The world GDP is over $80 trillion, and more than $15 trillion of that is spent on food. Sugar purchases alone account for over $1 trillion of this GDP. The percentage of food revenues spent on pumps is very small compared to that spent on municipal water treatment. It is even less than what is spent on mining, refining, and most other industrial sectors related to food production. It is however, still quite large.
By Robert McIlvaine, President & Founder, The McIlvaine Company
The pump market for processing equipment is valued at well over $2 billion per year. When discrete applications are included and a broader definition of pump products are used, the market is worth closer to $5.5 billion.
The Food Market in Relation to Pumps
The food and beverage market includes not only pumps, which are used directly in the creation process, but also the materials required in the use of utilities such as water, electricity, and waste treatment. Many food processing companies even generate their own electricity and utilize small processors to generate steam. The treatment of wastewater on site, for example, rather than discharging it to a public treatment plant, is common. In fact, in several small towns, the food processing company also supplies municipal treatment for the residents.
Some of the world’s largest pump suppliers look at the food market and ask themselves: ‘Where can we sell the same pumps we supply to other industries?’ This is a relevant question because it can lead to the most profitable orders.
Much of the success that arises from this approach is from buying small companies who have found highly pro table niches.
The rationale is that if the market for an existing grade is expanded, the cost of production will be less, and the margins and earnings before interest, taxes, and amortization (EBITA) can be increased. However, some companies have taken a different approach; they ask: ‘What are the customer needs? Can we supply a product with lower total cost of ownership than our competitors?’
Some of the companies who have taken this ‘customer first’ approach have generated greater EBITA than the industry as a whole. Their approach is to thoroughly understand all the processes and the cost of ownership and then develop solutions which deliver lower costs than the competition.
This approach starts with a segmentation of the food and beverage markets and processes. The questions in each sector are as follows:
• How big is the market?
• How fast is the market growing?
• How important are pumps in this market?
• What are the specific pumps uses in general, critical, severe, and unique service?
To understand this process more thoroughly, different market avenues are explored.
Different Market Avenues
Beverages Beer is the largest beverage market and pumps represent a relatively large percentage of this sector, compared to other industry revenues. There are both critical and severe service applications in beer operations. Wine, spirits, and other beverages are also substantial markets for critical and severe service applications. This means that there is substantial opportunity to provide innovative designs with lower total cost of ownership. One criterion is preservation of product quality.
For example, SEEPEX says that its progressive cavity pumps have exhibited operational improvements at vineyards that previously utilized centrifugal or rotary lobe pumps during crush and other steps throughout the wine making process, see Figure 3. These steps include:
• Must Transfer
• Stem, Skin, Lees, & Sediment Waste
• Filtering & Bottling
• Additive Dosing
Another area pumps play a key role in is the milk separation and pasteurization processes, Figure 5.
The poultry, meat, and seafood industry are the largest in the food market. While it is a big market for pumps, in relationship to total industry sales, pumps are quite small. The sugar industry is also big market for pumps, though sugar applications differ between cane and beet sugar. Cane sugar involves disposal of the waste (bagasse) which has substantial fuel value, while cane sugar milling and refining can be undertaken in different locations.
After determining how a specific pump can provide the lowest total cost of ownership in a cane milling application, the best prospects can be identified. Thailand is a major purchaser of pumps for sugar, even though it is a small purchaser in other food segments. Thailand has eight major sugar producers and 49 sugar factories; each has site-specific factors to incorporate.
The analysis of each pump application, and each process that requires them, can become the foundation of the business strategy, rather than a peripheral tool. The identification of the purchasers can therefore be an asset to expanding each pump market.
About the Author
Robert McIlvaine is the President and Founder of The McIlvaine Company, which publishes reports across worldwide pump and valve markets. He was a pollution control company executive prior to 1974, when he founded The McIlvaine Company. He oversees a staff of 30 people in the USA and China.
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