Bakers take pragmatic approach to investing
Dan Malovany, Baking & Snack
The health of the industry appeared especially robust during the 2013 International Baking Industry Exposition, which many touted as one of the most successful shows in a long time. From a capital spending perspective, many companies are wondering if 2014 might be the big breakout year.
Well, it just doesn’t work that way when it comes to investing, according to Marjorie Troxel Hellmer, president of Kansas City, MO-based Cypress Research Associates, which conducted Baking & Snack’s 21st Annual Capital Spending Survey.
From the capital investors’ perspective, ‘breakout’ is not a way of speaking for them,” she said. “When they go into investment mode, they’re still very pragmatic.”
In other words, she noted, bakers may be cautious, calculating, strategic and even opportunistic. As in a chess match, they want to make sure that all pieces are covered before they make their next move.
“What we see is that they’re increasing their capacity where necessary and where they have immediate growth opportunities,” Ms. Troxel Hellmer explained. “The idea of ‘build it and they will come’ is not a general trend anymore. They are responding to immediate and near-term growth opportunities. They’re definitely making investments, but it’s because they see that growth opportunity right in front of them.”
That’s especially true when it comes to return on investment (ROI), where the vision for capital spending has become increasingly nearsighted over the years. In the survey, completed in late December, nearly 68% of respondents indicated they see an ROI of two years or less — a trend that has been steadily shifting since 2011, when 46% of executives noted their companies’ ROI cycle was three years or more.
“When it comes to expectations for capital projects in 2014, the payback must be short term and very real for executives to commit to making an investment,” Ms. Troxel Hellmer noted.