Report shows rising market for bakery equipment

Despite its maturity, participants in the European industrial food processing equipment market are confident of slow but steady revenue growth, according to a new study by Frost and Sullivan.

Despite its maturity, participants in the Euro13.14billion European industrial food processing equipment market are confident of slow but steady revenue growth.

Recent legislation supporting improvements in product quality and subsequent replacement sales are expected to push the market to Euro15.12billion by 2009.

Responding to mounting consumer concerns over hygiene and food safety, the European Commission (EC) has passed a series of directives to safeguard consumer health.

To meet more stringent EC regulations on product quality and safety, food manufacturers are being compelled to invest in more advanced food processing machinery.

This is providing impetus to market expansion.

In addition to setting higher standards for public health protection, European Union (EU) legislation has attempted to keep consumers aware of the nature and provenance of foodstuffs.

Traceability has consequently become an important consideration with manufacturers having to incorporate tracking systems in their machines.

New food safety standards are also spurring an increase in software-based industrial food processing equipment.

Technological developments in the market are being driven by EU legislation governing food safety, product quality and energy efficiency.

At the same time, heightened competition is also supporting almost constant product innovation.

Here, the effort has been to boost productivity and reduce labour costs through flexible automation and higher capacity machines.

This, in turn, is expected to enable companies to pass on the savings to customers.

"Intense competition has put customers in a good bargaining position.

"They want higher specification/better equipment, namely higher output and more flexible machinery for the same amount of money.

"The challenge for manufacturers is to remain price-competitive and retain market share in this highly charged environment," warns Frost and Sullivan.

The development of technologically advanced machines with dual-application capabilities is expected to assume greater relevance due to changing consumer tastes.

As consumers demand greater variety in their food, there is expected to be a corresponding rise in demand for processing equipment with crossover applicability.

"With increasing demand for home meal replacement and convenience foods, end users are putting pressure on food processing equipment manufacturers to innovate and create equipment that can produce new product categories.

"These new products require new designs such as different sweetening systems, packaging systems and flavouring systems," the study explains.

A preference for greater food variety, changing demographics (the prevalence of one-person households) and changing lifestyles are all playing a role in driving market expansion.

For instance, demand for food processing equipment in the bakery segment is expected to increase due to the growing popularity of ready-to-eat, takeaway meals and snacks rather than traditionally home-cooked, set meals.

Growing purchases of premium products such as Italian bread are also likely to spur demand from the bakery segment.

With a share of 20.8 per cent in 2003, the bakery processing equipment segment has been, and is expected to continue being, the largest product segment of the overall market.

Along with the fruit and vegetable segment, it is also forecast to be the fastest-growing segment.

The meat and poultry processing equipment segment and the drinks segment are set to retain their positions as the second and third largest revenue contributors to the overall market.

Nearly 80 companies are active in the highly fragmented European industrial food processing equipment market.

A low total of companies such as FMC FoodTech, Alfa Laval, APV, Tetra Laval, GEA AG, Stork N.V., Klockner, Krones, Buhler and Baader account for a significant market share.

A spate of mergers and acquisitions has characterised the competitive landscape over the past five years.

The goal of such consolidation activity has been to augment product lines and become total equipment suppliers for a wide spectrum of food industries.

Strategic alliances are also regarded as a route for many companies to become globally competitive.

Competitive pressures are expected to remain strong over the long term, placing enormous pressure on prices and eroding profit margins.

"Key points of competition are expected to include the products' technological capabilities, price, quality, automation features, flexibility and customer service and support," the study concludes.

"Most competitors are also expected to focus on offering a complete product range and being a one-stop shop.

"Competition is also increasingly expected to lean towards complete automated flow lines.".

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