Every conversation with a supplier to the food industry ultimately comes around to the question, “How’s it going?” or, “What are you hearing?” Each company is trying to measure how its business is stacking up against that of others. If you are doing poorly as compared to the same time last year or last quarter, are you simply part of an industry trend? (You’d hope so.) Or, conversely, if you are doing well, are you bucking a downward trend in the industry or just keeping pace? And what about future business? … is the glass half full or half empty? While we think about these types of questions in good times and in bad, the answers to these questions seem to carry more weight when we are surviving an economic downturn similar to the one that has occurred over the past 12 months.
Members of the Food Processing Supplies Association (FPSA) no longer have to depend on anecdotal responses to the question “How is business?” For the past several years the quarterly FPSA Shipments and Outlook survey has provided some quantitative data organized by four major food industry sectors: bakery, dairy, fruit and vegetables, and meat. Respondents are asked to compare sales trend of the current quarter with the quarter passed as well as the same quarter of the previous year. Finally, they are asked their opinion of future business. This last query provides us the FPSA food industry confidence index (50 is the neutral point; below 50 shows pessimism and above 50 optimism).
For the current quarter each sector reported that business conditions are either staying the same or improving as compared to the previous quarter. When asked to forecast future trends (Confidence Index), most sectors had a modest rise in their expectations for the future, with an average of around 60. The notable exception was the bakery industry, which saw a measured decline especially in dough makeup and further processing. A one-sentence summary of this quarter’s results would be the industry is cautiously optimistic.
We spoke with a supplier to the meat industry whose response to how’s it going was,”We’re doing OK, but …” — that proverbial “but” that doesn’t allow one to go overboard in optimism.
Our customers were hit with a triple-whammy last year: increased commodity prices; higher energy costs; and a melt-down in the credit markets. We are beginning to see a little improvement going into 2010, he concluded.
A supplier to the fruit and vegetable sector commented, “We are doing about as well as can be expected but are working harder for every dollar.” Another supplier to the same sector said business was pretty good and explained, “Our customers are pretty conservative. They haven’t accumulated a lot of debt and thus are better prepared to ride out this economy.”
Venting some frustration in not being able to sell new machinery to his customers, a supplier asked us, “Why don’t you guys in Washington start a ‘cash for clunkers’ for processing and packaging machinery?”
Yet, despite those occasional frustrated comments, most of our conversations can be summed up by this remark from a supplier to the baking industry, who said, “I see a light at the end of the tunnel. I just hope it isn’t a freight train heading our way.”
