Baking & Snack’s Capital Spending Survey, conducted by Cypress Research and sponsored by BEMA, revealed that bakers are feeling positive about both their company’s outlook and the industry’s outlook as a whole even as the challenges facing the industry change. This positivity, shifting challenges and IBIE on the horizon are all having an impact on capital investments for 2025, much of it positive. Fifty percent of bakers expect their capital investments to increase in 2025 compared to 2024, while 38% expect investment to remain the same. This is in line with previous Capital Spending Study results, with 2023’s study being an outlier with 66% of bakers reporting capital investment would increase. In 2022 and 2021, 57% and 52% projected an increase in investment for the coming year. 

More bakers reported investments are staying the same in 2025 compared to 2024 and only 12% plan to decrease investments, compared to 16% in 2024. This kind of fluctuation may be due to major projects that were completed in 2024 and bakers turning to now maintaining and optimizing those systems.

“The data are telling us that there is a larger share that’s going to hold their capital investments the same looking ahead to 2025, and we do see that ‘steady as you go’ approach reflected across the whole data set,” said Marjorie Hellmer, president of Cypress Research. “Bakers aren’t having to exponentially invest to catch up to where they need to be from a capital perspective. They’re not having to spend so dramatically as they had to coming out of the pandemic. They’re still investing, but it’s not as frenetic.” 

Since 2019, respondents to the Capital Spending Survey have reported an increase in the share of their company’s annual revenue designated for capital spending projects. In 2023, bakers reported that an average of 13% of company revenue was going toward capital spending, but there was a dip in 2024. In the 2023-24 Capital Spending Study, respondents expected that percentage to increase again to an average of 14.5%. However, in this year’s study, respondents reported their actual average percentage of company revenue going to capital spending was 11.7% in 2024. They project that to increase to 12.8% for 2025, on average, though it still falls slightly short of 2023’s revenue share. 

“2024 started off stronger than it actually ended up being, both because of the uncertainty around the election and softening bakery sales,” said Clay Miller, BEMA chairman and president of Burford Corp., a Middle Bakery company. “Bakers may have postponed some smaller projects they had planned in response.” 

Much of how bakers will be spending this money reflects the priorities of the past few years. Maintaining existing equipment and production lines remains the main 2025 priority for equipment-related purchases (41%), with adding new equipment and upgrading existing equipment following behind (31% and 28%, respectively). For overall 2025 capital improvements, 71% will focus on systems improvements and 69% will spend on maintenance and replacement parts. Upgrading existing facilities (52%), facility expansion (50%) and new buildings (14%) have fallen on the priority list. Packaging remains far and away the department where bakers plan to spend most of their equipment-related purchases because every baking company needs packaging and it remains the most labor-intensive part of the process. 

“No one wants bakery sales to slow down, but when it does, baking companies can focus more internally,” explained Kerwin Brown, president and chief executive officer of BEMA. “After investing in new facilities or equipment, they can now focus on honing things in before gearing back up.” 

Bakers’ goals with their capital budgets reflect the shifts in the challenges they’re facing. For example, food safety has risen to tie the No. 2 spot with improving process capability/flexibility with 60% of bakers focused on it. While that’s only a 3-point increase from last year’s study, it beat out other goals such as increasing capacity for existing products, decreasing labor costs and increasing capacity for new products. Sixty-nine percent of bakers prioritized improving product quality, consistency and accuracy. Second-tier goals included increasing capacity for new and existing products, decreasing labor costs and increasing production speed. Surprisingly, making accommodations for lack of labor fell from 54% in last year’s study to 40% for the 2025 study. 

“Almost 70% of bakers want better quality, accuracy and consistency, and it’s nearly 10 points higher than the next goals of food safety and flexibility,” Brown noted. “That’s something equipment suppliers need to pay attention to. Product has to be perfect in this climate. With rising prices, consumers and customers expect the product to be perfect and high quality. It has to be great when it hits the market.” 

Miller concurred: “It’s what we as the equipment supplier promised when the baker made the investment, that the product would be better, and if it’s not consistent, accurate or better quality, then that investment hasn’t been fully realized. They spent the money, and they want to get it right.” 

The most significant pressures on capital spending remain rising raw material costs and inflationary pressures. These two factors out of seven, saw the fewest bakers reporting no impact on their capital spending, 26% and 33%, respectively. Depending on a baking company’s approach to those pressures, bakers are either increasing capital spending or decreasing capital spending. More baking companies did report that these factors would increase their company’s capital spending plans, with 44% increasing spend because of rising costs and 40% increasing spend due to inflation. 

“Rising raw material costs are pulling at capital spending in both directions,” Hellmer said. “They’re either holding off in the hopes that costs will come down or they’re investing now in automation to eventually reduce costs. Inflationary pressures and interest rates are also inhibiting their plans. They may still be spending, but they’re just not spending as much right now.” 

Lack of labor continues to cause bakers to bolster their capital spending with 41% reporting some level of increase. More than half of bakers reported that supply chain disruption and interest rates will not affect their company capital spending plans, while about half indicated extended equipment lead times were not having an effect. 

“It’s surprising to me that half of bakers said extended lead times aren’t impacting their decision because it’s a part of every conversation around equipment purchases,” Miller said. “It’s changed the way we have to engage bakers. Suppliers have to be more proactive and communicate with customers earlier to accommodate the longer lead times.”

While 2025’s investment attitudes may be business as usual compared to 2024, the positive outlook for both individual companies and the industry at large signify a baking industry settling down. Bakers seem ready to exit the tunnel into a more business-friendly, stable future.

This article is an excerpt from the February 2025 issue of Baking & Snack. To read the entire feature on Capital Spending Study, click here.