The chill factors

28-Aug-2008 - Last updated on 15-Mar-2017 at 16:17 GMT

Thanks to high demand for frozen foods, the cold storage business is currently booming. But how long can it continue? asks Allison Carvalho

Companies in the cold storage business have been quite busy over the past few months. New distribution centres have been opened, staff hire and services extended - all designed to stay ahead of the pack as competition for food clients hots up.

Naturally, it helps if your customers are doing well: the fact that the UK's retail frozen food market recorded 4.6% growth year-on-year by June 2008 probably offers those in frozen storage and distribution some hope.

According to market researcher TNS Worldpanel, the ready meals sector, for example, has returned to growth both in volume and value after a number of years when things hadn't looked too bright. Ready meals alone is now worth £628M, 1.3% up year-on-year. Premium ranges from celebrity chef Jean-Christophe Novelli and Aunt Bessie, plus new ranges from Birds Eye and Chicago Town all helped the sector to regain its momentum, says the British Frozen Food Federation (BFFF). The fish sector boasted year-on-year volume growth of 8.3% (worth £677M) and vegetables 4.6%.

Things are also quite buoyant in the chilled sector, too. Culina Logistics expects 350 new jobs to be created at its new chilled distribution centre at Haverhill in Suffolk when the site becomes fully operational. It will take the numbers it employs in the UK to over 1,650.

The 17,740m2 warehouse, which opened last month, will operate 24h/day to service retailers supplying consumers with a wide range of chilled food and drink. The facility features 25 dock-level loading bays, can house 75 trucks and trailers and service up to 450 delivery points in the wholesale and retail sectors.

Rien Brakel, group operations director at Culina, believes the company is in a strong position. "Our customer base continues to grow volumes despite the difficult retail market conditions. Both branded and own-label manufacturers are performing well and we remain confident that this will continue to be the case," he says.

The move is part of Culina's plans to meet organic growth among its customers and target new business in the UK and Europe. Brakel says: "Haverhill continues our strategic development plan to establish Culina as the market leader in high quality, shared user logistics services in the UK.

"The location fits perfectly as a large percentage of our clients' manufacturing facilities are based on the continent. It enables us to manage deliveries in the south east of England more efficiently, too."

Culina is also working towards introducing environmental standard ISO 14001, which will help it comply with legislation that may affect operations at its distribution centre.

Frozen consolidation expansion

In May, frozen food transport and storage provider ACS&T Logistics extended its national frozen consolidation service for food service operator 3663 with a second centre at its depot in Wolverhampton, West Midlands. The firm has operated the scheme for 3663 since 1994 from its Grimsby depot and includes over 110 suppliers. ACS&T hopes the new facility, in a more central location, will help it to attract extra suppliers.

The Wolverhampton centre allows suppliers to pay for delivery by the case, rather than by the pallet. Carl Robinson, sales and commercial director of ACS&T, explains that the company's chief aim is to simplify the process for frozen food manufacturers to be able to supply 3663 efficiently.

He says: "Suppliers need only to deliver their stock to one of our centres, or we can collect it for them, and we'll do the rest, saving suppliers time, money, administration effort and road miles, helping to reduce the carbon footprint of all involved.

"We'll store their product until a 3663 depot requests it and then deliver, with products from other suppliers, on consolidated pallets. This allows us to offer a very attractive supply chain solution for case deliveries, which could not be achieved in any other way."

Further benefits of the service include an online stock management system that allows suppliers to view the status of their stock in ACS&T's cold store in real time.

Over in North Yorkshire, Reed Boardall says its new £7M cold storage facility was almost full in July - just one month after opening - due to an increased demand for its services. The new facility, which holds 22,000 pallets, brings total pallet space up to 112,000.

Group md Keith Boardall is confident about making such investments because the firm is experiencing growth in collecting frozen food from manufacturers and then delivering to supermarkets, wholesalers and foodservice companies throughout the UK.

"Frozen food sales are up slightly in the market, but we're experiencing more demand because of our service and financial stability," he comments. "With our single site of 112,000 pallet spaces and more than 5,600 live stock keeping units we're already consolidated without having to pass the parcel to complete orders. Our ability to consistently deliver full loads is of benefit to all customers in the supply chain."

However, Boardall adds that the rising cost of diesel has had a "serious impact" on the business. The cost of red diesel, which is used to refrigerate delivery vehicles, has doubled. "This is a major challenge for us and everyone in the supply chain," he says.

Most recently Brake Brothers, Britain's largest food distributor, has added a 98p fuel levy on every delivery it makes to cope with the cost increases.

Logistics shake-out

The cold storage and distribution sector has also witnessed a takeover and an abandoned bid in recent months, although nothing as major as Norbert Dentressangle's takeover of Christian Salvesen last December. That deal led to the creation of a company with €2.9bn in combined revenue and 29,200 staff in 14 European countries.

In July, family-owned Yearsley Group bought the business of Innovate Frozen for an undisclosed sum after it filed for bankruptcy. Yearsley, which was established in 1955, sells, stores and distributes frozen foods across the UK and Europe. Long-term, Yearsley said it aims to integrate the two businesses "seamlessly". The company will continue to run the Innovate sites at Bristol, Newark, Chesterfield and Scunthorpe; the acquisition doubles Yearsley's storage capability to over 330,000 pallets nationwide.

Stobart Group took over the chilled operations of Innovate Logistics for, again, an undisclosed sum. Around 1,300 existing employees of Innovate Logistics are expected to transfer to Stobart. Under the deal, Stobart takes on several Innovate contracts, including a warehousing operation with Nestlé, an existing Stobart customer. The company says Innovate's operations may generate turnover of around £100M a year; Andrew Tinkler, Stobart's chief executive, describes the acquisition as a "low risk way of increasing our presence in the chilled market"

Wincanton, however, had a change of heart about a prospective deal. In May, it announced it had approached the board of fellow supply chain management company TDG with an indicative cash offer. But by June it said it had decided that it was not in the best interests of Wincanton shareholders to go ahead.

That same month TDG introduced a temperature controlled courier service which operates out of its Luton depot covering the M25 area. The company's 7.5t vans, configured to carry products at chilled and frozen temperatures, are available for last minute orders. Paul Spellacy, commercial manager for TDG Temperature Controlled Services, says the move will help its customers to maximise sales opportunities by ensuring they can get their product to restaurants or sampling rooms in the City "at the right temperature within a couple of hours"

Further developments within the sector can be expected over the next 12 months, if the BFFF is right about growth prospects for the frozen food industry.

The BFFF believes the frozen food market will continue to be fuelled by three factors. First, there is little waste with frozen food; second, nutrients are locked in by the freezing process; and third, frozen food is value for money at a time when consumers are struggling to manage their household bills.

Will the renaissance of frozen foods continue? If so, will it be at chilled's expense? The success of cold storage operators will hinge on the answer to these questions. FM

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