KANSAS CITY — A marked improvement in the business outlook for baking equipment manufacturers highlighted the fourth quarter 2020 BEMA INTEL member pulse survey, with 100% of respondents positive about their company’s outlook for the next six months.
The unanimously positive outlook was up from 79% in the third quarter and 70% in the second quarter. Drilling down a bit deeper, 92% of equipment makers were positive about the baking equipment manufacturing outlook, up from 86% after the third quarter and 77% after the second.
The results of the survey, compiled by Cypress Research, were part of the comprehensive BEMA INTEL data platform created by BEMA to give members a single-source snapshot of the baking and baking equipment industry’s economic health and outlook.
Signs of improvement in the industry’s financial picture were widespread but not universal in the BEMA INTEL data.
Summary data showed 51% of respondents said fourth-quarter bookings were up from the third quarter with 11% indicating a decrease in bookings.
The pulse survey, in asking about business outlook by channel, found BEMA members still guarded about prospects for business with foodservice customers. Respondents either somewhat or very positive about foodservice held at 33%, unchanged from the third quarter and up from 0% in the second. By comparison, the business outlook was 96% positive for industrial/commercial in the fourth quarter, 84% for distributors and 67% for retail.
In a review of challenges faced by equipment makers, COVID-19 ranked first at 70% in the fourth quarter, a figure down from 84% in the third quarter and 85% in the second quarter. Ranking second among challenges were rising raw material costs, cited by 48% of respondents, up from 18% in the third and second quarters.
Attracting and retaining a quality workforce ranked third among concerns, cited by 41% of respondents, little changed from 43% in the third quarter but up from 24% in the second quarter.
The rising raw material costs were evident in other BEMA INTEL data. Fourth-quarter Bakery Ingredient Indexes, compiled by Milling & Baking News, using weighted ingredient costs based on standard formulas, were at two-year highs for numerous products, including white pan bread, short bread cookies, cake donuts, devil’s food cake and saltine crackers.
In the case of white pan bread, the ingredient index in the fourth quarter was 187.9, up 12% from the third quarter and up 8% from 174.1 a year earlier. The saltine cracker index was 182.9, up 16% from the third quarter and up 8% from a year earlier.
Reflecting relative weakness in spring wheat and durum prices, the Bakery Ingredient Indexes for bagels and pasta were not stronger in the fourth quarter.
Other input costs advanced as well during the quarter. Diesel prices ended the year at about $2.62 a gallon, according to the Energy Information Administration, up 10% from November and the highest level since April. Diesel fuel prices still were down from $3.07 a year earlier.
Unit labor costs in the fourth quarter were up 7.7% from the fourth quarter of 2019, marking the third consecutive quarter in which labor costs were up 7% or more from the previous year.
While ingredient, energy and labor costs were surging, retail prices for baked foods in the fourth quarter were advancing only modestly. The Consumer Price Index, from the Bureau of Labor Statistics, US Department of Labor, for bakery products rose 3.1%, 2.2% and 3% in October, November and December, respectively, compared with prices a year earlier. The advances were consistent with a pattern of price gains averaging roughly 3% through the year, since the start of the COVID-19 pandemic. The price gains were far higher than was typical the previous two years — averaging just over 2% in 2019 and less than 1% in 2018. Conversely, while fourth-quarter baked foods prices were up an average of nearly 3%, the gains were well below average price hikes for all food at home — up 4%, 3.6% and 3.9% in October, November and December, respectively.
The BEMA INTEL summary also highlighted strength in commercial baked foods sales, noting that in the year ended Dec. 27, 2020, bread dollar sales rose 10%, bun sales climbed 18% and salty snacks were up 13%. In-store category sales were weaker, with bread up 1.3% (unit sales were down 23%), and pastry/doughnut sales were up 2.3%.