IBIE - 2019 Special Edition & Show Preview - 18

US CENSUS REPORT

"WE'VE ALWAYS BEEN THE
STEADY-EDDIE, STRONG
AND STABLE INDUSTRY,
AND ALL OF THE DATA
SHOWS THAT."
Robb MacKie, American Bakers Association
85% of 2016 capital expenditures
for machinery and equipment
Capital Expenditures: Commercial Baking Industry,
2002-2016 (with projections) ($ million)
3,894

2,934

Machinery and equipment
Buildings and other structures

2,371

2,470

2,091

2,201

1,939

18%

2,385

3,029
4%

295

457

432

380

644

2002
Census

2007
Census

2012
Census

2016
ASM

2022

1,563

1,744

1,859

960

2032

Note: Projections based on average annual growth rate between 2002-2012 of 2.3% for
machinery/equipment; 4.9% for buildings
*ASM = American Survey of Manufacturers
Cypress Research

Bread and cake spent nearly $700 million in
2016 on machinery and equipment;
Snack food stand-out investor in buildings
33%

692

Capital Expenditures: 2016 ASM ($ Million)
Machinery and equipment
Buildings and other structures

Cypress Research

18 PreShow Guide IBIE 2019

121

138

Tortilla

291
45

169

319
30

8%
Breakfast cereal

14%

Frozen cakes, pies, pastries

14%

Cookie and cracker

133

Dry pasta, dough, mixes

120

Snack food

Bread and cake

361

20%

industry began acquiring one another. Multinational
companies then began buying US bakeries.
Most recently, venture capital and other investment
firms started getting into the action in a big way. "They
are the 'new bank' for many businesses," Mr. MacKie
said. "And they're investing for the long run."

Mega metamorphosis
In the wake of consolidation that has changed the face of
the industry, there seems to be a wave of capital spending taking on greater emphasis in recent years. "I think
we'll look back at this period and say, 'Wow. This was a
big uptick in investment,' " Mr. MacKie predicted.
Historically, about 85% of capital expenditures targeted machinery and equipment, with the remainder on
buildings, according to the analysis by Cypress Research.
Overall, census data showed that total investment rose
steadily to $2.37 billion in 2012 compared with $1.86 billion in 2002, despite the impact of the Great Recession
and financial crisis that made it nearly impossible for
businesses to borrow money from 2008 to 2010.
Looking forward, Cypress Research projected that
cap spending may reach $3.03 billion in 2022 and approach $3.89 billion by 2032. Marjorie Hellmer, Cypress
Research president, noted those conservative projections are based on the average annual growth rate between 2002 and 2012 of 2.3% for machinery/equipment
and 4.9% for buildings. "Given the Census' historical
trends, anticipating an annual average increase of 2%
for capital expenditures in commercial baking seems
reasonable during the next 13 years," Ms. Hellmer said.
"A 2% annual increase in capital expenditures certainly
isn't a declaration of bullishness on the industry's part.
Rather, it plays into the industry's reputation for conservative investments in plants, reflecting the strategy to
enable facilities to make products that are in demand."
But there is reason for greater optimism because bakers have better tools to determine and even justify the
return on investment (ROI) for equipment purchases,
according to Dave Van Laar, senior advisor to ABA's
president and CEO, and long-time veteran of the cookie
and cracker industry.
Since 2012, he observed, more sophisticated and userfriendly data management systems are allowing operations to pinpoint bottlenecks, reduce downtime and garner
higher yields that achieve a quicker ROI than in the past. In
addition to replacing aging capacity with new technology,
companies are enhancing food safety processes through
Global Food Safety Initiatives to comply with the onslaught
of requirements from the Food Safety Modernization Act.
Continued investment in people and operations,
Mr. Van Laar added, will keep the industry strong for
the foreseeable future.

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