A combination of technological innovation, legislation as well as sprawling production facilities and complex supply chains are driving the European food and drink industry toward investments inautomation and control solutions, according to a new study by Frost & Sullivan.
The recent squeeze on their profit margins through higher input costs and a slow down in demand growth for their products has pushed the food and drink sectors to improve the efficiency of theirprocessing operations. Plants are investing in bigger and faster equipment to increase production.
New regulations in the US and the EU, mainly relating to the tracking and tracing of recipe ingredients and final food and beverage products add a legal thrust to investment in automation and control systems.
Technological advances such as functional touch-screen human machine interfaces, Web-enabled supervisory control and data acquisition (SCADA) systems and industrial asset management (IAM) solutionsare spurring existing users to replace legacy products with more up-to-date replacements.
Such trends are likely to be supported by low-priced, out-of-the-box solutions that are set to become increasingly popular in product areas such as the SCADA and IAM. This is in keeping with customer demands for low-priced, easy-to-use systems, stated Jonas Westlund, an automation industry analyst with Frost & Sullivan.
Typically, tight profit margins have made food and beverage sector participants steer clear of investing in equipment that are unlikely to rapidly boost profitability, Westlund stated.
In order to achieve their economic goals, many companies have continued using existing and often outdated systems or have deployed home-grown technologies.
"At the same time, the need to boost efficiency and maintain profitability in a highly competitive environment with tight margins is likely to encourage food and beverage manufacturers toinvest in automation and control equipment," he stated this week.
Investments in automation and control solutions in the European food and beverage sector have also been driven by consolidation in the retail sector
and among food and beverage producers. Large supermarket groups have been expanding their market presence.
"As large-scale distribution networks and just-in-time (JIT) manufacturing become increasingly common, the need for efficient and transparent production processes is gaining impetus,"Westlund stated. "At the same time, with products often sold in locations distant from their point of production, the need to monitor the age of ingredients used in food products is becomingsignificant."
Another push comes from the dominant multinationals, which are acquiring smaller rivals. The merger process pushes those companies toward greater harmonisation of systems and higher efficiencylevels across diverse global facilities.
Fierce price competition among automation and control suppliers could push down the costs for food and beverage makers, Westlund stated.
"Extreme price sensitivity among food and beverage companies, growing competition between suppliers and technological advances that enable cost reductions are all likely to trigger pricecuts for automation and control products in the market," he said.
However prices will not be the only consideration food and beverage makers will be looking for from providers. Expertise in the provision of automation and control solutions is also of crucialimportance.
Overall, revenues in the European food and beverage automation and control market are forecast to increase to $1,695.9m in 2011 from $1,331.6m last year.
The established programmable logic controllers (PLC) sector is projected to continue as the largest segment. Other segments are likely to exhibit higher growth rates as well, Westlund stated.
"Strong demand across segments such as SCADA, manufacturing execution systems (MES) and IAM offer considerable potential for future growth," he said. "The MES(manufacturing execution systems) segment, in particular, is expected to see the strongest growth, with revenues in the food and beverage sector nearly tripling in the next six years."
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