Food Products Machinery

SIC 3556

Companies in this industry

Industry report:

This industry covers establishments primarily engaged in manufacturing machinery for use by the food products and beverage manufacturing industries and similar machinery for use in manufacturing animal foods. Establishments primarily engaged in manufacturing food packaging machinery are classified in SIC 3565: Packaging Machinery; those manufacturing industrial refrigeration machinery are classified in SIC 3585: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment.

Industry Snapshot

The food products machinery industry and the processed food industry enjoy a very close relationship. This is illustrated by the presence of engineering departments within large food processing corporations. For their own specialized applications, many of which may be considered proprietary, patents may be obtained. Often, the level of this cooperation depends on the sophistication of the processing operations and the equipment required to carry out those steps.

According to Dun and Bradstreet, in 2010, 1,239 establishments were engaged in the manufacture of food processing machinery. Together these firms generated $5.3 billion in revenues and employed 25,063 people. The majority of businesses were small, with almost 60 percent employing fewer than 10 people. However, about 40 percent of the people who were employed in this industry worked for larger establishments, or those with more than 100 employees. Illinois accounted for the largest percentage of sales in 2010, with $3.2 billion.

Organization and Structure

Food products machinery and packaging equipment were included in the same industrial code by the U.S. Census Bureau until 1987, and much of the literature and data from the 1970s and 1980s combines the two industries into one category. The 1987 classification split the two types of businesses into separate categories, recognizing that the industries were serving divergent business niches.

According to a United Nations (UN) report, the industrial production of food processing machinery in North America was characterized by: (a) a large, but declining, part of manufacturing continuing to take place in small and medium sized independent firms; (b) production usually based on orders received; (c) restricted markets for many types of machines; (d) heterogeneous equipment production; (e) relatively small production series; (f) concentration similar to that in food industries; and (g) accelerating internationalization. The United States shipped $2.8 billion worth of food processing equipment in 1997, according to the U.S. Census Bureau. The smaller, specialized equipment manufacturers produced nearly 80 percent of all food processing equipment in the United States, while the 12 largest companies in the industry supplied the remaining 20 percent.

In developed countries, demographic trends determine the focus of the food industry. According to a UN report, longer lives, earlier marriages, more divorces, and fewer children are creating new population patterns, where more one- and two-person households are establishing new consumer patterns, such as eating out more frequently. A new structure in age distribution, with more people in the over-60 group, was leading to new demand patterns, as the requirements from this age group differ from those of younger individuals. For example, as people age, they require smaller portions but need a higher concentration of essential proteins and vitamins in those portions. Market forecasters were keenly aware of this trend as the first baby boomers reached retirement age and developed altered consumption patterns.

The increasing number of women in the workforce was perhaps the most important demographic trend that affected the industry in the late twentieth century, as women had been the traditional food preparers in families. Working women have less time to fix meals for their families and consequently purchase food that requires little preparation. The effects of this trend were especially notable in meat processing, where secondary operations are employed in response to consumer eating habits. The processing and packaging industries have been influenced by the trend because fresh chilled form, already marinated, skinned, and sectioned meats were growing in availability. There also was an increasing variety of frozen foods available.

According to the U.S. Census Bureau, industry shipments from U.S. companies remained steady at approximately $2.9 billion since 1998, with a brief dip in 2000 to $2.8 billion, before rebounding in the mid-years of the first decade of the 2000s with 2006 shipments of more than $5.8 billion, only to drop again to $4.28 billion in 2007 and further to $3.9 billion in 2008. The majority of products in this category were manufactured in Illinois ($1.6 billion), North Carolina ($575 million), and California ($522 million). The United States was the leading market for general food products machinery, while Western Europe was the leader for food processing machinery.

Current Conditions

Like most manufacturing sectors in the United States, this industry felt the negative effects of the economic recession of the late years of the 2000s' first decade. The International Trade Administration (ITA) reported that "As capital equipment, food processing and packaging machinery is highly sensitive to the business cycle, in the sense that major capital investment is the one of the first major corporate expenditures to suffer and the last to recover from a downturn." Nevertheless, Research and Markets estimated revenues for the industry in 2010 at $4.3 billion. Challenges for the industry entering the early 2010s included increasingly rigorous standards for sanitation and safety, as well as rising expectations for sustainability and "green" manufacturing processes. According to the ITA, this may prove a positive factor for the industry in the long run, as "more demanding regulation may lead end-users to invest in new equipment, technologies, etc. to replace sub-standard industrial capacity."

According to the most recent figures from the ITA, U.S. exports accounted for about 18 percent of total sales in this industry in the late 2000s, whereas imports comprised 35 percent of the domestic market. The most significant foreign competitors for U.S. manufacturers were located in Germany and Switzerland.

Industry Leaders

One of the industry leaders in the early 2010s was Standex International Corp. of Salem, New Hampshire, which employed about 4,000 workers in 2010. That year the company had sales of $633.7 million, which was distributed among its five main divisions, one of which was food processing machinery. Other leaders were Specialty Equipment of Houston, Texas, and Heat and Control Inc. of Hayward, California. Founded in 1950, the latter employed 1,200 people and manufactured food products equipment in 30 locations worldwide in 2010.

Workforce

While the industry's stock of machinery and equipment has grown since the late 1980s, the number of production worker man-hours decreased steadily during that time. Increased competition from imports was a motivating force, as was consumer demand for a broader range of food products. The U.S. Census Bureau reported that the industry had 17,756 employees in 2007, about half of whom worked for small companies employing fewer than five people. In 2010, figures from Dun and Bradstreet showed 25,063 workers in the specific industry of manufacturing machinery for use by the food products and beverage manufacturing industries and similar machinery for use in manufacturing animal foods. Illinois, California, and Ohio employed the most workers in the industry.

Employment for the industry was expected to continue its decline. Significant staff reductions of over 17 percent were expected in occupations such as machine builders, assemblers, secretaries, precision inspectors, welding machine setters, and machine assemblers. Increases of over 10 percent were expected for sales workers, production managers, machinery mechanics, and engineers.

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