Food and beverages enhance electric drives growth

The food and beverage sector, as the second largest in terms of demand for drive technology in 2001, is catalysing growth in the European electric drives market says a recent survey.

The food and beverage sector, as the second largest in terms of demand for drive technology in 2001, is catalysing growth in the European electric drives market.

This has made it essential for drives suppliers to develop a keener understanding of customer dynamics and exploit growth opportunities within this key application sector.

A new study by Frost and Sullivan, the international marketing consulting company, examines significant customer demands in the food and beverage end-user sector of the European electric drives market.

Data relating to main purchasing criteria, spending levels and principal customer requirements is provided along with a review of the competitive landscape, enabling drive manufacturers to devise optimal strategies to sustain demand and enhance market penetration.

End-user trends emerging in the course of the survey underlined the immense revenue generating potential of the food and beverage sector for drives manufacturers.

In terms of total drives purchased, patterns revealed customers' preference for purchasing less drives per order with 37.2 per cent of respondents asserting that they procured a single drive during their last purchase transaction.

This reflects end-users' preference for acquiring drives from a wider array of suppliers and at greater frequency rather than depending on one source and on a single transaction to fulfil all their drive requirements.

While this end-user trend is projected to open opportunities for suppliers to tap into new customer bases, it simultaneously emphasises the need to continually offer good customer service to retain existing clients.

The survey showed cause for much optimism from the viewpoint of frequency of end-user purchase.

Encouragingly, 64.4 per cent of respondents indicated that they purchased at monthly intervals or even more frequently.

Moreover, respondents that purchased on a monthly basis indicated that they invested in a greater number of drives per transaction.

"Manufacturers will need to target these customers to ensure that they can benefit from the high and regular demands to boost their own revenues," notes Frost and Sullivan Research Manager Mik Sabiers.

There was good news for electric drives manufacturers from the perspective of spending with 57.1 per cent of respondents indicating that they spend an annual average of between $5,000 and $50,000 on their drives purchases.

This positive finding was reinforced by data showing that 40.9 per cent of customers expected to increase spending in future.

A majority of the customers that anticipated making the largest increase in spending were those already investing heavily in purchasing a high number of drives.

"Such high levels of confidence in future spending bodes well for the sector's future growth potential, although all manufacturers must focus on supporting customer confidence and demand to ensure that this expectation becomes a reality," cautions Sabiers.

From the standpoint of customer requirements, competitive prices and product reliability were accorded top priority.

When prompted, 95.9 per cent of respondents focused on reliability as the principal issue determining their purchase.

Unprompted, the most important issue was price with one in five respondents identifying this factor as their main purchasing criterion.

Sabiers comments: "As the key issues cited by respondents, manufacturers will need to focus on sustaining product reliability while offering competitive prices.

Service and quality as well as fast lead and delivery times should also be evaluated to develop the key strategies to succeed in this competitive sector." The outlook for electric drives manufacturers in the food and beverage sector is upbeat.

Sizeable annual increases in demand will offset the restraining effects of continuing price erosion.

Consequently, while growth rates will be moderate in the long term, this key end-user industry is forecast to maintain its position as the second largest revenue contributor to the drives market.

Indeed, ongoing technological progress, expanding uptake of drives across the industry and sustained customer interest are anticipated to push sales revenues from drives sold to the food and beverage sector from an estimated $191.4 million in 2001 to $238.3 million in 2008.

A natural corollary of the projected market expansion has been intensifying competition.

The survey benchmarked leading suppliers, with traditional powerhouses such as ABB and Siemens spearheading market growth.

Other competitors with a good standing were Danfoss, Control Techniques and SEW- Eurodrive.

Mitsubishi emerged as the company that provided the highest satisfaction levels.

Principal competitive issues in future were expected to revolve around price, technology and specialisation.

Accordingly, suppliers that can offer drives at competitive prices, develop good technologies and cater to sector-specific applications will stand to benefit.

"A robust level of customer satisfaction should support continued interest and demand for drives, however, the lower rate of loyalty means that there is still good potential for manufacturers to gain orders from other suppliers as a means to build increased market share," concludes Sabiers.

Price: GBP 4,000.

Code: 6636.

Publication Date: October 2002.

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