The Baking & Snack 2022-2023 Industrial Baking Industry Capital Spending Study, sponsored by BEMA and conducted by Cypress Research, showed a baking industry with an appetite for investment. While outlook for industry, companies and channels may be improving and tempering based on market forces, the clearest sign of the baking industry’s health is the confidence with which it is reinvesting for 2023. For the baking industry, capital investments look robust for the year following the International Baking Industry Exposition (IBIE) in 2022. 

All 174 survey respondents are involved in equipment purchasing for their respective companies, whether that’s authorizing purchases (37%), recommending equipment (31%), selecting equipment (10%) or involved in other ways (21%). When asked how their company investments compared to the previous year, 53% of respondents projected an increase in their capital investments, and 33% anticipated capital investments would stay the same, leaving only 14% saying they would decrease their capital spending. When asked specifically about investment in equipment, the numbers were similar: 55% look to increase investment, 32% expect it will remain the same and 13% anticipate a decrease. 

“We haven’t seen in recent history inflationary pressures like this, so if bakers are going to maintain their margins, they have to find ways to make product faster with leaner operations, and that leads to more equipment and automation,” said Kerwin Brown, president and chief executive officer, BEMA.

Most significant, however, is how much annual revenue companies plan to designate for capital spending. For the second year in a row, that percentage has increased. In the 2021-22 Industrial Baking Capital Spending Study, respondents reported they would designate 11.3% of their revenue to capital spending, up from 8.5% for the previous year’s actual percentage. In the 2022-23 study, bakers reported that their actual designation in 2022 was 12.8% and anticipated this would go up to 14.1% for 2023. Regardless of downward pressures and moderating positivity, baking companies are prioritizing investment. Marjorie Hellmer, president, Cypress Research, pointed out that moving whole percentage points in this figure is striking.

“It is very difficult to increase whole percentage figures, making this increase stand out,” Ms. Hellmer said. “The upward trend of how much bakers are setting aside as well as the jump from 2022 to 2023 is a healthy earmark for capital investment. It’s a tangible data point.”  

Bakery equipment suppliers sense this, too, according to BEMA Intel’s Member Pulse Survey for Q3 2022. Eighty-five percent of BEMA members who responded to the survey have a positive outlook for the US bakery equipment manufacturing industry for the next six months. When compared to the previous quarter, 47% reported their bookings were up, and 34% reported bookings had remained steady. Sixty-eight percent expect overall sales for their companies to increase in the next 12 months. 

“Equipment manufacturers have to be prepared for the possibility of a slowdown in orders in 2023, but the overall total will still be high,” said Jim Warren, BEMA chairman and vice president, Exact Mixing, Reading Bakery Systems. “People aren’t giving up on expansion and new product development, but I do expect it to moderate a bit.” 

As IBIE just occurred at the end of 2022, it’s not surprising that 2023 is shaping up to be a big year for capital investment. Of the survey respondents who attended IBIE, 8 in 10 said they shopped for equipment there. Thirty-nine percent made decisions to purchase equipment because of their experience at IBIE, and 36% increased their company’s initial equipment investing plans at least in part because of the trade show.  

This article is an excerpt from the February 2023 issue of Baking & Snack. To read the entire feature on Capital Spending Study, click here.