As the economy sputters and consumers dig in, instead of hoarding your capital equipment dollars, now might be the best time to buy packaging machinery. Here’s why:
The Economic Stimulus Act of 2008 includes a couple of incentives for businesses that may lower the cost of investing in new equipment. First, companies that spend less than $800,000 a year on capital assets can now expense (deduct) the first $250,000 of purchases made in 2008. Second, for companies of any size, the law allows a 50% expensing allowance (a.k.a. accelerated depreciation) for capital equipment bought and installed during 2008.
Individually or combined, these incentives can help you reap significant tax advantages.
At least one equipment manufacturer,Pro Mach Inc., has been proactive about sharing this news with customers. Mark Anderson, president and chief executive officer, says, “It’ll be a shame if a purchasing guy says next January, ‘I wish I would have known about that.’ If companies know they’re going ahead with a project eventually, they should do it this year to take advantage of the tax incentives.”
Another good reason to buy now, Anderson adds, is that, because food and beverage companies can’t raise prices in today’s economy to shore up eroding margins, “that causes a tremendous pressure for them to develop productivity improvement projects.”
Automation improves productivity. In fact, according to the Packaging Machinery Manufacturers Institute’s 2007 Productivity & Profitability Trends Indicator study: “By far, the study’s respondents singled out packaging machinery and equipment issues as the facet of their packaging operations that, when addressed, yielded the most positive effect.”
Food and beverage processors are somewhat immune to an economic downturn because people have to eat and drink. Eating and shopping trends show that consumers are cutting back on eating out and, instead, buying more food at retail to make at home. You’ll have to fight for those retail dollars, though, as consumers shift their purchases to value brands and/or to products in innovative packages that catch their eye.F&BP