With the warning bells from the Ferndale Foods/Asda saga still ringing in their ears, and the relentless pressure on margins, many ready meal manufacturers are reluctant to invest in equipment to increase efficiency or make the move to automation, resulting in 2005 being hailed as "one of the worst years" ever, both for manufacturers and equipment suppliers.
"It's been the toughest year I've known," said one supplier. "There just hasn't been the same investment as in the past. Last year (2004) was one of the best, this year (2005) was one of the worst."
And the ongoing margin squeezes are hitting manufacturers hard, particularly those of chilled rather than frozen ready meals, says Dave Edwards, md of packaging line specialist D2 Food Systems. "Those making frozen ready meals have been able to fully automate their lines and drive down costs. Automation is much more effective in frozen as they don't have the same frequency of changeovers. "But in chilled, automation of solid products is far more difficult to justify and producers have really had nowhere to go. They have automated as much as they can but the margins are no longer there and there is very little payback for them."
But all is not lost. More and more solutions are appearing on the market, designed to improve production while keeping costs down. Having spotted a gap in the market, D2 Food Systems has developed Vortex - a cook, quench, chill system for pasta, rice and vegetables. It uses agitation to prevent pasta from clumping together during cooking, while simultaneously addressing one of the major issues in the current market - that of hygiene.
The company also cites flexibility as one of the key issues facing producers at the moment. "Some companies put 20 products on a line in a day and are constantly changing from product to product, so flexibility is extremely important," says Edwards.
"Manufacturers require versatility in terms of the different tray sizes that lines can handle and high efficiency. But nowadays there are lots of tray sealers on the market so it all comes down to the finer detailing. Our point of difference is flexibility and low running costs," he adds.
Room for improvement
As Edwards sees it, there is still room for improvement at the end of the production line - an area he is seeing the most interest in from producers. "This is where there is good payback to be made in terms of robotic loading," says Edwards. "One of the key drivers for manufacturers is space, which together with cost constraints has, until now, prevented automation in this area. But now labour rates are more expensive and availability of labour has become more difficult, so the paybacks of automation have become more in reach."
To this end, D2 Food Systems has developed a system it claims will give paybacks within six months - the CombiPPAC end of line integration system, which launches this month; incorporating sleeving, labelling, coding, case or crate loading, outer case marking and palletising in a modular and compact format.
"End of line efficiency is now a key business focus as companies drive to reduce labour and increase line speeds within the same production space," explains Edwards. "CombiPPAC has been designed to fit small pitches between adjacent production lines and can handle cartons or crates (including half size) on the same footprint. A compact palletising cell allows each CombiPPAC system to be handled by one operator reducing costs and improving efficiency."
Endoline Machinery has also identified opportunities in end of line packaging machinery. It has developed a range of hand operated, semi and fully-automatic machinery for use by manufacturers when putting boxes into boxes or trays. The company claims the lines give payback within six to eight months and reduce operator numbers as well as increasing efficiency.
According to Richard McGowan, factory manager at Greencore's prepared meals plant in Tiverton, the key dilemma for ready meal producers right now is whether to go for flexibility on the production line or take an automated, volume driven approach.
"There are some bespoke lines out there to cope with volume driven lines but they require high investment, and most businesses are reluctant to do that, because whilst retailers can guarantee the volume, they can't give the confidence that the contract will still be there in a few years," says McGowan.
Halfway house
He points out that changeovers between products on lines is what drives efficiency. "It's great while the machine is running but once you stop and changeover, that's often when you pay the price."
And, he says, the way the market has developed means meals have to be divided up into stations, resulting in long, complex production lines. McGowan believes that, in the current climate, manufacturers are not forking out for large pieces of kit to meet the need for flexibility. Instead, they are looking to a 'halfway house' and going for the maximum speed on a flexible operation.
To be successful, there are two different routes open to producers, he says.
"Many manufacturers are just assemblers - they contract out the preparation of the product so they can invest in the production line itself. Others aim to get point of difference by investing in the cooking and preparation processes, using quality ingredients.
"Packaging too is a massive area where you can achieve point of difference, although with the price of plastic 'sky high', this is very difficult and requires innovation," warns McGowan.
Packaging is the focus for Kliklok Woodman, which has built lines to handle foil, paperboard and plastic ready meal trays. The firm has recently supplied an automatic high speed cartoning line, to handle sealed trays at speeds of 250 packs per minute, to a major UK ready meals producer.
Kliklok says it has also seen a rise in sales of its shrink wrap systems as many customers are seeking to save money by reducing secondary packaging costs.
Cost, then, remains a key factor in the current market, as Neil Ashton, sales manager of equipment specialist Packaging Automation, explains. "Saving money is still a big issue and one that is not going to get any better," he says. "At the moment businesses are just firefighting and we're not seeing much innovation. It's more a question of just holding onto the business and keeping costs down.
"Whereas last year (2004) there was lots of investment, this year (2005) there is a lot of uncertainty and loss."
The problem, says Ashton, is that supermarkets won't commit to suppliers and are driving down margins, which is leading to constant uncertainty within the suppliers. "They are between a rock and a hard place - they don't know whether to invest half a million pounds or if they will lose their contracts the next day."
Look at Ferndale Foods, he says. "That's the marketplace right now. There is a real fear factor." As a result of this, and of more companies going out of business, the use of second hand machines, albeit a risky option, is increasing, he adds.
Nevertheless, there is still some investment within the industry, and as Ashton sees it, producers are now having to produce more product for less money, meaning to keep up, machines have to go fast. "Our customers are demanding flexibility. Very few people out there have a machine specifically for one product or pack."
To meet these demands, the company is working on a project with Loughborough University, looking at using a laser to heat seal a film to a tray and is currently looking at how to increase throughput with the equipment.
"This will have a big impact on industry as it will mean less down time and will help suppliers chop and change from product to product," claims Ashton. FM
Key Contacts
- D2 Food Systems 01582 622 111
- Endoline Machinery 01767 316 422
- Greencore 01909 545 900
- Kliklock Woodman 01275 836 131
- Packaging Automation 01565 755 000