When you look at this year’s Capital Spending Study, sponsored by BEMA and conducted by Cypress Research, you’re going to notice some declines, especially compared to 2021-22 findings from two years ago. But I’m here to remind you not to panic. This is all part of the natural ebb and flow. In fact, when placed within the larger context of what’s happening in the industry, the numbers tell an optimistic story. Telling that story so the numbers are more than just percentages is what we aim to do every year in the February issue of Baking & Snack. 

This year, we find an industry stabilizing after years of disruption. While the industry’s investment attitudes and outlooks dropped from 2022 to 2023’s studies, the numbers between 2023 and 2024 reveal that the decline wasn’t the start of a trend but most likely a correction from pandemic-fueled investment. 

And the industry is stabilizing in a strong place. As Clay Miller, president of Burford Corp. and first vice chair of BEMA, said in our interview about the data: “I would be happy to have a year as good as last year.” 

Chances of recession are declining as the Federal Reserve is expected to lower interest rates and job reports show an improved employment landscape. All of this points to an economy performing better than expected. While this may leave bakers confident enough to invest, the data in this study makes it clear that it isn’t the reason bakers are investing in their business. Only 40% of respondents said rising interest rates would increase their capital spending; 25% said it would lead to a decrease. Compare those numbers with the top three reasons capital investment would increase: lack of labor (68%), rising raw material costs (52%) and equipment/technology costs (48%). When asked about the biggest challenges facing their businesses for the next 12 to 18 months, weaker domestic and global economies were low on the list at 24% and 8%, respectively. 

A stronger-than-expected economy is certainly not hurting investment attitudes, but the real story here is that bakers see the need to invest in capital projects to continue addressing rising operational costs and the labor challenge. This has resulted in a year that bakers plan to cool it in massive expansions and new production lines and home in on improving their systems and streamlining production. 

While the economy may be stabilizing, the improving job market does not help the baking industry’s labor woes, so we continue to see bakers trying to reduce their reliance on labor for repetitive tasks. While the outlook and budget for capital spending may not have changed much from 2023 to 2024, the way in which bakers are investing to address those needs have changed, and you’ll see those goals reflected in the data. 

After years of build, build, build, bakers are going back to polish their new equipment and tighten efficiencies on old lines to make sure the entire production is running in tip-top shape to mitigate costs and remain profitable in the face of rising costs, prices and labor challenges.