As was done last year at this time, The National Provisioner surveyed you, our processor readers, on capital expenditure trends in your companies as part of our 2015 Economic Outlook.

The goal of our 2015 CapEx Study was to identify changes in spending levels this year compared with 2013, leading business factors fueling capital expenditures, areas of processing and production that are receiving increases (or decreases) in spending and the level of spending CapEx projects command as a percent of annual revenue.

Overall, the majority of processors that participated in the survey continue to be “very positive” to “somewhat positive” in their outlook on the health of their business and the economy — 80 percent of respondents compared with 79 percent in the 2013 survey.  That said, the average increase in CapEx spending processors reported for this year was 15 percent — down slightly from the 18 percent average increase reported in 2013.

Areas of spending of CapEx budgets this year were earmarked for equipment upgrades and replacement projects (54 percent versus 42 percent in 2013), maintenance and upkeep of equipment (50 percent versus 29 percent in 2013), new equipment purchases (41 percent versus 17 percent in 2013) and with major expansion/renovation of production facilities remaining relatively flat (26 percent versus 28 percent in 2013).  One significant change in plans was a sharp uptick in deferring CapEx funded projects to future years (22 percent) which accounted for 4 percent of plans in the 2013 report (see Figure 1).

A testimony to the health of processors’ business is that more than 60 percent of processor respondents indicated their CapEx projects this year were funded with cash, down slightly from the 2013 report (67 percent).  While borrowing, reduction of expenses and leasing remained largely unchanged as sources processors relied on to fund CapEx projects (30 percent, 25 percent and 20 percent, respectively), supplier-provided finance rose to 18 percent this year, up from 9 percent in 2013.

This year did see a shift in the application of processors’ CapEx spending between repairing and rebuilding existing assets and creating new assets. Spending to create new assets increased to 46 percent, up from 38 percent among processors in 2013. Spending on repairing and rebuilding existing assets received 54 percent of CapEx spending this year while it commanded 62 percent in 2013 (see Figure 2).

A similar shift in CapEx spending was seen in increasing capacity for existing products compared with new products. Spending to increase capacity of existing products accounted for 52 percent of respondents’ CapEx spending, up from 44 percent in 2013. Increasing capacity for new products rose slightly, to 29 percent from 27 percent in 2013. Spending on other CapEx projects unrelated to capacity decreased to 19 percent from 29 percent in 2013, which indicates  overall spending on increasing capacity, regardless if for new or existing products, was up in 2014 compared with 2013.  Last year’s CapEx survey showed growth in spending on increased capacity compared with 2012 (see Figure 3).

While increased capacity led in receiving the share of processors’ CapEx spending in 2013 at 66 percent, it fell to second place this year, to 55 percent, tied with spending aimed at reducing production cost, while investments to improve operational efficiency rose to 68 percent this year, up from 49 percent in 2013. This could be interpreted to mean the increased capacity gained in processors’ plants in 2013 was further optimized this year (see Figure 4).

Food safety, equipment replacement, and reduction of labor expenses received less CapEx spending this year than in 2013, while maintaining existing business operations, quality control standards, restoring or rebuilding facilities and improving supply chain/logistics received more attention this year among processors than in 2013.

Looking ahead to 2015, processors that participated in the CapEx survey are expecting changes in where investments will be made in their operations compared with expectations stated in the 2013 survey.

Increasing capacity as a focus of CapEx spending next year was projected by 63 percent of survey respondents, down from 76 percent for this year. The expectation of re-engineering equipment as a cost-saving measure or to avoid new equipment purchases for next year also declined to 35 percent from 46 percent that held that expectation for this year. While the expectation of CapEx investments in co-packing and outsourcing production next year rose compared with expectations for this year, there was a substantial increase in processors’ expectations that CapEx spending would be targeted to other areas not identified in the survey(see Figure 5).

Continuing to look ahead to 2015, processor respondents were asked about changes in their company’s CapEx spending compared with this year, and 44 percent expected spending to increase, whereas 42 percent held that sentiment 12 months ago. Processors that felt that CapEx spending would stay flat next year was 41 percent, down from 46 percent this year. Fifteen percent of processors believed their company’s CapEx spending would decrease next year, up from 13 percent.


For more information on this survey or to see a complete version of The National Provisioner’s 2014 CapEx Study, which includes additional data not included in this article, contact Scott Seltz at or (779) 221-9431.