Baking & Snack - February 2021 - 28

CAPITAL SPENDING SURVEY

BAKERIES PLAN TO INCREASE

CAPITAL SPENDING

About what percent of your company's
annual revenue is designated for capital
spending projects in 2020 and 2021?

2020 / 8.4% 2021 / 10.8%
investment levels the same. However, here's the kicker.
Only 12% expect to decrease their 2021 capital spending
plans from 2020 levels, compared to 34% who expected
a decrease in 2020 from their 2019 levels. These findings
suggest that baking executives have drawn a new map
for navigating success for their companies after a tumultuous year.
On many other levels, these numbers aren't surprising. Many bakeries have had to raise overall capital
spending to enhance safety protocols during the pandemic while others, particularly bakeries serving retailers, needed to invest to meet capacity for the surge in
supermarket and eating-at-home sales. Meanwhile, bakeries that serve foodservice and in-store bakeries with
frozen baked goods have had to pivot toward new retail
or even direct-to-consumer and other online opportunities. Those shifts required further capital investments for
their operations.
As a result, these trends suggest that executives see
a need for greater capital spending in 2021. This is also
due, in part, to the reality that many bakeries were unable to add equipment for myriad reasons, ranging from

" WHAT THE DATA ARE
SHOWING THIS YEAR
IS A CONTINUATION OF
THAT GROWTH TREND
AND AN ACCELERATION
OF INVESTMENTS AMID
COMPANIES WHOSE
PRIORITIES INCLUDE
EXPANSION AND IDENTIFYING
ADDITIONAL OPTIONS TO
GENERATE MORE PROFIT. "
Marjorie Hellmer, Cypress Research

28 Baking & Snack February 2021 / www.bakingbusiness.com

safety regulations that prevented outside technicians
from entering facilities for installations to a backlog of
orders, especially for packaging equipment.
Nevertheless, as the economy recovers, especially
within the travel and foodservice industries, there could
be an even greater amount of investment flowing into
equipment spending toward the second half of this year
as the traditionally conservative baking industry sees the
roadway to profitability open up further.
" It's good to see this level of planned capital spending in the baking industry, " Ms. Hellmer said. " During
the last decade, the story has been struggle, struggle,
struggle to reinvest. We're in a really healthy period
of expansion. "

Waving the green flag
While the pandemic slammed sales for those businesses
serving restaurants and institutions, the upheaval provided an unexpected bonanza for packaged goods operators in the retail channel.
In fact, 92% of bakery executives reported that their
outlook was somewhat or very positive for the wholesale
baking industry while an even higher 97% had a positive
outlook for their own companies.
" The positivity is off the charts now, " Ms. Hellmer
said. " However, as is characteristic of the baking industry, executives are more comfortable reporting outlooks for their specific companies than speaking for the
industry. This is why we see slightly more companylevel positivity. "
Moreover, she pointed out that 61% of executives
see the outlook for the baking industry getting better
in 2021 compared to 2020 while 36% expect no change
from 2020. Only 27% of bakers expected an improved
year at the beginning of 2020 while 66% expected 2020
to look a lot like 2019. No one could foresee the public
health crisis that was on the horizon.
" We have to reach back three years to see the sort of
optimism that baking executives anticipate for 2021, "
Ms. Hellmer said. " It has been since 2018 that we have
seen this kind of bullishness in the industry. "
Retail has bolstered optimism as more stay-at-home
households rediscovered the bread aisle and other packaged baked goods. In fact, a whopping 92% of respondents had a very or somewhat positive 2021 outlook for
the retail channel, followed by contract manufacturing
for food distributors (84%) and industrial/commercial
customers (83%). Only 56% of bakers, however, have a
positive outlook for restaurants and foodservice.
" Foodservice is taking the most significant channel
hit as executives look to 2021, " Ms. Hellmer said. " We
know there will be continued stress here. "
Bakeries like International Delights, the Clifton, NJ-

http://www.bakingbusiness.com

Baking & Snack - February 2021

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