Food Plants Using Auctions More Often to Buy and Sell Assets

Many and perhaps most auctions by major industry auctioneers are conducted simultaneously on-site and online. Either way, it's not the mode of selling, but the matching of asset to need that matters. Accountability and assurances are based on the reputations and relationships of established industry specialists. And in this data-heavy age, extensive information about the condition and working order of a machine often is available.

Loeb operates two types of auctions: on-site sales with a simultaneous webcast, and an online eBay-type sale. In contrast to on-site participants, very few online participants make the effort to do a physical inspection before the auction. So how do they know the assets they're after are worth their interest? Loeb offers photos and videos from every possible angle – showing any damage – and good online descriptions of the equipment for sale. The company does not guarantee the online content because it prefers buyers to visit and do a physical inspection.

Still, most online-only participants do enough homework on big-ticket assets to prevent ill-advised – and career-threatening – expenditures. "There are ways to mitigate the risk, or at least being able to explain to your boss why you've just bought a piece of equipment sight unseen," says Winternitz. "It's not uncommon for a customer to contact the OEM with the serial number and get a complete service history, or even hire the OEM or a third party to go in and inspect the equipment."

"People are getting more and more comfortable with the Internet," concedes Tom Larson, sales manager for the dealer side of Loeb. Even on the dealer side of the business, the digital age has brought significant changes to the marketplace. "To give you an example, in the last decade, we've gone from mailing-out a quarterly newsletter to updating our inventory twice a day on the web. There are times when an e-mail blast of incoming shipments results in sales before the truck even gets to the warehouse."

A financial hedge
Cost, time to market and an ongoing relationship can work in synergy to create a competitive advantage beyond the short-term transaction.

"An energy bar production line: You could buy one in an auction, have it disassembled from where it sits, reinstall it in your facility and it have it up and running within three to six months," says Rosenthal. "Now, if you were to order it from a manufacturer new, it could take up to a year or more. First to market means a lot, and a used piece of equipment can help you get your product out there faster."

Moving beyond one-time transaction services, surplus equipment companies can be part of a food processor's longer-term strategy to control assets and capital expenditures.

General Mills, Anheuser-Busch, Labatt Breweries and others have partnered with Schneider Industries (www.schneiderind.com), St. Louis, an auctioneer and more. Schneider manages ongoing investment recovery programs for those companies, which go beyond traditional buying and selling to include tracking and transferring internal assets from plant to plant.

"One of the things we've found over the years is that one plant may be looking to start a new project and spend significant dollars on equipment, when those same pieces of equipment – kettles, processors, downstream packaging metal – may be sitting idle at another plant, but they don't know it," says Dan Rosenthal, chief operations officer for Schneider. "We can track all of this, and when the need arises, we can move it from one plant to another and save money in the process."

He adds that used equipment can be a hedge against risk in an industry where consumers are sometimes fickle and trends are short-lived. For example, a few years ago, lines and even plants were being built to cater to demand for Atkins Diet foods "and some of those plants weren't even finished before the fad passed," he reflects. "You have to be careful when you're forecasting what you're going to be producing a year or two years from now."

Equipnet also offers asset management services. Services that go beyond the sale include asset redeployment, custom information technology programs, maintenance services and more. Specifically germane to buying and selling is a set of "cascading liquidation" options that includes various levels of negotiated sales as well as auctions – from live on-site auctions to webcasts to an eBay store.