E-commerce dictating the future of cold storage construction:
Globally, the trend of e-commerce has hardly left any region untouched, and one sector witnessing evolution in its trade tactics as a consequence is the food and beverage sector. As the emphasis on e-commerce, direct-to-consumer and last-mile deliveries is undoubtedly pacing up, it is disrupting the current food storage and distribution facility and design concepts. The percentage of grocery store shoppers that interact with their supermarket digitally has increased from 56% in 2017 to 63% in 2018. Similarly, 1.61 billion people globally purchased good online in 2016 with total sales value estimated to be $ 1.9 trillion. As the trend of e-commerce remains unchallenged, the value is forecast to reach $4.06 trillion by 2020. Warehousing is an inevitable aspect of this direct to consumer and last-mile delivery trade tactics, but since the F&B sector is among the top sectors adapting ‘bricks and clicks’ business model and vice-versa, refrigerated warehousing market growth is gaining traction exponentially. For example, in 2017 Amazon.com, Inc., acquired Whole Foods Market Inc., an American multinational supermarket chain for an amount exceeding $13 billion. This acquisition has delivered Amazon a cutting edge ecosystem to deliver fresh food, and refrigerated warehousing market in North America is leveraging this multi-billion dollar deal for the advanced freights logistics. Cold storage warehouses with temperature controlled storage facility (that is comprised of vapour absorption system and vapour compression refrigeration system) and cold chain logistics is imperative for the e-commerce vendors investing in food and beverages products. For example, to expand its Amazon Fresh business, the e-retail giant is scheduling renovations to its Prime Now warehouses in Seattle, concentrated towards refrigerated warehousing. Due to its acquisition of the Whole Foods, Amazon is bound to increase the total area of its cold storage facilities. Presently, the retailer has gained access to cold space well under 10 miles to approximately 80% of the population. Hence, the e-commerce industry is the major disruptive force in global refrigerated warehousing market.
The global Refrigerated Warehousing Market was evaluated to be $19.77 billion in 2018. The F&B retail sector is exponentially dwelling into the trade of processed and frozen food with emerging trend of supermarket and hypermarkets globally that are completely reliant on refrigerated warehousing for supply chain. It is to be noted that the global frozen food market was evaluated to exceeding $225 billion in 2018. Moreover, the trend of e-commerce is adding further impetus to the market demand that is progressing at a global CAGR of 10.52% during the forecast period of 2019 – 2025.
Cold storage facilities are the hottest new real estate investment:
The total export value of frozen meat of bovine animals in 2018 was $24.4 billion and frozen vegetables accounted for $6.7 billion of exports. Considering the growth rate in exports, both of the products witnessed 6% and 10% acceleration respectively during 2017 – 2018. These numbers strongly evinces the trend of frozen food, considering the market being global. The earlier market for frozen food was dominated by the physical retail space such as super market and hypermarkets, whereas the modern market is dedicating majority of its shares to online retailers. Hence, the already flourishing processed and frozen food market demand has gained further impetus with the e-commerce dwelling into the sales of frozen consumables. Additionally, Food Marketing Institute has stated that by 2022, online grocery sales will account for 22% of total grocery sales. This growth will direct impact the refrigerated warehousing market companies since majority of food producers outsource the required cold storage capacity. The U.S. Department of Agriculture states that 79% of cold storage in the United Sates is simply hired by by food producers. This necessity has led towards numerous investments in the refrigerated warehousing market adding to its growth. For example, in 2019 a 606,000-square-foot food distribution facility mainly concentrated towards temperature controlling was opened by Kroger and Penske Logistics. And, Walmart Inc. in 2020 will be opening a high-tech facility that will emphasize on fresh and frozen grocery. Consequently, CBRE Group, Inc., has stated that that the cold storage facility in the United States that resembles 214 million square feet, will demand more area of up to 100 million square feet by 2024. As food is the prime occupant of refrigerated warehousing, fruits & vegetables segment is the fastest growing in refrigerated warehousing market. The segment is estimated to be progressing with an application CAGR of 6.9% during the forecast period of 2019 – 2025.
North American Top 25 companies operates 3.17 billion cubic feet of refrigerated warehousing spaces out of 5.54 billion cubic feet available globally:
Majority of the global refrigerated warehousing companies with primary market shares are located in North America. Such as AmeriCold Logistics (US), Lineage Logistics (US), Preferred Freezer Services (US), John Swire (UK), and AGRO Merchants (US), Kloosterboer Services (Netherlands), Interstate Cold Storage (US), Cloverleaf Cold Storage (US), Burris Logistics (US), Frialsa Frigoríficos (Mexico), and Henningsen Cold Storage (US). This eventually evinces the dominance of North America in the global market. After an acute analysis it is estimated that North America in 2018 held 28% of the global demand.
IARW associates at present own 5.54 billion cubic feet of refrigerated warehousing industry space. Out of this North American Top 25 operates 3.17 billion cubic feet followed by The European Top 10 with 791.26 million cubic feet and The Latin American Top 10 with 241.67 million cubic feet. The market in North America is driven by mergers and acquisition, and expansion activities. Few examples are listed below:
· AmeriCold Logistics, globally the largest temperature-controlled warehousing and logistic provider with 980.172 million cubic feet (IARW) has agreed to acquire Chiller Holdco, LLC (Cloverleaf Cold Storage) for $1.24 billion in 2019. This deal will further augment the share of Americold’s in the U.S as it adds affects 22 facilities with 132 million cubic feet of storage space addition.
· Lineage Logistics, had also announced in 2019 its plan to acquire Preferred Freezer Services of Chatham, N.J. This will assist the company in further enhancing its more than 1.3 billion cubic feet of temperature-controlled warehousing space affecting 200 facilities globally.
· VersaCold Logistics Services, Canada, announced in 2018 the approval for its 21 refrigerated warehousing facilities to export fish to the People's Republic of China. Also, 17 have been approved to export fish to the European Union (EU) as of April 2018. The new approvals determines the VersaCold’s operation of 21 refrigerated warehousing facilities situated in Canada permitted to export fish to two biggest global markets.
Walmart Inc. supercenters recorded $136.2 billion in sales (2016) of food and non-food grocery. The top 20 supermarket and supercenter retailers accounted for 66.6 % of U.S. grocery store sales. it is to be noted that the governing trend of supermarket and supercenters and its reliance on cold storage supply facilities is directly proportional to the refrigerated warehousing market demand.
APAC’s chemical industry – a mega employer in refrigerated warehousing market:
Other than the food and beverages industry, the refrigerated warehousing market demand is bolstering due to requisite application in the chemical, pharmaceutical and healthcare industry. Transportation and storage of temperature sensitive chemicals, medication, storing vaccines, blood samples, and other cellular fluids are some of the generic tasks that engross the demands for refrigerated warehousing in the chemical and pharmaceutical industry. Hence, APAC with an enormous share in global chemical production is a lucrative spot for refrigerated warehousing market. APAC is the global leader with 51% share in global chemical industry’s GVA of $1.1 trillion (2017). The GDP contribution that was recorded to be $2.6 trillion was also the highest in APAC for the same year. Out of this entire contribution, China alone had a share of $1.5 trillion in 2017. The dominant market players in the APAC’s refrigerated warehousing market are Nichirei Logistics (Japan) and Konoike Group (Japan).
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