Growing demand for refrigerated warehouses to serve Minnesota’s food industry

The United States remains among the world’s largest markets for refrigerated/frozen warehousing services, with 131 million cubic meters of cold storage warehouse capacity – second only to India – according to the 2018 GCCA Global Cold Storage Capacity Report. Together with China, these three nations account for 60 percent of the global total for cold storage space.

And the industry continues to grow. The report showed that global cold storage capacity increased 2.7 percent since 2016, while trend data from the frozen food and pharmaceutical industries suggest this growth will continue for several years to come.

Great River Energy’s economic development team is preparing to respond to its member-owner cooperatives needs as cold storage industry growth presents business expansion and attraction opportunities around the state.

As part of this research, Great River Energy recently participated in the 128th IARW-WFLO Convention, the joint annual meeting of the International Association of Refrigerated Warehouses (IARW) and the World Food Logistics Organization (WFLO).

Capacity growth

Trend data presented at the convention by Alison Bodor, president and CEO of the American Frozen Food Institute, charted growth in new frozen food products over the past several years. The Institute expects this growth to continue, as shifts in customer demographics and the advent of new shopping/product delivery technologies make regional supply chains with temperature-controlled warehouses more vital.

The refrigerated warehousing industry is responding to this growth with a surge in new capacity investments.

Minnesota has seen its own surge in mergers and capacity expansions in the cold storage industry. On April 15, Americold Logistics announced its acquisition of Cloverleaf Cold Storage for $1.24 billion, a deal which will boost Americold’s market share in the United States by an additional 132 million cubic feet of storage space across 22 facilities, including Cloverleaf’s three facilities in Minnesota.

Americold was already the world’s largest cold-storage warehousing firm at the time of this acquisition, with 156 facilities worldwide. Great River Energy member-owner cooperatives serve two of Americold’s six existing facilities in Minnesota: one in Park Rapids and one in New Ulm.

Powerful partners

Utility partners can provide valuable support as these companies work to research and implement new automation technology. And it’s no secret that electric energy is one of the most important drivers in the temperature-controlled supply chain industry, thereby providing further opportunity for Great River Energy and its member-owners to support cold chain industry growth.

According to the Cold Chain Index, an annual survey of Global Cold Chain Alliance members, electricity costs account for around 10 percent of the total cost of operations for refrigerated warehouses.

This data suggests that U.S. utilities are helping hold costs flat, as overall expenses for refrigerated warehouses rose by an average of 3.24 percent from the end of 2017 through the end of 2018; while electric utility rates rose more moderately at 1.19 percent over the same period.

Great River Energy’s service area stacked up well in the Index, as Minnesota’s electric rates rose at a lower pace than the rest of the country.

Overall, the Global Cold Chain Index data supports the business case for expanding warehouse capacity in Minnesota, where competitive operating costs complement the core strengths of the state’s robust transportation networks and thriving agricultural/food production sectors.

Great River Energy is prepared to work with its member-owners to provide site selection and business financing for new and expanding operations in the state, while helping to pioneer new programs that will support the ongoing success of those operations we already serve.

For more information on Great River Energy’s research into the global cold storage industry, or related opportunities for growth in Minnesota, please contact Jeff Borling at jborling@grenergy.com.