Overall, "capital expenditures are going to be fairly steady for the upcoming year," having increased $6bn from last year, Godet said. US and Canadian food and beverage manufacturers have $29.7bn in active construction and $47.8bn in the pipeline, according to Industrial Info Resources data.
Consumers also "impact how manufacturers disperse their capital expenditures and what their outlook on the market is 12, 24 months ahead," he said. For instance, with the dip in demand for plant-based meats, manufacturers have “closed facilities or closed production lines" and focused their funds on capital projects with a greater rate of return, he added.
Alt protein market takes a different turn
While the alternative meat market is facing several headwinds, there is still $3.2bn in capital investment activity, Godet noted.
“We're beginning to see that market take a different turn. I wouldn't call it a U-turn,” Godet said. "I think this year will be sort of a reset for alternative products.”
One reason consumers are shifting away from plant-based alternatives is the premium associated with these products, which can be two or three times as expensive as their animal-based counterparts, Godet said. Additionally, some alternative meat products don't deliver the same taste, texture, and overall experience as traditional meats, he added.
These challenges and the overall drop in demand for alternative meats are creating a climate where it's hard to raise money for capital projects, he added.
“There's still going to be some opportunities for some of these startups. I think though that will be a big challenge, and investors are becoming a bit weary of these food tech firms for the same reasons that I just mentioned taste, challenge, and cost. That doesn't mean that the market is going to die; it's just not going to be a strong driver that it has been.”
ESG becomes a major focus of capital expenditures
While food and beverage manufacturers might not be investing as heavily in alternative meats, many are responding to the demand from customers to create a more sustainable supply chain. In 2022, food and beverage manufacturers invested nearly $9.5bn to support over 1,400 ESG-related projects, Godet said.
“The food and beverage industry is probably one of ... the largest contributors to greenhouse gases,” Godet said. “And that's just basically because of the nature of how food is made from farm to the table. So, it's a big question. It's a big concern for a food manufacturer to identify where those needs need to be met and further to implement changes of capital expenditures to address those issues.”
With this investment, manufacturers are looking to boost renewable energy in the form of installing solar panels and investing in wind energy, Godet said. Many food and beverage manufacturers can capture methane and ethanol to be processed into useable fuel, he added.
"There's a natural source for methane, as you can imagine, on a dairy farm or dairy processing facility. So, they're able to capture that gas pipeline and transfer it to a facility to be processed and used at the end of the pipeline.”