Major players to support 2011 capital spending

by Dan Malovany
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From an investment perspective, Baking & Snack’s 18th annual Capital Spending Survey indicated that larger baking companies and snack manufacturers will fare better than smaller ones in 2011. In fact, 63% of those companies with annual revenues of $25 million or more plan to increase spending this year. However, on the downside, 57% of those businesses with less than $25 million in annual sales reported their capital spending budgets will decline this year, according to the recently conducted survey.

These trend lines should not be unexpected in the current economic market. The data suggested that larger companies have the cash flow and the ability to invest, while smaller, more vulnerable and cash-sensitive bakers and snack manufacturers continue to hunker down and reduce their investments this year, according to the survey. The majority of smaller businesses — or those companies with less than $25 million in annual revenue — tends to have budgets that are $500,000 or less while the larger companies spend the big bucks.

So how much are the companies budgeting for this year? According to the survey, 49% of all executives responded that their companies will spend $1 million to $9.9 million in 2011, and another 6% said between $10 million and $19.9 million. Lumped together, that’s more than half (55%) of all companies surveyed. Another 24% will spend between $30 million or more. On the opposite side of the spectrum, 22% expect to spend less than $1 million. The numbers add up to more than 100% because of rounding.

From a historical perspective, capital investing has returned to levels that are similar to pre-recessionary spending, and 2011 will rebound even more. Still, there is room for improvement, especially among the biggest of spenders, according to the survey.

Industry executives reported that new products (31%) and economic pressures (29%) most affected their companies’ capital spending plans during the past two years, followed by high commodity prices (22%).

For more analysis on capital investments in the baking and snack industry, check out the upcoming February 2011 issue of our magazine.

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