The colors of money - 1993 Capital Equipment and Supplies Survey - includes listing of firms that participated in survey - Cover Story

Dairy Foods, May, 1993 by Paul Rogers

The DFISA/Dairy Foods capital investment survey enlightens the spending spectrum

For Wells' Dairy, it's green, red and orange. For Broughton Foods, it's blue, white and pink. For Avonmore West, it's silver.

"It" is money. It comes in the form of the tri-colored Bomb Pop Jr. novelties (seen at left) churned out by Wells' mammoth, new ice cream plant, by Broughton's new fleet emblazoned with the company logo, and more commonly by the stainless steel whey processing equipment installed at Avonmore. The cold, hard cash may be green, but the results it buys represent a rainbow of dairy processing, packaging and support equipment.

What will be the color of money spent this year? The 1993 Capital Equipment and Supplies Survey, conducted by the Dairy and Food Industries Supply Association (DFISA) and Dairy Foods magazine sheds light on numerous spending trends. However, four categories of spending jump out of the survey as most prominent: byproduct processing, waste treatment, filling and labeling.

Byproducts strike gold

"The dairy industry has got to get closer to the consumer. It needs to move away from commodity products |and into~ value-added products that generate more revenue," says Dave Fuhrmann, vice president, Wisconsin Dairies Cooperative.

Judging from the survey, that's just what the big dairy co-ops and large cheese companies are doing. Among the 399 dairy and juice companies that returned their questionnaires, investment in drying/powdering, milk condensing and powder bagging equipment is up more than $27 million in 1993 compared with 1992, an increase of 980 percent.

The story's been told before, many times in the pages of this magazine, but three-digit investment growth demands a quick recap: A cheesemaker throwing nearly 90 percent of its milk supply down the drain does not make sense; paying ever-increasing fees for the right to throw it down the drain makes even less sense. So, dairies began processing whey, or selling it to other dairies who further processed it. "There's hardly any whey being landspread anymore," says Fuhrmann.

The effort was more of a reactive response to the outside forces of supply and government regulation. Now, companies have become proactive. Whey, protein and lactose processing are no longer just a way to avoid fines and efficiently utilize the milk supply, but a way to earn big dollars.

"We're selling the functional characteristics of milk ... selling fractions. Milk is a complete food, but you can fractionate it. And it gets more valuable as you divide up the parts," says John Jeter, president, Hilmar Cheese Co. Hilmar's capital spending budget has more than doubled, from $4.4 in 1992 to $11.5 this year, mainly for new construction in its byproducts operation.

The California cheesemaker is not alone; Mid-America Dairymen, Wisconsin Dairies, Associated Milk Producers Inc. and Avonmore West, to name a few, are all devoting significant portions of their spending budgets to ingredient processing.

Signs are that such spending will continue across the board. Lactose, for example, has been the darling of the industry for the last couple years. "Everybody and their brother is into lactose processing now," says Mark Davis, president, Davisco.

Davis says that the newer and larger whey processing facilities are in Minnesota. Because Minnesota developed later in the cheese market than Wisconsin for example, it had to do something with the whey, he says. Wisconsin will now be spending to catch up in the byproduct market while Minnesota may have plateaued for awhile.

California, on the other hand, is an even more recent entry into the cheese market. The Midwest is ahead in the whey market right now, "but California is now installing the latest technology," says Jeter. "|To keep up~ the Midwest is going to have to reinvest." And so on.

Combine this regional game of one-upsmanship with expanding uses for dairy ingredients in prepared food products, and capital spending should stay strong in the associated equipment.

Wastewater in the pink

Spending on waste treatment equipment is up $2.2 million (a 41-percent increase) and is the fifth largest spending category among all processing, packaging and support services equipment, according to the survey.

TOP 10 PURCHASES OF 1993

PROCESSING
(in millions of dollars)

1) DRYING/POWDERING EQUIPMENT           $16.8
2) MILK CONDENSING EQUIPMENT            $10.8
3) STORAGE TANKS/SILOS                   $7.0
4) FAST-FREEZING EQUIPMENT               $5.3
5) CLARIFIERS/SEPARATORS                 $4.1
6) HTSTS                                 $3.7
7) CIM CONTROLS                          $3.6
8) INSTRUMENTATION/CONTROLS              $3.0
9) PROCESS VESSELS/VATS                  $2.8
10) FITTINGS                             $2.7

(in number of companies buying (*))

1) FITTINGS                               145
2) VALVES                                 137
3) CENTRIFUGAL PUMPS                      114
4) INSTRUMENTATION/CONTROLS                97
5) STORAGE TANKS/SILOS                     90
6) HTSTS                                   69
7) POSITIVE DISPLACEMENT PUMPS             65
8) PROCESS VESSELS/VATS                    56
9) CIM CONTROLS                            51
10) CLARIFIERS/SEPARATORS                  40

PACKAGING
(in millions of dollars)

1) PAPER FILLERS                         $3.8
2) BLOWMOLDERS                           $3.2
3) CASE/CARTON FORMING, FILLING
SEALING EQUIPMENT                        $3.2
4) PALLETIZERS/DEPALLETIZERS             $2.8
5) POWDER BAGGING EQUIPMENT              $2.7
6) PRE-FORMED CUP FILLERS                $3.7
7) CASE HANDLING EQUIPMENT               $2.0
8) ON-LINE INSPECTION EQUIPMENT          $1.9
9) ESL/ASEPTIC EQUIPMENT                 $1.9
10) LABELING EQUIPMENT                   $1.6

(in number of companies buying (*))

1) LABELING EQUIPMENT                      67
2) CAPPING EQUIPMENT                       31
3) CASE/CARTON FORMING, FILLING
SEALING EQUIPMENT                          30
4) TIE: CASE HANDLING EQUIPMENT,
ON-LINE INSPECTION EQUIPMENT,
AND PLASTIC BOTTLE FILLERS                 27
7) SHRINKWRAPPERS                          20
8) PALLETIZERS/DEPALLETIZERS               18
9) BAG-IN-BOX/POUCH FILLERS                13
10) PAPER FILLERS                          12

DISTRIBUTION/SUPPORT SERVICES
(in millions of dollars)

1) REFRIGERATION EQUIPMENT              $16.9
2) ROUTE TRUCKS                          $9.9
3) WASTE TREATMENT                       $7.7
4) DRY/RAW MATERIALS HANDLING
AND STORAGE                              $3.3
5) CIP SYSTEMS                           $2.5
6) BOILERS                               $2.0
7) LAB/QC EQUIPMENT                      $1.8
8) AIR COMPRESSORS                       $1.0
9) GLYCOL SYSTEMS                        $0.5
10) CLEANING AND SANITIZING              $0.4

(in number of companies buying (*))

1) REFRIGERATION                          121
2) LAB/QC                                  87
3) ROUTE TRUCKS                            79
4) CIP SYSTEMS                             64
5) AIR COMPRESSORS                         52
6) WASTE TREATMENT                         50
7) BOILERS                                 44
8) DRY/RAW MATERIALS HANDLING
AND STORAGE                                38
9) ICE BUILDERS                            18
10) GLYCOL SYSTEMS                         16

Source: DFISA/Dairy Foods Capital Equipment and Supplies Survey

* A total of 399 dairy companies responded to the survey. Of
that number, 71 were multi-plant companies. Numbers on charts
refers to companies, not plants represented.