PRWs: The Cold Facts

Public refrigerated warehouses are fighting the good fight, including an unpredictable economy, severe customer demands and costly regulations.


This fickle and unpredictable economy is no one’s friend these days, not even public refrigerated warehouses (PRW), who are being squeezed by higher costs while receiving lower-than-ever inventories from customers demanding lower prices.But that is only half the story for the $4.5 billion PRW industry. It is beset by unprecedented inspections and fines relative to governmental regulations. No doubt about it, although the industry is witnessing dramatic changes impacting business-as-usual activities and the bottom line, leading PRWs are proving their mettle as they successfully manage and overcome these impediments through innovative service offerings.

Back in the 1960s and 1970s, the PRW industry was largely owned by individuals and families who went to work in the morning and played golf in the afternoon, reminisces Daniel Kaplan, at Cloverleaf Cold Storage in Sioux City, IA. “Business operations are much more complicated today than they were years ago when most everything moved in full truckloads. Increasing complexity means that fewer food companies own and operate their own cold storage facilities today. Some companies that had public warehousing in their portfolio of businesses have exited the PRW industry as they discovered that accelerating change meant they could not retain first-in-class status across multiple industries in today’s changing, increasingly specialized business environment.”

Another significant change is the consolidation between the two largest companies in the industry—Americold and VersaCold, notes David Harlan, president and CEO of United States Cold Storage (USCS) in Voorhees, NJ. “This will change the dynamics of our industry. I think this presents an opportunity for us because customers of those two companies may not want to have all of their business handled by one provider.”

The consolidation last December will expand Americold’s footprint to include Australia, New Zealand, Argentina and Canada and now represents over 1 billion cubic feet of storage space, reports Carey Falcone, executive vice president of business development and chief customer officer for Americold Logistics in Atlanta. “Our goal is to be the global partner our customers can rely on for their distribution needs around the world.” He adds that customers are looking to emerging markets for growth opportunities and they are looking for partners like Americold to help them manage their global food supply chains.

Regulatory changes are tightening financial and operational pressures on PRWs. “Even with a brand-new facility, it is hard for someone to justify owning a single facility or even two facilities because you have to be able to spread costs relating to compliance and expertise over more facilities to make things work,” Kaplan explains.

The Food Safety Modernization Act shifts the focus of federal regulators from responding to contamination to preventing the incidents of contamination, notes Falcone. “Americold’s Web-enabled inventory tracking and reporting system—i3PL—helps in this regard, allowing our customers real-time visibility of their products at all times.”

The emphasis on food safety in the distribution and warehousing network has really exploded in the last several years, Harlan says. USCS facilities are inspected by different agencies and the company requests its own inspections through the American Sanitation Institute. He adds that customers and their respective customers want to see where their products are being stored. “So this puts a lot more pressure on PRWs, and especially the smaller companies because of the economies of scale required to spread the costs involved.”

In any business, there is always a degree of uncertainty; but Kaplan notes that cold storage trends are being upset by underlying global economic currents. “Today’s world demand for US grains because of the cheap dollar value and conversion of food to fuel is causing an unprecedented and alarming rise in grain prices.” Corn had historically bounced between $1.80 and $2.50 a bushel, while today’s price is over $7 a bushel. “I have never seen the protein industry so uncertain about what is coming next.”

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