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The impacts of COVID-19 on the cold storage industry

June 25, 2020

The COVID-19 pandemic is going to have long-term and far-reaching impacts on the cold storage industry — not only here at Bellingham Cold Storage’s portside facilities in Washington state, but across the country and around the world.

Seismic shifts are happening already. Just look at the way the virus and its attendant stay-at-home orders have changed the way people live and do business.

Online shopping has increased further, faster.

Kroger, the largest chain of supermarkets in the U.S., reported a 92% jump in online sales during the fiscal first quarter of 2020, in large part due to increases in online grocery shopping. And in mid-March, almost 50% of respondents to one survey reported that the novel coronavirus had convinced them to either try online grocery shopping for the first time or to use it more. A full 20% of grocery shopping is expected to be conducted online by 2025, according to the Food Marketing Institute.

Online grocery shopping was poised for growth even before worldwide stay-at-home orders; now, that growth is expected to be even stronger. As Bloomberg put it: “There’s at least one spending shift brought on by the pandemic that is bound to be quite sticky: buying groceries online. Many shoppers tried this format for the first time in the past several months, and there’s good reason to believe they won’t give it up.”

In 2020, the global e-commerce market for food and beverages is expected to grow by 50% from the levels of just one year ago, according to Research and Markets. By 2023, the market is expected to grow 132%.

These changes in behavior portend huge adjustments in the way the cold food chain operates.

The world needs more cold storage space.

The increase in online shopping, plus the spate of panic buying early in the pandemic, led to empty grocery store shelves and a need for increased throughput from cold storage facilities — largely due to what the federal Food and Drug Administration called “unprecedented demand from the retail sector.” What’s more, drops in orders from restaurants and hotels led to backups and overflows in storage centers and pipelines serving the food service industry.

Empty store shelves and backed up warehousing space were part of a “complex story of parallel food supply chains,” states the NAIOP, the Commercial Real Estate Development Association. According to the NAIOP, the pandemic has highlighted the need for greater grocery “surge capacity” in cold storage: “In the post-COVID world, we will see larger tenant demand for food storage capacity across the supply chain — from retailers to wholesalers and producers. Larger storage capacity means a need for more warehouse space, square footage and pallet positions.”

The COVID-19 pandemic, the NAIOP adds, also has pointed out the importance of a resilient, open food system that keeps domestic food production flowing throughout the U.S. while supplementing those flows with imports and continuing to provide much-needed U.S. products to countries worldwide.

“Shifting to a resilient food system of open product flows will require not just additional square footage of cold storage but a high-quality and diversified stock of facilities,” said the NAIOP. “Port-located facilities, which have attracted significant development attention to date, will continue to be critical.”

Through health challenges, economic pressures and changes in habits, the COVID-19 pandemic has changed life across the board for most people around the globe. The cold storage industry, declared an essential business for its critical place in the food pipeline — from Bellingham to New York to the Russian Federation — is poised to experience much of that change. At Bellingham Cold Storage, we work continuously to meet the needs of the cold storage market. We’re poised and ready to assist food producers in managing their storage of perishable products via our Northwest Washington portside and interstate warehouses.