Food Processing Equipment

# Executive Summary * The Food Processing Equipment industry is currently facing significant pressure from macroeconomic headwinds, with rising tariffs and delayed customer capital investments dampening near-term revenue and profitability. * In response, food processors are accelerating investment in automation and robotics to combat severe labor shortages and drive efficiency, creating a clear divergence in performance between automation leaders and laggards. * The long-term outlook remains positive, underpinned by the powerful secular trend of growing consumer demand for processed and convenience foods. * Competitive differentiation is increasingly driven by technological capabilities, particularly integrated systems, IoT connectivity for real-time data, and equipment designed for stringent food safety and hygiene standards. * The competitive landscape is actively being reshaped by strategic actions, including large-scale M&A to build comprehensive solution providers and portfolio optimization via spin-offs and divestitures. * Financial performance is bifurcated: automation-focused players are showing resilient organic growth, while others see declines. Margin pressure is a common theme, though leaders in high-value segments maintain strong profitability. ## Key Trends & Outlook The Food Processing Equipment industry is navigating significant macroeconomic turbulence in 2025, which is directly pressing financial performance. Escalating tariffs and economic uncertainty are causing customers to delay major capital investments, leading to soft order levels. This directly impacts revenue and profitability, as seen in Hillenbrand's 24% year-over-year revenue decline in Q3-FY25 and its estimated $15 million direct tariff headwind for the remainder of the fiscal year. As a direct countermeasure to rising costs and labor shortages, processors are prioritizing investment in automation and robotics. This demand for automation is driving strong growth for technology leaders like ATS Corporation, which reported a 12.6% organic expansion in Q2-FY26, as their solutions offer quantifiable ROI, such as a 25% reduction in labor costs and a 15% improvement in production throughput. Despite near-term headwinds, the industry's long-term growth is supported by the unwavering consumer shift towards processed and convenience foods, with the global prepared food equipment sub-market forecast to grow at a 7.9% Compound Annual Growth Rate (CAGR) from 2025 to 2034. This foundational demand ensures a continued need for equipment upgrades and capacity expansion once economic uncertainty subsides. Furthermore, increasingly strict food safety regulations, such as the FDA's Food Safety Modernization Act (FSMA), necessitate investment in modern, hygienic equipment with advanced traceability features, providing another stable source of demand, exemplified by JBT Marel's high-pressure processing offering 30% better pathogen reduction. The most significant opportunity lies with companies providing highly integrated automation systems that address labor, efficiency, and food safety simultaneously, as they can command premium pricing and capture market share. Conversely, the primary risk is a prolonged period of high interest rates and economic softness, which could further delay customer capital spending and extend the current downturn in orders. ## Competitive Landscape The global food processing equipment market is relatively fragmented, with the top five companies accounting for approximately 17% of the total global market, indicating significant room for further consolidation. This dynamic environment is fostering distinct competitive strategies among key players. Some of the largest players are focused on building comprehensive, end-to-end solutions for food processors, a strategy exemplified by JBT Marel's recent merger. JBT Marel's $3.5 billion acquisition of Marel in January 2025 created a diversified entity, combining JBT's expertise in certain areas with Marel's leadership in protein processing to offer a complete, integrated portfolio of equipment, software, and services across multiple stages of the food processing value chain. This approach aims to foster deep customer relationships, enable significant cross-selling opportunities, and build a resilient recurring revenue base from services and aftermarket parts, leveraging increased scale as a competitive moat. In contrast, other competitors leverage deep expertise in a core technology like automation, applying it across various industries including food. ATS Corporation follows this model, with its core business centered on providing sophisticated automation solutions. While the acquisition of Paxiom diversified its Food and Beverage segment, ATS's competitive advantage stems from proprietary technology like the SuperTrak Horizon3 conveyance platform, which offers enhanced precision and higher throughput across multiple industries. This specialized approach allows for technological leadership and pricing power, though it requires constant innovation to maintain its edge. A third strategic approach involves actively managing a diverse portfolio of brands, using M&A, divestitures, and spin-offs to optimize value, as seen with The Middleby Corporation's plan to spin off its Food Processing business by early 2026. Middleby, with a history of growth through disciplined acquisitions, is now strategically optimizing its portfolio to unlock value and sharpen focus on its core segments. Similarly, Hillenbrand, Inc. is actively reshaping its portfolio through numerous divestitures (e.g., Batesville, TerraSource Global) and acquisitions (e.g., FPM, Linxis) to transform into a focused global industrial company providing highly-engineered processing equipment and solutions. This strategy offers financial flexibility and the ability to pivot to market trends, but its success is highly dependent on the quality of these strategic decisions. ## Financial Performance Revenue growth in the Food Processing Equipment industry is sharply bifurcating based on companies' exposure to automation tailwinds versus macroeconomic headwinds. This stark divergence is driven by the interplay of immediate external pressures and urgent internal industry needs. Companies like ATS Corporation, whose automation solutions address critical labor and efficiency requirements, are demonstrating resilient organic growth, reporting a robust 12.6% organic expansion in Q2-FY26. In contrast, companies like Hillenbrand, Inc., more exposed to cyclical capital spending decisions now being delayed by economic uncertainty, are experiencing significant revenue declines, with a 24% year-over-year decrease in Q3-FY25. JBT Marel, however, reported a substantial 120.6% year-over-year revenue growth in Q3-25, primarily driven by its strategic acquisition of Marel. {{chart_0}} Profitability across the industry shows general stability for leaders, but with clear pressure on companies facing volume declines. Adjusted EBITDA margins are typically clustered in the 14% to 20% range. Profitability is a function of pricing power and operational efficiency, with technology leaders in high-value segments able to maintain strong margins even in a tough environment. For example, The Middleby Corporation's Commercial Foodservice segment, a market leader, commanded a high 26.9% Adjusted EBITDA margin in Q1-25. Conversely, companies experiencing significant volume declines, such as Hillenbrand, Inc., saw margin compression, with a pro forma Adjusted EBITDA decline of 28% in Q3-FY25 as they lost operating leverage. {{chart_1}} Capital allocation strategies reveal a clear split between returning cash to shareholders and strategic portfolio transformation. Companies are making distinct choices based on their current position and outlook. Mature, cash-generative businesses like The Middleby Corporation are aggressively returning capital to shareholders via buybacks, signaling confidence in their cash flow, as evidenced by the $323 million in shares repurchased during Q2 2025. Others, such as Hillenbrand, Inc., are focused on transforming their portfolios and balance sheets through major M&A, divestitures, and subsequent debt reduction, having reduced debt by over $300 million during fiscal year 2025 from divestitures. Balance sheets across the industry are generally healthy, with a clear industry-wide focus on deleveraging. Net leverage ratios are typically in the 2.0x to 3.5x range. Following a period of strategic activity, companies are now prioritizing balance sheet strength in the face of economic uncertainty. Debt reduction is a top priority across the board to increase financial flexibility. Hillenbrand, Inc. serves as a clear example, having stated debt reduction as its top capital allocation priority as it works to bring down its 3.4x net debt to pro forma Adjusted EBITDA ratio. {{chart_2}}