Seeing the light
After years of cautious optimism — and sometimes downright caution — the baking industry outlook is finally starting to lighten up, according to survey results. “Almost half of the industry expects performance to be stronger in 2017 than it was in 2016,” Ms. Hellmer reported. “For the second year in a row, the baking industry is looking forward with positivity … the outlook is more positive than last year and may be the most positive we’ve seen since the recession of 2008.”
In general, when asked about the outlook for the US commercial baking industry for 2017, almost 90% of respondents answered “Positive.” And more specifically, more than half (54%) said the outlook for 2017 is better than 2016.
This optimism is not entirely surprising, considering 62% reported company revenue up at the end of 2016, and 67% expected it to rise this year, as well. And while these bakeries indicated an average 7.4% revenue increase in 2016, respondents projected another 7.0% rise in 2017.
At the same time, on the other side of the ledger, company costs rose an average of 3% in 2016, and the average expected 2017 increase slipped to 2%, with 46% of participants projecting overall expenses to hold steady for 2017. “As an industry, bakers are telling us they anticipate about a 5% balanced revenue increase against costs,” Ms. Hellmer observed.
Compared with the tepid climate of general manufacturing, commercial baking is feeling pretty healthy. “It really is no surprise — baking is a steady performer,” Ms. Hellmer said. “There aren’t always huge increases, but there are typically increases.” Even in the age of health and wellness, consumers are back to spending on food — baked goods in particular.
If one looks closely enough, the optimism can also be seen in the profit margins. In 2016, 51% of the companies indicated their gross margins remained steady, and 53% expect margins to continue holding in 2017. “No change is a good thing with gross margins,” Ms. Hellmer suggested.
That said, a surprising 42% actually predicted gross margins to be up this year.
“This industry traditionally has thin profit margins,” Ms. Hellmer said. So when the study revealed that gross profit margins were up by an average of 1.6% last year, predicting an average 2.7% increase for 2017 is good news indeed.
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