Survey: Bakery equipment manufacturers’ outlooks improving

KANSAS CITY — Bakery equipment manufacturers’ assessment of domestic and global business outlooks improved in the first quarter 2021 BEMA Intel member pulse survey even as the companies eased back appraisals of their own prospects for the next six months.  That dynamic comported with members’ growing concern about the rising cost of raw materials and transportation as the challenges presented by COVID-19 recede.     

Ninety-five percent of equipment manufacturers viewed the outlook for business in the United States positively in the quarter ended March 31, up from 92% in the fourth quarter of 2020 and markedly improved from 76% in the second quarter of 2020. In the latter, the first full quarter after an outbreak of the novel coronavirus COVID-19 became a global pandemic, 2% of respondents held a “very negative” six-month domestic outlook. Since then, no participating manufacturer held a “very negative” view of domestic business prospects. In another sign of improvement, the portion of survey-takers indicating a “very positive” US outlook jumped to 37% after holding flat at 29% over the last half of 2020.

Turning to global business prospects, 95% of respondents were positive on the outlook for baking equipment manufacturing, up from 91% in the fourth quarter of 2020 and 86% in July-September 2020. More respondents were “somewhat positive” (69%, up from 65% in the fourth quarter of 2020) while 26% sounded a “very positive” global tone, the same as in the previous quarter.  No manufacturers were “very negative” in their six-month global assessment, whereas 2% of respondents held that view through the last half of 2020, which itself was an improvement from 10% who shared that sentiment in the second quarter of 2020.

The quarterly survey results were compiled by Cypress Research from questionnaires completed by 61 of 170 (36%) baking equipment manufacturers invited to participate. First-quarter survey respondents included 77%, or 23, of the top 30 baking equipment manufacturers. The survey summary comprises one aspect of the comprehensive BEMA Intel data platform created by BEMA to provide members a single-source snapshot of the baking and baking equipment industry’s economic health and outlook.

Improvements in forward appraisals of the industries were not universal. Equipment manufacturers were 98% positive about the six-month outlook for their own companies, down from 100% in the fourth quarter, but still well above 79% positive in July-September 2020 and 70% positive in April-June 2020.

That downtick accompanied summary data indicating changes in what were viewed as top challenges facing companies.  Complications of COVID-19 were cited in the first quarter 2021 by 54% of company leaders. That marked a continued downturn for the category from 85% in the second quarter of 2020, 84% in the third quarter, and 70% in the fourth.

The growing cost of raw materials also was seen as a more significant challenge. The category rose in importance from 18% in April-September 2020 to 48% in the fourth quarter and 54% in the three-month period ended March 31.  Other BEMA Intel data backed up that statistic.  First-quarter Bakery Ingredient Indexes, compiled by Milling & Baking News using weighted ingredient costs based on standard formulas, were at two-year highs for such products as bagels, shortbread cookies, cake donuts, devil’s food cakes, and saltine crackers.

In the case of shortbread cookies, the ingredient index in the first quarter was 190.5, up 10% from the fourth quarter and up 20% from 158.1 a year earlier. The cake donut index was 177.8, up 8% from the fourth quarter and up 17% from a year earlier.

Other input costs continued an upward trajectory. Diesel prices ended the year at about $3.6219 a gallon, according to the Energy Information Administration, up 35% from a two-year low of $2.372 per gallon on Nov. 6, 2020. Diesel fuel prices ended the first quarter about 11¢ higher than a year earlier. Unit labor costs in the first quarter were up 4.4% from the same quarter of 2020, marking the third straight quarter in which labor costs were lower than a year earlier. 

The percentage of respondents eying increased transportation and logistics costs also rose for a fourth-straight quarter from 10% in the second quarter of 2020 to 54% in the first quarter of 2021.  The number of manufacturers citing an unfavorable business climate (taxes and regulation, for example) and trade uncertainties also advanced in the first quarter, although less drastically.  Fewer respondents in the first quarter felt a significant challenge in the following categories: attracting and retaining a quality workforce, rising health care and insurance costs, a weaker domestic economy and sales to US customers, weaker global growth and slower export sales, or a strengthened US dollar relative to other currencies.

In asking about business outlook by channel, the pulse survey found BEMA members’ views on business with foodservice customers improved immensely. Seventy percent of equipment makers were positive to very positive about foodservice, up from 33% in each of the preceding two quarters and a sharp increase from 100% negative in the second quarter of 2020.  In fact, 10% of respondents were very positive on foodservice, the first such responses in the category since the third quarter of 2020.

Regarding other channels, retail prospects reached 100% (though no respondents had checked “very positive” since the third quarter of 2020), industrial/commercial prospects edged up to 99% positive, and distributor channel prospects eased to 83% positive (though more were “very positive” in the latest quarter).

The BEMA Intel summary also highlighted strengths and weaknesses in commercial baked foods dollar sales, which hit three-year highs in the second quarter of 2020, the initial pandemic lockdown time period, and have remained mostly steady since. Commercial aisle bakery sales were up 0.6% overall in the year ended March 31. In that year, hamburger-hot dog bun dollar sales rose 1.3%; other buns, rolls and croissants sales rose 7%; cake dollar sales rose 4.7%; pastry and donuts rose 3.9%; salted snacks rose 3.2% and bakery snacks rose 0.6%. Meanwhile, over the same period, bread dollar sales declined 3.2%, cookie dollar sales declined 2.3%, and cracker dollar sales fell 7%.

An examination of year-over-year dollar sales increases and declines indicates most of the categories within commercial baked foods peaked in the second or third quarters of 2020 and have declined incrementally since then. The exceptions were cake dollar sales, which have proved more volatile over the past five quarters, hamburger-hot dog bun dollar sales, which waxed and waned seasonally, and pastry-donut dollar sales. For the latter, the BEMA Intel summary combined commercial aisle with in-store bakery sales and showed year-over-year sales plummeted in the initial pandemic quarter, recovered in the third quarter of 2020, and have since slid lower and turned higher in smaller degrees.

With one exception, in-store sales were weaker year-over-year in the latest quarter with bread down 0.6% (unit sales also down 0.6%), bread-buns-rolls down 3%, and cookies up 0.8%. In-store cake sales bested commercial cakes with a 6.9% year-over-year increase. Examining the past five quarters indicates year-over-year in-store bakery sales plummeted in the second quarter of 2020 and have been up and down since. The exception was year-over-year in-store bakery bread, buns and rolls, which have only trended lower for the past five quarters.  

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