Capital spending back on track

by Dan Malovany
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After years of heightened spending on streamlining operations and slashing overhead in response to a faltering economy, new products returned as the dominate driving force for investing in 2011 and should continue to do so in 2012 as bakers and snack producers remain much more customer-focused, according to Baking & Snack’s 19th Annual Capital Spending Survey.

Looking at 2012, 41% of respondents selected new products as most important reason for capital spending, followed by economic pressures (22%), increasing capacity/efficiencies (19%), commodity costs (10%) and food security (8%). Those percentages were statistically similar to those of 2011.

By contrast, only 31% in 2010 listed new products as the primary force behind capital expenditures, followed closely by responding to economic pressures (29%), offsetting high commodity prices (22%) and then a host of other reasons. During the recession, new product activity tumbled by as much as one-third in many food categories as skittish companies retrenched until the economy showed some signs of leveling off.

Just because new products have become the primary push behind capital spending doesn’t mean food companies have stopped searching for further ways to improve productivity, according to Marjorie Troxel Hellmer, president, Cypress Research Associates, Kansas City, MO, which conducted the survey in November and December.

Rather, the justification for capital expenditures has become more balanced between businesses seeking out new opportunities to bolster their sales base in addition to identifying operational efficiencies to protect their bottom lines.

For more information on our exclusive survey, please check out our upcoming February 2012 issue of Baking & Snack magazine.

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