Canadian Packaging

Food companies cautious on new packaging equipment spending

By Canadian Packaging Staff   


New PMMI) survey finds only 50 per cent large food companies intending to make new machinery purchases this year—compared to 76 per cent a year ago.

Despite some signs of revival in the North American economy last year, large food manufacturers remain fairly cautious about investing in new packaging machinery and equipment in 2011, according to a recent survey by the Arlington, Va.-based Packaging Machinery Manufacturers Institute (PMMI) ( showing that only 50 per cent of the polled food companies intend to make new machinery purchases this year—compared to 76 per cent of respondents with buying intentions in PMMI’s similar survey a year ago.

While most of the responfing food companies reported higher production volumes last year, “capital budgets are being doled out so carefully that many companies look to modify existing equipment, make do with what they have, or refurbish older equipment that wasn’t being used,” PMMI observes in the Trends and Advances in Food Packaging – 2010 report released near the end of last year.

The study asserts that while North American food companies often find themselves pressured to implement changes to existing primary packaging, to launch new products or to increase production, “deciding to buy new equipment is not often the first consideration.

“Whenever possible, companies are looking to use the equipment they have, or modify existing equipment, or redeploy the equipment that has been out of use,” states PMMI, noting that nearly two-thirds of its 550-plus member-companies—comprising leading U.S. and Canadian packaging machinery suppliers—serve the food industry.


“The food industry has been considered recession-proof the last few years [but] food manufacturers are not exempt from the effects of the economy when justifying capital expenses,” the report states, describing its findings as “an indication of economic caution and closely-held capital budgets.

“The uncertainty of the economic future has many food companies guarding their capital budgets,” PMMI notes, citing ROI (return-on-investment) as the “single greatest obstacle by far for justifying capital purchases.”

According to the PMMI, food manufacturers today expect to recoup ROI payback between two and three years after the machinery purchase.

“The next two most frequently mentioned hurdles when purchasing equipment are the difficulty in obtaining funding and internal approval, followed closely by machine functionality—finding the best equipment for the application,” the study reveals.

“Additional obstacles mentioned when purchasing new equipment are related to lead-times, footprint limitations, evaluating business growth and service/performance claims about the OEM (original equipment manufacturer),” the report adds.

“Food companies are also scrutinizing the value of changing materials against the cost of bringing in new equipment,” the study notes, citing packaging sustainability as a major driver of increased focus on material substitution.

“Whenever a new material is introduced, it is often followed by speculation as to what performance characteristics are true or false,” PMMI observes. “Renewable materials are under the microscope, even though they answer the goal of many food manufacturers who have, for years, sought solutions to move away from oil-based materials.

“The materials industry continues to respond to the sustainable call with an ever-growing list of renewable and degradable material choices,” reports states, but there is still much work to be done before new eco-friendlier materials widely fulfill the key packaging performance requirements of helping extend product shelf-life; offer better product protection; reduce production costs; and to be affordable.

“Food companies, while striving to bring environmentally-friendly packaging to the consumer shelf, cannot substantiate a decrease in throughput and the material must be equal to or better than the current option—and most importantly—bring cost advantages,” the report states.

The study also predicts that the tenuous economic recovery will continue to put pressure on food manufacturers to accelerate introduction of more innovative products for North American consumers—based on the fact that they are more keen to save money by cooking at home instead of eating out, while also continuing to demand more convenience in their packaged foods, such as having a choice of more single-serve, on-the-go and right-size portioned products.

“Another indication that value-conscious consumers are tightening their budgets is a shift towards store-brand, lower-cost product purchases,” PMMI states. “Long-standing brand loyalty is eroding as consumers look for bargains and find satisfying quality with store brands.”

In addition to facing greater private-label competition, food firms are also being pressured by retailers to reduce the amount of packaging shipped to their stores, the study observes.

“Material reductions continue to be driven by Big Box stores and grocery chains in both the primary package and the corrugate material in secondary packaging,” states the report.

“The latest trend of  retail-ready packaging (RRP) is being considered, or is already being implemented, at 68 per cent of the food manufacturers participating in this report.”


Stories continue below

Print this page

Related Stories

Category Captains 2024