SIC 3556
FOOD PRODUCTS MACHINERY



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.

NAICS Code(s)

333294 (Food Product Machinery Manufacturing)

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.

In the late 1990s, 587 establishments were engaged in the U.S. food processing machinery industry. They employed 18,110 people and shipped $2.78 billion worth of equipment in 2000, compared to shipments valued at more than $2.9 billion in 1998.

Organization and Structure

Food products machinery and packaging equipment were included in the same industrial code 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 report, the industrial production of food processing machinery in North America was characterized by the following features: (1) a still large, but declining, part of manufacturing takes place in small and medium sized independent firms; (2) production is usually based on orders received; (3) the markets for many types of machines are restricted; (4) equipment production is heterogeneous; (5) production series are relatively small; (6) concentration similar to that in food industries is taking place; and (7) internationalization is accelerating. In the United States, over 500 establishments shipped processing equipment, which had total value of nearly $2.8 billion in 1997. 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.

Current Conditions

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 giving rise to new population patterns, where more one-and two-person households are establishing new consumer patterns, such as eating out more often. A new structure in age distribution—more people in the over 60 group—leads to new demand patterns, as the requirements from aged people differ from those of younger individuals. For example, elderly people eat smaller portions but need a higher concentration of essential proteins and vitamins in those portions. Market fore-casters are keenly aware of this trend as the baby boomer generation reaches middle age and develops altered consumption patterns.

The increasing number of women in the work force is perhaps the most important of the demographic trends affecting the industry, as women have been the traditional food preparers in the family unit. Working women have less time to fix meals for their families and consequently purchase food that requires little preparation. The effects of this trend can be seen especially in meat processing, where secondary operations are employed in response to consumer eating habits. Both the processing and packaging industries have been influenced by the trend because meats in the fresh chilled form, already marinated, skinned, and sectioned, are growing in availability. There is also an increasing variety of frozen foods available.

Total industry shipments declined from $2.906 billion in 1998 to $2.899 billion in 1999 and to $2.782 billion in 2000. The cost of materials also fell, from $1.32 billion in 1998 to $1.24 billion in 2000. The total number of industry employees dropped as well, from 19,054 in 1998 to 18,110 in 2000.

Industry Leaders

In 1997, the highest concentration of shipments originated from California's 85 food processing machinery establishments. California's shipments, valued at $243.4 million, represented about 9 percent of the nation's total shipments. Illinois' 40 establishments shipped $370.4 million worth of equipment, claiming 13 percent of the nation's total shipments. Ohio, which had 77 establishments engaged in this industry, controlled a 10.6 percent share of the market with $298.3 million in shipments.

In 1998, Premark International Inc., located in Deer-field, Illinois, was the industry leader with sales of $2.73 billion and a work force of 19,300. Now a subsidiary of Illinois Tool Works, Premark manufactured commercial kitchen equipment, which was sold under its Hobart brand name. Premark is a relatively new company; it was created in 1986 after the failed Dart & Kraft merger. Kraft, feeling that its earnings were being stifled by the Dart interests, returned alone to its primary concern, food products. The Dart companies formed Premark, which consisted of Tupperware products, Ralph Wilson Plastics, and West Bend. Premark also obtained Hobart, which was acquired by the Dart & Kraft group. The Tupperware operation lost $57.9 million for Premark in its first year and continued to lose money until 1994, when demand for Tupperware in Europe and Latin America increased. In 1992, Premark announced it would close the Tennessee factory that makes Tupperware products and, in 1996, sold its Tupperware division as part of an extensive re-engineering plan.

The Hobart line was the core of Premark's food equipment group. Hobart was acquired by Dart & Kraft in 1981 after a hostile takeover attempt by Canadian Pacific Enterprises failed. Canadian Pacific offered a reported $300 million for Hobart's operations, but Hobart, preferring independence, declined. Congressmen supported Hobart and appealed to U.S. Treasury Secretary Donald Regan to prohibit the takeover on grounds of breaching national security. Hobart finally sold out to Dart & Kraft for $460 million, having realized it probably did not have the strength to battle future takeover attempts alone.

Americans' changing lifestyles and eating habits boosted Premark's food equipment sales. Fast food menus began changing in the mid-1980s and required new equipment—such as catalytic chicken fryers and grooved griddles for fajitas. Take-home foods, such as bakery products from grocery stores, were more readily available for consumers as 2,500 in-store bakeries were built in 1987. These bakeries generally cost $130,000 to equip with the necessary machinery, although some cost as much as $300,000. International lifestyles and eating habits were changing too, as the English started eating more pizza, and the Japanese started eating more hamburgers. Improved sales of these foods helped the food equipment group to contribute $57.8 million to Premark's profits.

Workforce

While the industry's stock of machinery and equipment grew in the late 1980s and early 1990s, the number of production worker man-hours has decreased steadily. Increased competition from imports were a motivating force, as was consumer demand for a broader range of food products. Of the industry's 18,110 employees in 2000, over 60 percent were production workers. On average, these production workers earned $16.10 per hour during a 37-hour work week.

As previously mentioned, the employment outlook for the industry is expected to decrease in the twenty-first century. Significant staff reductions of greater than 17 percent are expected in occupations such as machine builders, assemblers, secretaries, precision inspectors, welding machine setters, and machine assemblers. Increases of greater than 10 percent are expected for sales workers, production managers, machinery mechanics, and engineers.

Further Reading

Bohman, Jim. "Hobart Corp: Oakwood Resident to Head U.S. Group." Dayton Daily News , 20 August 1996.

Darnay, Arsen J., ed. Manufacturing USA. 5th ed. Farmington Hills, MI: Gale Group, 1996.

Dempsey, Dale. "Business: PMI to Cut 301 Workers at Troy Plant." Dayton Daily News , 12 June 1996.

"Premark International Inc." Chicago Tribune , 2 June 1996.

United States Census Bureau. Available from http://www.census.gov . October 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

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