Declining prices mark trend in equipment market

By Ahmed ElAmin

- Last updated on GMT

Related tags Food Food processing Price Marketing

Food and beverage companies can expect declining prices for
processing equipment to continue for another three years, according
to a study by Frost & Sullivan.

The competitive pricing is a boon for food and beverage processors, who are at the same time demanding ever more automated and higher speed machines as a means of boosting their productivity.

The ability of manufacturers to focus on technological advancement along with improved product quality is likely to help them stay at the forefront of market, Frost & Sullivan analyst Alok Tiku said. Tiku wrote the report on the food and beverage processing machine markets.

Meat, poultry and seafood are the main growth areas for US equipment sales. In general, the average prices have been falling because of the mature state of the market along with food processors inability or reluctance to make the additional investments, he told in an interview.

"An increasing number of consolidations between major processing firms has negatively impacted the price,"​ he said. " Due to the consolidation of the customer base there has been severe price pressure and to remain competitive there has been only a marginal increase, no increase or in some cases a decrease in price. The prices are however expected to stabilise after 2008."

He noted the turnaround will occur with the expected recovery in the US economy. Prices have been declining since 2000, mainly brought about by the deteriorating economic conditions. He believes once the turnaround occurs, food processing companies will become more willing to re-invest in new equipment.

He noted that in Europe, the overall pricing for food processing equipment has more or less remained static. The scale of increase of prices in recent years has been subdued, as competitive pressures have heightened, owing to the slow advance in demand coupled with low consumer confidence and expenditure.

"However, the food processing equipment market in Europe is expected to see an increase in the average price,"​ he said. " This should be a consequence of rising demand for more specialised and advanced technology, which commands a premium."

While there has been no major changes in the basic technology of the equipment, manufacturers are making them more automated and speedier due to the demands from food processors.

" Due to an increasingly competitive environment, processors demand more sophisticated machinery to reduce their operational costs through efficiency and savings,"​ Tiku said. " There is also an increasing amount of attention being paid to hygiene, which includes providing a clean and safe production area in the food processors."

In general the report on the US market found that equipment makers have also been merging and making acquisitions to remain competitive amid the declining revenues, Tiku said.

"Consolidation is a key strategy that is opted for by companies not only to increase their market share but also to make it difficult for the smaller companies to compete,"​ the report stated. " Many of the larger companies are further expanding their product diversity and entering newer markets through these consolidations. Mergers and acquisitions are threatening the very existence of smaller firms, since they are finding it difficult to respond to the financial strength of larger companies and corporations."

The US equipment market has also been heavily impacted by the shift of many food and beverage processing facilities to Asian and Latin American countries. This has mainly been brought about by the slow growth and high market saturation in the US food and beverage processing market.

The food and beverage processing equipment markets earned total revenues of $4.94 billion in 2004. The analyst estimates the market will reach $5.76 billion in revenues by the end of 2011, according to estimates by Frost & Sullivan.

Related topics Processing & Packaging

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