive data that help bakery manufacturers and suppliers understand the health of the US baking industry on a regular basis. Mr. Brown said the capital spending study dovetails nicely into this broader initiative.

For more information on the capital spending survey and BEMA Intel, visit www.BEMA.org

This article is an excerpt from the February 2021 issue of Baking & Snack. To read the entire feature on capital spending survey, click here.