As worldwide unemployment numbers soar into the multi-millions and COVID-19 continues to take its toll, many are left wondering how the global economy will fare in the coming months. With each passing day, supply chain companies—which work beginning to end to transform raw resources into consumer products through manufacturing, shipping, and ultimately putting products into consumers’ hands—become increasingly crucial in determining the state of big and small businesses alike.
Specifically, the resilience of cold-storage warehousing is uniquely equipped to weather recession-like market conditions. Benjamin Gordon, Managing Partner of venture capital and private equity firm Cambridge Capital LLC, believes cold-storage businesses, which ship fresh produce to supermarkets and provide consumers with increasingly popular fresh food deliveries may continue to thrive even under tough conditions. The field of logistics is deeply intertwined with these businesses and are also crucial in the success of cold-storage warehousing and shipping. In one of Gordon’s personal blog posts from December 2019, he described Lineage Logistics LLC’s early 2019 purchase of Preferred Freezer Services LLC for over $1 billion.
With the acquisition, Lineage, already one of the largest refrigerated storage companies in the world whose customers include Walmart Inc., Sysco Corp. and General Mills Inc., furthered the trend of companies looking to further consolidate food delivery operations. According to Gordon, industries like Lineage consolidate in order to “costs by eliminating overlapping overhead. They can pool technology investment across a broader base. And they can generate cross-selling into new markets.” Continuing, Gordon says, “Buyers like Lineage, Agro, Emergent and Americold have all achieved these benefits.”
But while cold-storage may be thought to be recession proof, it is not risk proof. Although food will not fall out of demand, the market for it is subject to change. Especially in the midst of the 2020 COVID-19 outbreak, some grocery store chains, like Draeger’s Market in the San Francisco Bay Area, have experienced hardship due to stocking complications. “There’s been a supply chain crunch. It’s been hard. I don’t want to say impossible. I hate to say impossible,” says Tori Draeger, the director of marketing for Draeger’s Market. But, she remarks, “Produce has been great. The produce supply chain has really held up well. The people who usually sell to restaurants are now able to sell some of that product to us, so at least it’s not going to waste.”
This spells good news for cold-supply chain companies, which are working to address concerns of supply and demand in changing times. The responses of individual companies will dictate long term growth effects, which still seem promising given the prioritization of fresh produce and same-day delivery. In this time of social distancing and increased precautions surrounding the food industry, companies which focus on online sales play a key role when it comes to supply and distribution. Fresh food is still in ever-increasing demand, and in this environment, adaptation is key. In this situation, opportunities are transformed, not lost, and supply chain companies have a crucial role to play in determining just how and when the market will bounce back.