Online grocery could increase cold storage demand by 100M square feet

Originally published on Supply Chain Dive

Dive Brief:

  • Growth in online grocery and meal kit delivery sales in recent years will generate demand for up to 100 million additional square feet of cold storage warehousing space over the next five years, according to a CBRE report emailed to Supply Chain Dive.
  • The report’s author, Matt Walaszek, an associate director of industrial and logistics research at CBRE, predicts this could be a disruptive shift in the coming years, as cold storage currently accounts for only 1-3% of national warehousing.
  • The bulk of this demand is expected to be concentrated in major food producing states like California, Florida, Texas, Wisconsin, and Washington where there is already a significant food supply chain in place, according to CBRE. Additionally, some of these areas include major cities like Austin, Seattle, and Los Angeles where urban consumers are more likely to order groceries online.

Dive Insight:

The Food Marketing Institute and Nielsen predict online grocery orders will account for 13% of all grocery sales by 2022, up from 3% in 2018.

Grocery startups and heritage brands alike don’t want to be caught in a capacity crunch if and when the online grocery industry truly takes off, Walaszek told Supply Chain Dive.

“There are some folks who believe the grocery store is not going to go away,” he said, “but we may see more of a hybrid grocery store model with a smaller footprint on the front-end, and larger distribution and fulfillment functions in the back end,” to compensate for this shift.

Some of these big brands are already exploring moves in this direction. Walmart has launched online grocery ordering and in-store pickup and has even partnered with Ford and Postmates to pilot door-to-door robot deliveries in some of its markets. In addition, Kroger has partnered with Instacart to offer customers same-day delivery options, and Amazon’s acquisition of Whole Foods in 2017 has continued to generate anticipation around how soon drones are going to be dropping off groceries at our doorstep.

Accelerating demand for cold storage space could prove problematic due to the specialization and resource-intensive nature of cold-storage construction. “These are specialized facilities requiring significant capital, power and government approvals,” Adam Mullen, CBRE’s industrial and logistics leader in the Americas, said in a press release. The cold warehousing market could see an imbalance if supply doesn’t rise quickly enough to meet demand.

Morgan Forde | June 6, 2019