Capital Spending Strategies for Food & Beverage Companies

In Grassi’s 2024 survey of food and beverage manufacturers and distributors in the NYC metropolitan area, companies reported a myriad of issues threatening profitability and growth. The top concerns were high labor and input costs, economic uncertainty, increased competition, and challenges implementing newer technology.

Despite these obstacles, many manufacturers and distributors are overcoming them by spending more, not less. Overall, companies recognize that to grow their profits, they need to invest in their assets. Eighty percent of survey respondents expect to increase capital spending this year.

The benefits of strategic capital spending, even in challenging economic times, are evident throughout the survey findings, including:

Increased productivity. According to the companies that expect to increase capital spending this year, the most common investment they are making is expanding production lines (65%). Additionally, companies that grew profits in 2023 were much more likely to increase square footage in existing facilities (59%) or purchase additional facilities (35%) this year than those that reported steady or declining profits. This heightened productivity leads to more opportunities to invest in customer acquisition strategies, tap into new geographic markets, open new distribution channels, and develop product innovation and diversification – all drivers of profitability and growth.

Increased efficiency. A close second, IT/Technology, was the next most common response (61%) when asked what areas of increased capital spending these high-growth companies anticipate. The reasons for this are multi-faceted, but chief among them are the high levels of efficiency that technology and automation afford. The most common and effective strategies cited include implementing enterprise resource planning (ERP), robotics automation, cloud computing and artificial intelligence (AI). Seventy-four percent of respondents say adding automation to the production line is part of their business plans this year.

Lower risk. High-growth companies are also using capital spending, particularly in technology and automation, to reduce risks associated with today’s supply chain disruption and the need for enhanced internal controls. Companies leverage ERP systems to more effectively manage procurement, production and supply chain. Through AI, inventory management software and predictive supply chain management bring accuracy and KPIs that no manual process ever could.

In addition to capital spending, companies are using a wide array of strategies to combat inflation, competition, labor shortages and more. To learn more, download a complimentary copy of Grassi’s 2024 State of Food & Beverage Manufacturing survey report.

Robert E. Grote Robert E. Grote is a partner at Grassi and leader of the firm’s Manufacturing & Distribution Practice. With more than 30 years of experience in public accounting, tax planning and management consulting services for the M&D industry, Rob has grown the practice to become the second largest industry group in the firm. In his role as M&D Practice Leader, Rob leads a team of... Read full bio

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