Baking&Snack - February 2013 - 38

CAPITAL SPENDING SURVEY

For years, Mr. Irvin added, the
tortilla industry has been bullish
when it comes to capital spending. Even despite the deep recession and the slow recovery that
followed, most tortilla manufacturers enjoyed robust growth and
have taken a business-as-usual
approach with new players entering the market and existing businesses spending money to boost
their share.
As everyone in the baking
industry knows, however, the good
times don’t last forever. Eventually,
those who make the biggest of bets
end up paying the piper. “In 2013, I
honestly think some bills are going
to be coming due,” Mr. Irvin said.
“We’re at a point where increased
commodity prices have to be absorbed somewhere. Some people
will be in trouble this year. With
the tortilla industry, there is not a
lot of caution here. They’re like [in
the movie] ‘Field of Dreams.’ They
believe, if you build it, they will
come. At some point, the check is
going to come due. We’ll start to
see that a bit. Our company is more
cautious — we sell it, then we build
it. It could be why we’re still in a
healthy situation.”

Anteing up for the long run
Because of the way bakeries
operate these days, plants cannot
afford to sit idle. For many businesses, downtime is just a lost

Fuel behind bread prices
What do a gallon of gas and a loaf of bread have in
common? “When the price of one goes up, the other does
too, said Bill Zimmerman, president and CEO, The Long
”
Co., Chicago.
That’s been the general correlation during the past 45
years that Mr. Zimmerman has been involved in the baking
industry. Typically, the average price of a loaf of sandwich
bread is about half the amount of a gallon of gas. “With
gas prices at $3.75 to $4.25, bread is staying constant at
more than $2 for a loaf of bread, he said.
”

“Regardless of the economy,
we’re in the business to grow.
”
Richard Irvin, Tyson Mexican Original
opportunity to maximize their
assets. “Investments will have to
be made because of the demands
we’re putting on equipment in the
industry,” said Bill Zimmerman,
president and CEO, The Long Co.,
Chicago. “Plants are always working. We work 168 hours a week. We
have to make sure the ovens are up
and running, and there is product
always moving through them.”
Some baking companies, he
added, have no choice but to invest
in today’s competitive environment
to minimize maintenance, enhance
efficiencies, eliminate bottlenecks
and boost operating capacity. “I
don’t think there’s a single factor out
there that doesn’t influence capital
spending,” Mr. Zimmerman said.

Compared to 2012 capital spending levels, what does your company plan
to spend on capital improvements in 2013? (year-to-year comparison)

Spend more this year than last year / Spend about the same / Spend less / Not sure

/ Baking & Snack / February 2013

“There’s very little, ‘We’re doing it
because we want to.’ We do it because we have to do it.”
As the saying goes, if you’re
not moving forward, you’re likely
falling behind. In the baking industry, companies can’t even afford to stand still. That’s why New
Horizons Baking invested around
$15 million during the past three
years to upgrade and expand its
Norwalk, OH, bakery. During the
wake of the recession, the company
replaced its antiquated conveyorized proofer-and-oven system,
which had been initially installed
in 1964. Additionally, it retooled
its bun line from mixing through
packaging to increase capacity from
3,900 doz buns an hour to 5,200
doz, as well as lower operating costs
and enhance product quality.
“We made up our minds to grow
the business and did necessary investments to do that,” said John
Widman, New Horizons’ senior
vice-president of operations. “The
things we did made us more efficient. A lot of investments hadn’t
reduced headcount, but we gained
throughput and controlled costs
that way.”
In fact, the company added 32
employees as it more than doubled

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