Despite lingering overall economic uncertainty, food & beverage processors apparently have come off a pretty good year. Those with plant operations responsibility remain cautiously optimistic for their prospects for profits and growth for the new year, according to Food Processing's 2012 Manufacturing Trends Survey.
That optimism is tempered by what may turn out to be a structural shift as consolidation and outsourcing give rise to greater uncoupling of brand owners and the plants that produce their products.
Capital expenditures, automation, energy and sustainability issues continue to make gains, albeit with mixed messages as to the rate of growth. Still, the overall picture for 2012 is healthy, given the challenges processors face and factors beyond the industry's control – such as rising commodity costs, government regulations and worldwide financial uncertainty in this increasingly global business.
The big question may be: Can we beat 2011?
Our first question on the survey, "What are your manufacturing priorities for 2012?" (Figure 1) saw not a single change in the order from last year – but some tiny movements up and down within the 10 priorities. Food safety, of course, remains Job One; cost control remained about even with last year's votes; sourcing & materials garnered a few more first-place votes and a gain in its average score; labor concerns nearly doubled its first-place votes; environmental concerns rose, too.
Only 4 percent saw a pay cut in their factories last year; 41 percent think it will increase this year. Other top-line results:
- 45 percent say their companies are growing.
- 23 percent expect plant expansion.
- Less than 6 percent expect a decrease in production.
- 63 percent say they're optimistic going into the new year – that's less than the 66 percent of optimists in both 2010 and 2011, but way above the 44 percent of in 2009.
Processors volunteered write-in statements, as well. There were multiple comments that placed maintenance high on the priority list, in large part because the discipline serves to maximize asset health and lifecycle costs, thereby conserving or delaying capital expenditures. Others cited cost and budgetary constraints; capacity management and utilization; managing staff as plants close or are consolidated; and maintaining product quality.
By the way, the survey was taken between Nov. 14 and Dec. 20, 2011. We had 205 responses, and all should have been food & beverage processors with plant operations responsibilities.
When asked, "How is your company dealing with the economy?" 45 percent said "We're growing," indicating sustained optimism, just a point over last year's response. Since the financial meltdown, perhaps driven by optimism or confidence in long-term planning, there's been a steady uptick in the number of respondents have said they expect to make "no great changes," from 32 percent to 36 percent to 40 percent over the past three years.
In our survey, one-tenth of respondents cited "other" ways of dealing with the economy. These included efficiency improvements, cost and waste reductions, price increases and generally "minding every output" in the face of rising commodity costs.
Some noted the difficulty of finding qualified employees, while another seemed to answer those comments by saying: "We are growing with process design and moving toward mechanical automation to increase production."
On the negative side, expectations of staff reductions are up to 18 percent of respondents vs. last year's 13 percent, which itself represented a drastic reduction from the prior year's 34 percent. The other side of that coin: 28 percent expect an increase in hiring, better than last year's 26 percent.
Now, much like the proverbial "other shoe dropping," comes outsourcing. Last year, 3.6 percent said they would outsource within the U.S. and Canada and another 3.6 percent outside of those boundaries. Today, 6.5 percent of respondents plan to outsource to manufacturers in the U.S. and Canada and 5.5 percent will outsource further afield. While staff reductions and more outsourcing could put employees on the streets, it also may be a net neutral for the industry – but with the same workers and plants operating as low-cost contract manufacturers and packers for the brand-owners, who have retrenched to focus on their core competency, marketing.
This view is perhaps bolstered by a 6-point decline in those expecting their companies to expand (23 percent). Nevertheless, 72 percent of respondents' anticipate that their plants will see a production increase in 2012, up roughly 3 percentage points from a year ago.
Asked specifically about staffing levels for 2012, 28 percent think their companies or plants will increase the size of the workforce -- up 2 points from last year -- while 18 percent plan to reduce the workforce compared to only 13 percent who expected layoffs or attrition last year.