On Our Radar: Deals we are paying attention to for their impact on industry.
The cold storage business is heating up after Americold Realty Trust agreed to pay $1.24 billion for privately held Chiller Holdco LLC, also known as Cloverleaf Cold Storage, to expand its geographic reach and increase a hold in the growing protein business segment.
The purchase, from Chiller Holdco’s management and its private equity investors led by Blackstone, is expected to close later this quarter.
The deal is the latest in the cold storage industry by Americold, a publicly traded company focused on owning and operating the refrigerated warehouses that are essential to the food industry. The acquisition makes Americold the largest cold-storage owner and operator in the world, according to the company.
Americold aims to benefit from a global cold storage market that Grand View Research estimated was valued at $94.02 billion last year.The research firm projected the market will expand at 12.2% annual rate through 2025 as stringent government regulation of refrigerated food and medication, along with growing organized retail sectors in emerging economies, drive the construction of new warehouses.
Rising automation in refrigerated warehouses, including cloud technology, robots and energy management, is expected to boost demand further, Grand View said in a report.
Most of the cold storage warehouses built by grocery chains were constructed decades ago and are no longer efficient, especially as frozen food sales have grown far faster than most other food segments, Fred Boehler, president and chief executive of Americold, said in an interview last year. “They have a choice: Do they want to spend capital on investing in infrastructure or do they need to invest their capital in storefronts given that retail is the most competitive it’s ever been,” he said.
More fresh and chilled products are being ordered in smaller quantities from a wider range of product choices, according to a survey of the cold storage industry by Datex. “No longer will refrigerated warehouses be able to exclusively enjoy the simplicity of pallet in-pallet out operations,” according to the report. “The cold chain needs to change and must become as flexible and transparent as possible and that will take technology, forward-thinking business executives and investments in innovation.”
The cold storage industry is also being boosted by new pharmaceuticals. In 2017, about half of the new drugs approved by the FFA — 28 of 57 — were temperature-sensitive products, with 23 requiring refrigerated storage and transportation, according to a report from Pharmaceutical Commerce Five additional products require below-zero temperatures. In the 2017 Cold Chain Outlook produced by Pharmaceutical Commerce, the global volume of 2017 cold-chain products was estimated to be $283 billion and was seen growing at twice the rate of non cold-chain market.
As the industry grows, it is striving to reduce the environmental impact of cold-chain shipping, pushed by corporate social responsibility policies, government regulation, and changing customer expectations.
A move to single-envelope technology, which uses insulated panels to build warehouses, will help reduce overall construction time and costs of materials, operations and maintenance while ensuring flexibility for future changes in use. A warehouse built using the single-envelope technology boasts a smaller footprint and lower height without compromising the internal volume, according to the Grand View report.
In North America, Mexico is expected to witness exponential growth amid rising investment in logistics infrastructure both to feed a growing local economy, and to streamline exports to the U.S. Grand View noted China is also seen as a growing cold storage market.
Cloverleaf, founded in 1952 and based in Sioux City, Iowa, is the fifth-largest cold storage provider in the United States by refrigerated cubic feet and serves over 360 customers. Americold is buying22 facilities, of which 21 are owned and one is managed, totaling 132 million refrigerated cubic feet. Cloverleaf’s assets are located in nine states in the Central and Southeastern United States, complementing Americold’s existing geographic reach and expanding the Americold’s hold in the growing protein business segment.
Once the deal is completed Americold will own or manage over 1 billion cubic feet of refrigerated storage.
Americold also announced plans to invest $126 million to $136 million in the expansion and redevelopment of its Atlanta major-market campus, consisting of its Tradewater, Gateway, Westgate, Southgate, and Skygate facilities. In January, Americold acquiredprivately held PortFresh Holdings LLC, a temperature-controlled operator servicing fresh produce trade primarily through the Port of Savannah, Georgia. Americold said it plans to build a new 15 million cubic-foot state-of-the-art cold storage facility on adjacent land owned by PortFresh.
Peter Green is an award-winning business and investigative journalist based in New York.