Food Processing and Packaging Equipment are Still in High Demand

Food processing and packaging equipment are still in high demand since the world's population is expanding.

Even in the challenging year of 2022, the companies in the sector saw a rise in production of 7% to EUR15.8bn in Germany. Accordingly, the fourth-largest segment of mechanical and plant engineering in Germany saw growth in 2019 and surpassed its EUR15.3bn pre-crisis level.

“Even in the difficult year 2022, the demand for our machines remained high. This is primarily because food processing and packaging machines make a decisive contribution to the safe supply of food, beverages, and pharmaceutical products to a growing world population,” Christian Traumann, Chairman of the Food Processing and Packaging Machinery Association, explained at the VDMA press conference on the occasion of interpack 2023.

The VDMA Food Processing and Packaging Machinery Association assert that growth should have been much higher but that the slowdown in the economy's recovery was mostly due to ongoing supply chain issues as well as Russia's actions in Ukraine.

“The war in Ukraine, with all its consequences - rising energy prices, inflation, and the associated interest rate policy - created uncertainty, especially in Europe, which was reflected in a reluctance to invest,” Traumann added, looking back at the order intake in 2022, which fluctuated sharply from March onwards.

USA leads, China with Strong Growth in the Packaging Machinery

In 2022, the sector's exports fell by 1.7% to just under EUR9bn. Exports to the EU-27 and other European countries decreased by 4% and 8%, respectively. In total, European nations received 49% of German exports, 34% of which were bound for the EU.

With a concentration on North America and Asia, more than half of the exports were sent to non-European nations. The USA has long been by far the most significant market. Machinery for food processing and packaging worth EUR1.4bn was sent to the U.S. in 2022, making up 16% of all exports. Germany, rather than Italy, Canada, or China, is the most significant provider of food processing and packaging equipment to the U.S.

Despite the zero-COVID strategy there and the ensuing travel restrictions, exports to China, the second-largest market, rose by 11% to a record EUR605m.

“This shows that our products are still in high demand in the Chinese market. High-performance machines and process engineering know-how secure our market position here,” Traumann explained.

Despite the zero-COVID strategy there and the ensuing travel restrictions, exports to China, the second-largest market, rose by 11% to a record EUR605m.

In international trade, the EU-27 countries will export 65% of all food processing and packaging machinery by 2021. As a result, this industry is the export champion of European mechanical engineering. Germany and Italy are at the top of the list, each accounting for 20% of global equipment trade.

Prospects and Challenges

Even just the growing world population serves as a positive market factor for businesses in the food and packaging machines sectors. Order intake increased by 5% in real terms in 2022 as well, mostly due to non-European nations.

“Our order books are still well filled and we also expect strong impetus from interpack 2023. However, we cannot estimate how the geopolitical risks, inflation, and the associated interest rate policy in the individual countries will affect investments and thus our business development,” Traumann declared.

According to the VDMA poll from March 2023, a significant bottleneck caused by a lack of competent labor affects about two-thirds of industry organizations. Because of the large order backlog, the Food Processing and Packaging Machinery Association predicts that sales will increase by 8 to 10% this year.

Less Bureaucracy and Open Markets

Christian Traumann urged policymakers to take additional steps to eliminate red tape and open markets.

“If a transformation of the manufacturing industry is to succeed, we must not be overwhelmed with regulations but must be supported by policies that promote industry and small and medium-sized enterprises. Innovation needs entrepreneurial freedom and competition,” he mentioned, referring to slow approval procedures in Germany and current and upcoming EU regulations.

Traumann emphasized the critical role that open markets have in the global development of mechanical engineering. He asserted that the EU must concentrate on free trade agreements with its most significant trading partners in light of the rising protectionist climate. Only then will it be possible to stop new obstacles from being built for European industry.

“We need China as a sales market and we also need products from China. And China needs the EU market. We should not forget that and represent our own industrial and location policy interests to a greater extent than before,” Traumann concluded.