While the recession has cut the appetite for many goods and services, demand for food processing and packaging equipment is strong and is likely to continue growing, industry observers and executives say.
The recession-resistant demand for food, as well as changes and competition within the food industry, is boosting orders for the equipment.The industry's growth would be faster if not for the recession, observers said. And foreign sales of U.S. food processing and packaging equipment are expected to grow faster than domestic business.
The industry is sheltered from the recession in part because of the perennial need for food. "People don't stop buying groceries," a Commerce Department official said.
Many manufacturers of food processing and packaging equipment are reporting double-digit growth, which is enviable expansion in recession-weary 1992.
For example, sales of food process equipment are up 15 percent to 20 percent at Jacobson Cos. of Minneapolis and 20 percent to 25 percent at MAC Equipment Inc. of Sabetha, Kan. And business is expected to continue growing.
Equipment for the food industry is helping buoy softer sales of other processing equipment for products such as chemicals, forest materials and ceramics.
"As a whole, the business is flat, but the food industry is consistently sound," said Chuck Copenhaver, executive vice president of MAC.
The Packaging Machinery Manufacturers Institute (PMMI) in Washington, D.C., forecasts its members' sales will rise 6.4 percent to $2.9 billion this year; food packaging equipment accounts for about half of the sales. That growth rate is higher than in 1991 or 1990.
Jack Mans, plant operations editor for the industry magazine Prepared Foods in Chicago, added: "We're seeing a lot of plants being built and a lot of renovations."
However, observers agree business would expand faster if not for the downturn in the economy.
The recession had led to some dips in sales. The PMMI said sales in the second quarter were down about 15 percent compared with the second quarter of 1991.
"With manufacturers having a hard time making ends meet, it's understandable they might defer investments and make do with existing equipment," said Andy Benson, PMMI director of marketing development.
Ivar Sorensen, president of Jacobson Cos., said purchases of food equipment today are prompted mostly out of necessity, such as replacing defunct
machinery. Food companies are delaying long-term investment and upgrading.
While the recession has not caused a drop in demand for food, it has changed buying patterns. Consumers are spending less money on prepared products, the foods that require the most processing and thus spur demand for equipment.
"Food companies have not gone unscathed. Consumers are buying less value- added products in favor of lower-priced ones," said Terry Thompson, spokesman for Pillsbury Co. in Minneapolis.
Growing exports are making up for some of the lost steam in the domestic market, said George Melnykovich, president of the Food Processing Machinery and Supplies Association in Alexandria, Va.
Exports of processing and packaging equipment are growing faster than domestic business. Exports of packaging equipment, for example, are expected to grow 8.1 percent to $657 million, compared with 6.4 percent growth in total sales, according to the PMMI.
The United States has a trade surplus in food processing equipment, while trade in packaging machinery - currently in a deficit - is expected to be balanced by next year, according to the Commerce official.
Canada is listed as one of the strongest markets for the equipment. Mexico and other countries in Latin America are also increasingly lucrative.
"Our members are very heavily in favor of (the North American free-trade agreement)," Mr. Melnykovich said. "Nafta will increase our sales as the food industry is developed in Mexico."
The Far East is another strong export market.
Europe is a tougher nut to crack, largely because of strong competition from local manufacturers in Germany and Italy. "Some of our key competitors in the food business are German companies," Mr. Copenhaver of MAC said.
Still, MAC is considering entering overseas markets. Thus far, it has not exported in part because of the "huge" size and weight of its machinery, which boosts transport costs, Mr. Copenhaver said.
East Europe is another promising area, observers said. However, that market is not expected to develop for at least a couple of years because of its lack of capital.
The food industry today is not undergoing a major technological revolution, like the move toward aseptic packaging a few years ago. However, a number of more subtle changes are under way and are spurring business.
First, competition between food companies has intensified, which is prompting demand for more sophisticated processing and packaging machinery.
"There's a shelf war in the consumer marketplace," Mr. Copenhaver said, citing increased jockeying for market share in the breakfast cereals market.
Cereal makers are seeking to better their products, increase shelf life and boost consistency. At the same time, they're seeking to reduce labor and cut costs.
The drive toward greater efficiency is seen in the building of larger processing and packaging plants.
"There are more megaplants," the Commerce Department official said. Food is also increasingly processed before it hits the store, the official added. ''Butchers are getting cuts of meat rather than a side of beef."
Thus food processors are looking for more sophisticated machinery. "There's a trend toward more precise measurement, more consistency," Mr. Sorensen said.
And food companies increasingly want the larger plants, with more sophisticated equipment, from one supplier.
"Fortune 500 companies in particular are looking for turnkey solutions, one-source suppliers," Mr. Copenhaver said. They are asking manufacturers, which traditionally specialize in either processing equipment or packaging machines, to provide complete plants with both.
Stronger laws to protect the environment are prompting food companies to invest in exhaust filters and waste treatment equipment.
Advanced technologies, such as supercritical extraction, are creating new breeds of machinery that can perform new tasks such as removing cholesterol