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COLD STORAGE SOARING IN US
FIRST
FREIGHT
CUSTOMER
Open Country Dairy – New Zealand’s second
largest exporter of whole milk powder – has
confirmed it will be the first freight customer
for Ports of Auckland’s major freight transport
hub at Horotiu, north of Hamilton. “We are
thrilled to have secured OCD as our first major
tenant,” Ports of Auckland chief executive Tony
Gibson says. “The hub’s earthworks are now
complete, and we’ve started building a facility
for OCD that will be operational in 2019.” The
Waikato Freight Hub is a key part of Ports of
Auckland’s rail-connected North Island freight
hub network, which links Kiwi businesses
with New Zealand and global markets. “This
new facility will give Waikato farmers a more
efficient and environmentally friendly way to
send their exports overseas, improving their
competitiveness and sustainability,” Gibson
says. “This is part of Ports of Auckland’s strategy
to support regional growth with freight hubs in
South Auckland, Mt Maunganui, Manawatu and
now Waikato. All are located next to rail and are
in regions that generate significant volumes of
exports that need to be efficiently transported
to a major port. The freight hub network will
contribute to lower freight costs, reduce carbon
emissions, and offer a wider range of shipping
services to North Island exporters and importers.
The hub provides future customers with a unique
opportunity. Businesses will be able to have their
own sites with customised sized warehouse
design and layout. OCD chief executive Steve
Koekemoer says the company will benefit from
the huge advantage of having its warehouse
located between New Zealand’s two dominant
ports, Auckland and Tauranga. “Strategically
the new Waikato hub will allow us to continue
our export growth while lowering our costs and
environmental footprint through greater use
of rail.” Waikato District Council mayor Allan
Sanson believes a strong freight and logistics
sector is key to supporting the region’s growth.
“This hub will support our existing export
industries as well as providing an opportunity for
more local businesses to grow and be successful
on the international stage. We are also pleased
that when fully complete, the freight hub is
expected to generate around 300 jobs directly
in our district and facilitate many more across
the region by acting as an economic catalyst.”
The Waikato Freight Hub is expected to become
operational in mid-2019. Ports of Auckland’s
other freight hubs are located in Wiri (South
Auckland), Mount Maunganui and Longburn
(Manawatu).
America’s cold storage industry – once the
domain of smaller operators – is rapidly gaining
scale with hundreds of companies now competing
in North America. However, the largest 10
companies control 70% of total capacity, and all
are sinking serious money into future-proofing
their toehold in the market. Lineage Logistics –
second largest cold storage operator in the US
– has recently announced a US$700m acquisition
of minority ownership by two private equity
firms. Cloverleaf Cold Storage – around seventh
on the scale – has been purchased for an undisclosed
(but believed to be in the billions) sum by
private equity giant Blackstone. Meanwhile, competitors
such as third-ranked Preferred Freezer
Services and American newcomer and European
mainstay NewCold are sinking hundreds of
millions of dollars into mammoth, state-of-the-art
warehouses. “There’s a tremendous consolidation
taking place,” NewCold US country manager
Jonas Swarttouw says. “There are less and less
one-off cold storage operators.” Americold alone
owns 109 cold storage warehouses and leases
50 more – a total capacity of 945 million cubic
feet, the equivalent of 3.2 million pallet positions.
Americold isn’t standing still either, and is investigating
upgrades, expansions and new facilities.
The rush of big capital into cold storage reflects
several factors: the investment opportunity this
particular kind of industrial property offers; the
pressures by customers and operators alike for
much larger, more technologically advanced
facilities; and the growing cost such buildings
bring with them. A new development can now
run upwards of US$100 million - NewCold is now
constructing a building in Idaho with a price tag
of US$90 million. In 2015, Preferred constructed
what was then claimed to be North America’s
largest cold storage warehouse in Washington,
with 455,000 sq ft, 120,000 pallet positions and
costing $115 million. New cold storage warehouses
are being built larger and constructed
much higher as well. The reason for going up
and not out is simple: energy costs. Also, newer
facilities tend to be highly automated, with
driverless pallet or reach cranes easily, and more
accurately capable of grabbing pallets stored at
far greater heights than manned forklifts. The
growth of fresh-food related ecommerce, with
its own blueprint for distribution, drives the need
for cold storage. So, too, does more and more
imported produce. Food processors demand an
increasingly more sophisticated supply chain and
distribution system, one that’s capable of delivering
food fresher and faster. Newer warehouses
are crowding out older facilities, which can’t
adhere to the increasingly exacting standards of
big food distributors. “The large supply of cold
storage space constructed over the past decade
is putting older facilities at the risk of obsolescence,”
MetLife warned in an industry outlook
report. Cold storage industry revenue in the US
last year reached close to US$5.3 billion, according
to estimates provided by Americold in its IPO
offer document. That reflects a modest gain over
the past decade, with revenues increasing about
$1 billion over ten years. Capacity has grown by
almost half since 2000, but the new warehouses
command higher storage and handling fees,
and margins tend to be higher. A cold storage
warehouse promises a bigger payout than does
a traditional warehouse, and that’s a big inducement
for investors.
L O G I S T I C S
KEY POINTS:
• A 33ha development, due to open in the
first half of 2019 once the OCD facility and
a new road connection have been built
• A rail connection is due to be built in the
next few years, but for now freight will
travel by road to Hamilton and then by rail
to Ports of Auckland’s Waitematā sea port
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