What’s trending with spending
On average, according to this year’s survey, bakers are generally dedicating 10% of total annual revenue to capital projects.

And 29% of bakers reported an investment R.O.I. cycle of more than three years, a marked improvement from five years ago, when that number sat at just 10%. Additionally, while 29% also reported a one-year cycle, that’s a significant drop from 39% during the same period.

“Five years ago, manufacturers were making more short-term investments,” Ms. Hellmer explained. “They were, perhaps, reactionary needs. Playing it that close to the vest to expect a one-year turnaround is based on an attitude of, ‘What do I need to keep operating and stay as healthy as I can in a tough climate?’ Now, we see more industry confidence with bakers stretching that expected return to make more long-term investments.”

Additionally, 44% of bakers indicated their 2018 capital spending budgets will increase over last year’s actual spend.

“We see fairly healthy spend levels at the top of the industry,” Ms. Hellmer observed, suggesting that those companies budgeting in the $10 million to $20 million investment range are more mid-tier manufacturers, while the ones with capital budgets ranging from $20 million to $70 million or more are most likely global juggernauts.

“The breakouts and global baking companies are spending, and then you have those mid-tier and smaller bakeries clustering more toward the conservative end of spending.”

Where? How? And why?
So, the clouds are parting, and the climate is finally starting to improve. What’s next? Perhaps the better question is: Where, how … and why do bakers plan to invest in their companies?

“You can see there are increases across categories in terms of where bakers are spending, even compared with five years ago,” Ms. Hellmer suggested.

Areas such as maintenance and replacement parts, systems improvement (system integration or automation), warehouse and distribution, and expansion for existing facilities emerged as areas where more bakers plan to invest than five years ago.

Although certain target investment areas — new processing equipment, new packaging equipment and upgrades for existing facilities — appear to be down compared with 2013, they took a dip in 2014 and are back on the rise.

So, where will the actual dollars go? According to survey results, budget allocations are pretty evenly spread at 10% to 20% across all areas of operation this year compared with five years ago when a third of capital budgets appeared to be reserved for new processing equipment.

“There’s no one area where bakers are piling up their dollars,” Ms. Hellmer noted. “They’re spreading across many different investment areas.”

Planned allocations for new processing equipment declined from 33% in 2013 budgets to 22% for 2018. That’s not surprising, considering bakers invest in new equipment designed to last 20 years or more with the right upkeep, suggesting that manufacturers are now better positioned in this area.

In terms of capacity, bakers appear to hold steady on increasing capacity for existing product lines — with 43% doing so for this purpose — and nearly a third (30%) reported upping capacity for new products. When asked to rank the importance of capital investment goals, 62% of survey participants identified increasing capacity for existing products as “very important,” and 48% placed the same emphasis on this for new products.

Interestingly, a breakdown by company size revealed that mid-size and larger companies — those with more than $25 million in annual revenue — placed a heavier emphasis on increasing capacity for new products than did companies with less than $25 million. The opposite was true for increasing capacity for existing -products. That says a lot about the pressure on larger baking companies to innovate with new products or reinvent the old standbys.

In terms of the correlation between company size and area of concern, the same goes for traceability. Overall, 41% of respondents considered traceability a “very important” capital spending goal. However, looking at the question by company size revealed that, at 49%, mid-size and larger companies are significantly more concerned with this issue than smaller companies, of which 26% identified it as “very important.”

A similar trend stood out for food safety and sanitation as well, with 70% of mid- and large-size companies placing a high priority on this goal compared with 45% of the smaller ones. Perhaps that’s because food safety-related mishaps become a much greater concern with far-reaching impact and potentially devastating ramifications for larger operations.

That’s not to say smaller bakeries aren’t addressing food safety; it’s more likely that it doesn’t require as heavy an investment for them to address it.

“Smaller operations are not as concerned about investing for food safety because it is likely easier to monitor and control,” Ms. Hellmer said. “But this is still a driver for the larger companies.”