From a macro-economic perspective, among the myriad factors fueling capital spending is the influence of non-U.S. companies like Grupo Bimbo and Aryzta AG, which have grown in the United States. In Baking & Snack’s capital spending report, published in February, Marjorie Troxel Hellmer, the report’s primary researcher and president of Cypress Research Associates, added that many of these multinational companies — as well as an increasing number of private equity firms entering the baking industry — are putting money in newly acquired businesses to bring them up to speed.
“They have to make capital investments that the previous owners had been deferring for a long time,” she explained.
Aging manufacturing equipment is not unique to the baking and snack industries. Ms. Troxel Hellmer pointed to a September 2014 Wall Street Journal article that decried the state of equipment used by U.S. manufacturers. Quoting economists at Morgan Stanley, the report noted that the average age of industrial equipment is the highest it’s been since 1938 — more than 10 years old on average.
While some bakers may chuckle that 10-year-old equipment is still relatively new, there seems to be a pent-up demand for investments that have been put on the backburner for years, noted Jim Kline, Baking & Snack contributing editor and president of The EnSol Group, an Erwinna, Pa., consulting firm.
“What we’re seeing right now within the industry is that a lot of projects that have been held are coming forward,” he said.It’s good to see the industry investing in a brighter future.