Baking&Snack - February 2013 - 32

CAPITAL SPENDING SURVEY

Capital Spending Year-to-year Comparisons
42%

Under $1 million / $1 million to $9.9 million / $10 million to $49.9 million / $50 million or more
*Budgeted for 2013

As the economy appears to be
improving, how would you describe
your company’s financial position?
Firmly in the black: We’re
seeing no ill effects.
Financially sound: Our profits
have taken a hit, but we’re
on solid ground.
Unstable: Our profits are
turbulent these days.

in the previous year’s survey. “This
is a huge statement of confidence,”
Ms. Troxel Hellmer said.
A cross tabulation of the data
showed that 58% of businesses
with more than $25 million in annual sales plan to increase their
2013 budgets from 2012’s real
spending compared to 30% of
companies with $25 million or less
in sales.
“Larger companies are driving
investments, whereas the smaller
companies are still struggling,”
she observed. “They’re struggling
to find the money to make these
investments in their facilities, and
it’s a huge source of frustration
for them. Those numbers have to
come back at some point because
these small companies — in order
to survive — must start spending
again. They’re still not in a very
strong position to do that.”
The survey’s results also hinted
that banks and other financial institutions seem more willing to lend

/ Baking & Snack / February 2013

this year, Ms. Troxel Hellmer noted, and this could be a good omen
for the near-term outlook. When
asked to list all of the ways they
plan to cover capital purchases in
2013, seven in 10 executives noted
they will use existing cash, but 39%
added they would like to borrow
from outside sources. That’s up significantly from the 25% of respondents who mentioned borrowing in
the previous survey, suggesting that
there’s more liquidity in the market.
“That’s an option that wasn’t open
to them in the last few years,” Ms.
Troxel Hellmer said.
And most bakeries and snack
manufacturers are spending money on equipment. In fact, 83% of
those surveyed budgeted for new
processing equipment in 2013

while 69% planned to buy new
packaging equipment. Those percentages were up substantially from
last year’s report. Additionally, 61%
wanted to upgrade existing facilities, 60% would invest in maintenance and replacement parts, and
56% earmarked funds for systems
improvement. Only 31% budgeted
for new buildings.
Companies were asked what
percent of their budgets they plan
to spend across their business.
Executives responded that 33% of
their budgets will go toward new
processing equipment, or more than
double the 16% of available dollars
they plan to spend on new packaging equipment. Only 11% of overall spending would go toward new
buildings, but that amount was up
from a paltry 6% in last year’s report.

What’s driving spending?
New products continue to prime the
pump for capital expenditures. In
fact, 45% of respondents listed product innovation as the single most
important factor influencing investment strategies in 2013. That percentage was similar to survey results
during the past two years. However,

Survey reaches wide sample
In addition to an online survey, Cypress Research, Kansas
City, MO, called many of the leading companies in the
industry to urge their executives to participate in the 20th
Annual Capital Spending Survey.
Demographic information indicated 18% of respondents
worked for companies with annual sales of $500 million
or more. Another 17% of companies had $100 million to
$499.9 million, 27% with $50 million to $99.9 million, 13%
with $25 million to $49.9 million, and 25% with under
$25 million. Industry consolidation and the closing of
Hostess Brands reduced the number of large companies
responding to the survey.
Primary products made at respondents’ plants included
82% fully baked or par-baked bread and buns; 34% cakes
and sweet goods; 27% cookies and crackers; 20% frozen
dough; 11% tortillas; 10% salted snacks and 18% other products including waffles, wafers, cereal bars and items such as
pizza and mixes.

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Baking&Snack - February 2013

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