Holding Steady in 2024

On Thursday, February 22, viewers saw a snapshot of Baking & Snack’s 2024 Capital Spending Outlook report. Responses from 156 industry decision makers revealed a commonality of cost concerns including ongoing labor issues, rising raw materials costs and inflationary pressures with labor and raw material costs remaining top challenges.

Sentiment indicated a slight shift in the general outlook from very positive to somewhat positive, indicating the industry is likely settling into a new normal from pandemic highs. 54% anticipate increasing cap investments compared to 2023, and many feel a palatable sense of energy. Attendance at conferences and trade shows is strong with people seeking out solutions and collaboration.

But the familiar foe of labor costs will likely be ongoing considering the major nice-to-haves among many workers include a flexible, work-from-home environment – something that is largely out of reach for many working in the baking industry. This leaves an opportunity to review how the industry looks at staffing and labor, considering a multi-generational approach and increasing the use of automation.

While costs haven’t shifted back to pre-2023 levels, they do not remain the challenge they were 2-3 years ago. The supply chain is also improving with companies buying more when it’s advantageous to manage potential future shortages. Additionally, more leaders are prioritizing the use of data to present a compelling argument for systems change. “There’s a lot of moving parts to the increase in capital spending,” said Mike LaValle, corporate account manager – bakery and snack team, Intralox.

As many adjust to what appears to be a new normal, there remains a feeling of apprehension about what might be around the next corner. Industry leaders also anticipate some level of uncertainty, particularly in an election year. Yet this level of collective awareness is contributing to increased collaboration and a desire to plan based on lessons learned. Planning is more important than ever considering equipment costs more and increased demand means the line that took 6 months before could now take 12-14 months.

“Manufacturers don’t want to be in the same spot they were during the pandemic, and more are willing to invest in things that will decrease dependency on labor, especially as manufacturers see demand remaining strong,” said Kerwin Brown, President/CEO, BEMA.

The most advantageous being automation with investments in systems improvement (system integration/automation) and maintenance and replacement parts. In 2024, Cap Ex is primarily spent on equipment in packaging (84%), makeup/diving/depositing, (56%), and mixing (54%). With many running equipment long and hard to produce SKUs as quickly as possible, more are exploring the idea of quarterly maintenance contracts.

“The industry confirms most bakeries will shift to more and more automation to reduce waste and reliance on labor,” said Jim Warren, VP of Exact Mixing, Reading Bakery Systems. “Automation prevents human error, and less training is needed, allowing bakers to accommodate variations from day to day. The head count may be less, but the industry will need more highly trained people earning a higher pay scale.”

With more space to breathe, many are again turning to the production of higher-quality product and looking at ways to reduce waste to meet sustainability initiatives with equipment that will meet standards for the next 20-30 years. There is also a shift away from running a line as fast as possible to slowing down to reduce waste and improve safety and sanitation to avoid a recall situation, LaValle said.

“Over the last few years, those in the industry have worked very hard at being able to produce more goods and services with the same number of people, adjusting to the demand of the industry,” Warren concluded. “At this point, we’ve optimized all that we can, but we have to be able to meet the demands of the industry or someone else will.”

Research for the Baking & Snack’s 2024 Capital Spending Outlook report was conducted by Cypress Research and sponsored by Intralox, Reading Bakery Systems and BEMA.

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