Finance and Administration Committee
IARW-WFLO Trends and Industry Relations Committee Sunday, July 30, 2006, 1:30 pm, Salon A Room The Four Seasons Hotel, Washington, DC, USA
Paul Dennis, Chairman Brenda Goble, Vice Chairman/Recorder Mark Blanchard, IARW Board Liaison Pat Floyd, WFLO Board Liaison Bill Hudson, Staff Liaison 2006 Committee Roster .............................................................................................................................. 2 Committee Statement of Purpose ............................................................................................................... 4 Review IARW and WFLO Strategic Plans Minutes of the 2005 Committee Meeting .................................................................................................... 5 2005 Global Frozen Foods Almanac .......................................................................................................... 8 IARW-QFFI Survey ................................................................................................................................... 25 Summary of Refrigerated Space and Trends............................................................................................ 31 Logistics 2006—The World Turned Upside Down .................................................................................... 37 Resource Guest: Ben Gordon, BG Strategic Advisors Customer Perspective on the Dynamic Trends Facing the PRW Industry................................................ 40 Resource Guest: Gary MacNew, VP of Customer Service and Logistics, Rich Products Corporation Critical Trends—Regional Reports ........................................................................................................... 41 Other Business Nomination of 2007 Chair and Vice Chair/Recorder
2006 Trends and Industry Relations Committee Agenda
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2006 Trends and Industry Relations Committee Roster Larry Adams, Burris Refrigerated Logistics, Inc. Doug Bailey, SSA Global Mike Barisse, Merchants Terminal Corporation Tom Berger, Daifuku Stan Bigford, Trenton Cold Storage, Inc. Sandi Bishop, Sodus Cold Storage Company, Inc. James Black, Gleeson Constructors, L.L.C. John Blair, Trenton Cold Storage, Inc. Mark Blanchard, NOCS Hank Bonar, Bonar Engineering and Construction Terry Brown, ICS Logistics, Inc. Bob Burris, Burris Logistics Ben Campbell, ICS Logistics Jeff Carden, Merchants Terminal Corporation Gino Carlone, Atlas Cold Storage Milton Chrissovergis, The Stellar Group Joe Couto, Headwater Technology Solutions Brian Davis, Imperial Freezer Services LLC Raymond de Graaf, Integrated Global Low Temp Operations Phils., Inc. Paul Dennis, Atlas Cold Storage David Dickson, Atlas Cold Storage John Dittrick, Inland Cold Storage Tim Dorn, Atlas Cold Storage Len Ebersberger, Refrigerated Warehouse Consultants, Inc. Ernie Ferguson, Merchants Terminal Corporation Brad Flinn, Bellingham Cold Storage Co. Patrick Floyd, Total Logistic Control, LLC Anthan Fuller, Loop Cold Storage Co. Stephen Galati, Mattioni, Ltd Bonnie Geise, SCS Refrigerated Services, LLC Brenda Goble, Industrial Cold Storage Inc. Ben Gordon, BG Strategic Advisors Drew Greenberg, Newport-St. Paul Cold Storage Tim Groff, Atlas Cold Storage Rolfe Haas, NAI James E. Hanson Harry Halpert, Merchants Terminal Corporation Jeff Hartman, Atlas Cold Storage Bill Hendricksen, Inland Cold Storage, Inc. Mike Henningsen, Henningsen Cold Storage Co. John Horvath, Horvath & Lieber PC Joe Howard, Lockton Companies Bill Hudson, Association Staff Ken Hudson, Inland Cold Storage Pat Hughes, RCS Chester, Inc. Chris Issakides, Energy Wise Lighting, Inc. Mike Jahncke, Virginia Polytechnic Institute Eben James, Trenton Cold Storage Limited Andy Janson, Hanson Logistics
Bruce Jayne, Hall's Warehouse Corporation Tom Jones, Refrigerated & Frozen Foods Magazine Gary Jones, Frozen Assets Cold Storage, LLC Darryl Kawano, Unicold Corporation Gene Klein, SYSCO Dan Kline, Columbia Colstor, Inc. Brian Kyle, Burris Logistics John Langeveld, Landstar Logistics Larry Laurin, Conestoga Cold Storage Merle Lemmen, Atlas Cold Storage Pete Lepschat, Henningsen Cold Storage Co. Robb Lockie, Spire Group Limited Elizabeth Lowe, Parke Industries Tony Lucarelli, Henningsen Cold Storage Co. Anita Lydiard, SCS Refrigerated Services Archie MacDonald, Spire Group Limited Dave MacLean, Atlas Cold Storage Ian MacNair, Spire Group Limited Gary MacNew, Rich Products Corporation Kevin Margeson, Commercial Warehousing, Inc. Maves, Maves International Software Chuck McCarthy, Imperial Freezer Services Mike McClendon, Richmond Cold Storage John McGuire, Loop Cold Storage Randy McMaster, ICS Logistics Lodi Meza, Inland Cold Storage Ian Miller, Trenton Cold Storage Inc. Rod Minogue, Atlas Cold Storage John Miranda, Baltimore Aircoil Company Stan Moya, United States Cold Storage of Terry Myers, Hall's Companies Charlie Newell, Minnesota Freezer Warehouse Co. Mike Oberg, Terminal Freezers, Inc. Patti Paris, Columbia Colstor, Inc. Laurier Pedneault, Congébec Inc. Jamie Peracchi, Food Tech Structures, LLC Connie Phipps, IARW Insurance Service Frank Plant, San Diego Cold Storage Tom Poe, Crystal Distribution Services, Inc. Cheri Puvogel, Lockton Companies Fred Radcliffe, Radcliffe Systems Inc. Larry Rauch, Los Angeles Cold Storage Co. Jim Reits, Hanson Logistics Dennis Rhodes, ICS Logistics Al Rickard, Association Vision Howard Roberts, John Bate & Associates Ltd Rose, W.R. Rose and Companies - Ashland Cold Storage Corey Rosenbusch, Association Staff
2006 Trends and Industry Relations Committee Agenda
Page 3 Bob Ross, Food Tech Structures, LLC Jerome Scherer, United States Cold Storage, Inc. Don Schlimme, University of Maryland Don Schoenl, Nordic Cold Storage, LLC Janice Scott, Commercial Cold Storage, Inc. Ryan Silberman, Henderson Cold Storage Jeff Spence, ICS Logistics, Inc. Ray Tarnowski, Philadelphia Warehousing & Cold Storage Co. James Tateyama, Unicold Corporation
Doug Thomas, Bellingham Cold Storage Co. Garry Tilburn, Reed Boardall Cold Storage LTD Ron Vallort, Ron Vallort and Associates, Ltd. Derk Van Mackelenbergh, Eurofrigo B. V./Nichirei Corp. Bill Vargo, Nordic Cold Storage LLC Joe Vickers, ICS Logistics Darren Warren, ICS Logistics Nancy Waterman, Bellingham Cold Storage John Williams, Jamison Door Co.
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Trends and Industry Relations Committee Statement of Purpose
Examines, in general terms, what is happening in the public refrigerated warehousing/logistics industry today and factors which are likely to impact PRWs in the future. Also attempts to forecast opportunities and threats facing the industry and oversees industry marketing programs and industry/trade press relations.
Note: Please pay special attention to the committee statements of purpose this year. Each one has been edited to make concise statements that can be used on the website and in promotional materials for the Assembly of Committees.
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Minutes of the 2005 Trends and Industry Relations Committee Meeting
Officers
2005
2006
Chair
Michael Black (for Paul Dennis)
Paul Dennis
Vice Chair/Recorder
Brenda Goble (for Michael Black)
Michael Black
IARW Board Liaison
Larry Adams
TBD
WFLO Board Liaison
Patrick Floyd
TBD
Staff Liaison
Bill Hudson
Bill Hudson
Sunday, July 24, 2005, 1:30 pm, Salon A The Four Seasons Hotel, Washington, DC, USA
Chairman Michael Black, P&O Logistics called the meeting to order at 1:30pm. 1. Committee Roster Michael Black, Chairman Brenda Goble, Vice Chairman/Recorder Larry Adams, IARW Board Liaison Patrick Floyd, WFLO Board Liaison Bill Hudson, Staff Liaison Members Present [listed alphabetically without companies] Larry Adams Bruce Jayne Steve Andre Ken Johnson Angelo Antoci Tom Jones Doug Bailey Darryl Kawano Mike Barisse Kevin Kendall Tom Berger Gene Klein Stan Bigford Joe Knausdorf Sandi Bishop Eugene Kogan Jim Black Sal Labruno Michael Black Larry Laurin Mike Bolander Merle Lemmen Sam Bradshaw Randy Lewis Frank Breen Danelle Lindman Jeff Carden Rick Loesel Scott Chapman Elizabeth Lowe Joe Couto Tony Lucarelli Wayne Cullen Chuck McCarthy Brian Davis Mike McClendon Clement Deliso Jr. Ian Milller Clement Deliso Sr. John Miranda John Dittrick Stan Moya Len Ebersberger Charlie Newell Dave Eden Thomas Newell Ken Evans Humphrey Nolan Ernie Ferguson Nicholas Obbink 2006 Trends and Industry Relations Committee Agenda
Page 6 Patrick Floyd John Fountain Anthan Fuller Bonnie Geise Ann Girvin Brenda Goble Alicia Gouveia Patrick Gouveia Joe Grealy Andrew Grienberg Jean Gueguen Steve Hall Harry Halpert Dell Hamilton Dave Hendricks Bill Hendricksen Mike Henningson Sheryl Hershey Dan Hopf John Horvath Joe Howard Bill Hudson Ken Hudson Eben James Andy Janson David Kessler
Patti Paris Nick Peck Jamie Peracchi Vinny Perricone Connie Phipps Frank Plant Barbara Platt Cheri Puvogel Dan Quinn J.R. Randall Larry Rauch Jim Reits Howard Roberts Bob Ross John Ryan Jerome Scherer Donald Schlimme Janice Scott Kitty So Keith Sunderlal James Tateyama Ron Vallort Gerard Von Dohlen Bill Wiley John Williams David Williamson
Resource Guests: James Sumner, USAPEEC Mark Roberti, RFID Journal 2. Committee Statement of Purpose – Michael Black reviewed the Statement of Purpose for the IARW-WFLO Trends and Industry Relations Committee. 3. Minutes of the 2004 Meeting – Minutes were reviewed and approved. 4. 2004 Global Frozen Foods Articles – Michael Black highlighted several interesting points and urged the committee to read the articles thoroughly at their leisure. 5. IARW-QFFI Survey – Bill Hudson urged the members to participate in the Quick Frozen Foods Survey if they had not already done so. 6. Summary of Refrigerated Space and Trends – Michael Black lead a discussion on the increase in private cooler space versus PRW’s. He also highlighted the fact that PRW’s now account for 74.6% of total refrigerated space and 80 % of total freezer space. 7. Global Trade – Impact on Business – Jim Sumner, President, USAPEEC Jim provided the committee with an overview of the USAPEEC organization and the services they offer. The main points of his presentation were: -Update on Avian influenza and BSE -Review of chicken, egg, and turkey market conditions and worldwide competition -Vietnamese Poultry Donation 2006 Trends and Industry Relations Committee Agenda
Page 7 8. Justifying RFID Implementation – Mark Roberti, Editor, RFID Journal -Explanation of RFID, types and usage -Customers using RFID -Uses for RFID -Benefits of Usage 9. Transportation Trends – Michael Black lead a discussion on the transportation trends affecting our industry. -Container shortages -Increased Fuel Cost -Driver Shortages 10. Chapter Reports – Each chapter representative gave a report on specific issues affecting their region such as construction, mergers and acquisitions, and occupancy. 11. Nomination of 2006 Chairman and Vice Chairman/Recorder - Paul Dennis, Atlas Cold Storage as Committee Chairman and Michael Black, P & O Cold Logistics as Vice Chairman/Recorder, were reelected. Meeting adjourned at 4:50 pm. Respectfully submitted, Brenda Goble ICS Logistics Vice Chairman/Recorder
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2005 Global Frozen Foods Almanac Pizza Leads European Tonnage Growth, But Seafood, Meat Bring in More Euros By J.J. PIERCE, QFFI Associate Editor Ice cream sales slump in 2004, due to a cool and rainy summer. Poultry volume unknown except for Germany and Sweden. Bake-off bread products gain substantial market share in Scandinavia. Meet the new challenger for frozen food consumption leadership in Europe: it's Ireland, at 46.6 kilograms per capita, just a little short of Sweden at 46.9 kg but ahead of the United Kingdom and Denmark at 45.5 and 45.2. Irish consumption grew by 14% last year to 186,400 tons, according to Food for Thought (FFT), a Geneva, Switzerland-based food and drink research group. Pizza was the star performer among product categories last year in 22 countries tracked by FFT, with a 9.3% increase to 638,000 tons. This followed a slight decline in 2003. Yet ready meals, which held steady in 2003, showed a 2.7% decline in 2004, to 1,336,400 tons. In euro value terms, however, fish and seafood and convenience meats far outweighed other frozen food categories. These are high-ticket items compared to vegetables or french fries; fish and seafood products average 7.40 euros a kilogram, and convenience meats 6.81, versus 1.41 euros for potato products. Ice cream sales, not included by Quick Frozen Foods International in tonnage totals, as volume is given in liters, was down 2.7% to 3.362 billion liters and 4.4% to 14.824 euros. In Germany, the largest single ice cream market, volume was off 9.1% to 610.4 million liters and 7.6% to 2.788 billion euros. But there was an increase in Spain, 3.6% to 321.8 million liters and 6.7% to 1.527 billion euros. Overall consumption was up two percent to 11,950,300 tons, exclusive of poultry. Among the gainers were frozen potato products at 5.2% to 2,999,000 tons and frozen fruits at 6.5% to 171,800. Yet bakery products were off 0.3% to 1,201,100. Vegetables scored a slight 0.2% gain, to 2,617,700. As in prior years, FFT's figures don't necessarily agree with those from other sources, but the number of other sources is dwindling. Germany, where the Deutsches Tiefkuhlinsitut (dti) was the only national industry group to issue a comprehensive report, showed a total consumption of 2,715,385 tons without poultry (compared to 2,566,000 for FFT) and 3,022,365 with poultry. Sweden reported a growth index rather than actual tonnage, but put last year's per capita consumption at 46.7 kg. Chances are that Germany has overtaken the United Kingdom as the largest frozen food market in Europe if poultry is counted. Number three is still France, at 1,553,900 tons excluding poultry. But number four is Spain at 1,204,900 tons, and since Spain has a considerably smaller population it has a higher per capita consumption - 36 kg versus 25.8. In terms of value, Food for Thought put the market at 51.109 billion euros without ice cream and 65.917 billion euros with it. But besides ice cream, the most valuable segments were fish and seafood at 11.630 billion euros, up 4.8%; and convenience meats at 9.163 billion, up 2.9%. Potato products may remain the largest in tonnage terms, at nearly three million; but in euros they're relatively small potatoes at 4.312 billion even though they scored an impressive 6.6% gain. With only Germany releasing a full report of its own, Food for Thought has put out a Western European Database as well as tables of raw figures for 15 older EU members plus Norway and Switzerland. Among its findings are that Unilever is the market leader in Western Europe at 16.6%, followed by Nestle© at eight percent. That might change if Unilever goes through with its oft-rumored plan to divest its Birds Eye frozen food operation in the UK. The UK, France and Germany combined account for 53% of the Western Europe market, including ice cream, in euro value terms, FFT reported, compared to 52% of the population. The top five, with Spain and Italy added, account for 74% of the frozen food sales and 77% of the population. Euro growth since 1999 has been highest in Germany, with an average of 4.95%, followed by Italy at 3.4% and Spain at 2.98%. But factoring in inflation, FFT says, it's a whole different story: leaders in "real" growth are Norway at 5.2%, Sweden at 4.5% and Austria at 3.7%. 2006 Trends and Industry Relations Committee Agenda
Page 9 There's a similar pattern in category segments, FFT found. In current euros, the leaders since 1999 have been fish at 3.28%, ready meals at 2.88% and vegetables at 2.21%. But in constant euros, the relatively small category of fruit has led at 10.6% a year, followed by fish at 2.9% and potato products at 2.3%. Fish, appearing on both lists as well as leading in total euros, bears closer examination. In Germany, the dti showed a tonnage increase of 9.1% to 262,601, while revising its sub-categories from 2003. The largest increases were in raw fillets and fish dishes, but breaded fish also did well. What didn't do well was fish sticks. Molluscs and shellfish, once a separate category, have been lumped in with "other fish and seafood," but probably account for most of that sub-category's 9.1% growth. FFT puts euro value for German fish and seafood at 2.832 billion, up 5.7%. For other major countries, frozen fish and seafood tonnage and value work out as follows: • Spain: 356,000 tons (largest in EU), up 4.1%; 2.227 billion euros, up 7.2%. • UK: 253,700 tons, up 1.0%; 2.257 billion euros, down 0.1%. • France, 177,600 tons, down 0.1%; 1.553 billion euros, up 0.1%. Much of the growth is in smaller countries. In Sweden, frozen fish sales were up four percent to 371 million euros and 4.6% to 57,700 tons. Greece recorded a 15.7% increase in value to 192.7 million euros and a 12.4% gain in tonnage to 51,700. But in some countries, it was all a matter of price. Ireland showed a 21.2% increase in euro volume to 134.3 million, but tonnage was up only 2.7% to 30,900. Polish frozen fish sales were up 13.8% to 251.4 million euros, but tonnage fell. Italy reported retail frozen fish and seafood tonnage for 2004 at 81,151, up three percent from 2003. But the gain was all in shellfish and molluscs, up 32.1% to 28,569. Raw fish was down sharply at 29,189, and breaded products barely gained at all. Overall retail consumption in Italy, according to the Istituto Italiano Alementi Surgelati, was 486,851 tons, up 2.8%. But the organization put the increase at 3.1%, and the percentage changes it gives for categories and sub-categories don't jibe with figures in its 2003 report. For what they're worth, category figures include: Vegetables, 203,882 (single 119,737, mixed 70,960, prepared 4,845, other 8,340); Potato products, 60,213 (fries 54,455, other 5,758); Fish and seafood, 81,151 (raw 29,189, breaded 23,392, molluscs and shellfish 28,569); Meat, 3,451 (hamburger 2,413, other 1,038); Poultry, 6,568; Bakery products, 7,665; Pizza and snacks, 60,461 (pizza 31,444, mini-pizza 2,869, savory snacks 26,148); Prepared foods, 57,204 (primary, 32,900; secondary, 9,813; side dishes, 14,490); Desserts, 3,178; Fruits, 709; Other, 2,389. Although it doesn't give any breakdown by country, Food for Thought estimates the overall retail frozen food and ice cream market for Western Europe at 43.2 billion euros and the foodservice market at 20.3 billion. In Sweden, the Dijupfrysnings Byran breaks out a third segment, bake-off - bread and related items to be baked in stores, foodservice establishments or at home - which reached 45,360 tons last year compared to 213,973 for retail and a little over 160,000 for foodservice. Bake-off products such as bread and pastries are distributed in frozen form to the industrial foodservice trade and the retail/in-store sector as well as to HoReCa (hotels, restaurants and catering), according to BakeMark, a Swedish pioneer in the category that also markets its products in Norway, Denmark and Finland. Another Swedish company, Vaasan & Vaasan Group, claims to have "a new highly popular home bake-off concept." Home bake-off is said to be extremely successful in Finland, where the "retail bake-off category is the second largest product group within the frozen food department after ice cream." Bake-off crosses the boundary between retail and catering. In Sweden, it dwarfs retail tonnage for frozen bakery products that stay frozen (7,635 tons), and was second last year only to ready meals (55,869 tons). Other retail figures in Sweden included 36,654 tons for poultry, 31,791 for vegetables, 31,754 for potato products, 20,306 for fish, 14,204 for meat, 10,643 for shellfish, 3,177 for fruits and berries (fastest gainer, at 20.8%) and 1,940 for vegetarian products. Foodservice consumption is 30.9% meat, 22.1% potato products, 11.6% poultry, 10% ready dishes, 8.8% vegetables and 8.2% fish.
2006 Trends and Industry Relations Committee Agenda
Page 10 Poland has the largest tonnage in Eastern Europe at 270,700, but the increase was only 0.1% and the per capita rate was a mere 7 kg. Tonnage in the Czech Republic was off 2.3% to 58,400 and 5.7 kg per capita. Hungary had the largest per capita consumption at 12.7 kg, close to that of Portugal and Italy in Western Europe.
1. includes processed poultry parts. *changed from 2003 Source: Deutsches Tiefkuhlinstitut (dti) 2006 Trends and Industry Relations Committee Agenda
Page 11 EUROPEAN TOTAL FROZEN FOOD MARKETS MEASURED BY VOLUME IN 2004* (Ton '000s/million liters) Countries
Frozen Frozen Frozen Frozen Ice Frozen Frozen Frozen Frozen Frozen Grand Pastry Fruit Vegetables Potatoes Cream Soup Convenience Fish Pizza Ready Total+ Products Meat Meals
Per Change Capita Consumption
Austria 14.0 5.6 50.0 37.5 55.0 0.0 30.3 18.3 15.1 12.3 183.1 +3.3% 22.6 kg Belgium/Lux 31.7 0.4 51.0 143.5 83.0 5.6 42.5 21.4 8.1 21.6 325.8 +0.1% 31.6 kg Bulgaria 1.3 1.8 2.0 8.0 7.3 0.0 1.5 0.5 1.4 2.2 18.7 +57.1% 2.5 kg Czech 5.0 1.8 13.0 14.4 61.4 0.5 3.8 12.8 4.4 2.7 58.4 -2.3% 5.7 kg Republic Denmark 52.5 1.5 35.5 35.7 49.8 7.6 17.0 40.0 3.9 50.5 244.2 +0.1% 45.2 kg Finland 51.0 3.7 27.3 19.3 69.1 0.7 8.0 9.9 9.5 11.6 141.0 +8.7% 27.1 kg France 87.4 7.3 541.9 440.8 364.7 4.5 130.1 177.8 38.7 125.4 1,553.9 +1.6% 25.8 kg Germany 515.5 78.8 440.5 384.2 610.4 14.7 244.1 262.6 234.0 392.1 2,566.5 +0.1% 31.2 kg Greece 16.5 1.4 36.4 42.5 92.0 0.0 5.5 51.7 6.5 0.6 161.1 +5.4% 15.0 kg Hungary 1.6 7.9 67.4 24.9 34.0 0.9 8.2 6.9 4.8 4.1 126.7 -7.0% 12.7 kg Ireland 1.7 0.4 31.0 89.9 42.2 0.0 19.2 30.9 8.8 4.5 186.4 +14.0% 46.6 kg Italy 15.1 2.0 390.5 101.8 590.0 41.7 68.4 99.0 52.3 68.3 839.1 +3.0% 14.5 kg Netherlands 15.4 1.1 45.4 128.0 135.7 2.1 98.3 20.5 20.4 31.0 362.2 +3.0% 22.4 kg Norway 46.3 2.8 18.3 24.6 54.9 0.7 52.9 22.0 28.2 8.1 203.9 +5.7% 14.3 kg Poland 12.3 20.3 31.6 75.2 102.0 3.0 37.0 55.1 25.9 10.3 270.7 +0.1% 7.0 kg Portugal 9.7 0.8 23.9 34.4 67.6 0.2 10.8 30.7 5.0 17.7 133.2 +4.7% 13.2 kg Romania 0.0 0.00 9.1 6.7 17.3 0.0 14.7 4.6 0.4 2.2 37.7 -0.1% 1.7 kg Slovakia 0.0 0.5 5.0 14.0 20.0 0.2 1.8 4.0 2.0 2.4 29.9 +3.5% 5.4 kg Spain 92.1 13.0 308.8 132.0 321.8 0.6 81.0 356.0 15.5 205.9 1,204.9 +4.3% 30.0 kg Sweden 43.2 3.9 53.5 87.0 113.7 0.8 76.0 57.7 21.7 73.7 417.5 +5.3% 46.9 kg Switzerland 19.8 5.5 32.4 54.6 54.0 0.4 8.4 20.4 11.5 15.0 168.0 +3.0% 23.0 kg United 169.0 11.3 401.2 1,100.0 415.9 2.0 386.1 253.7 119.9 274.2 2,737.4 +1.3% 45.5 kg Kingdom Total 1,201.1 171.8 2,615.7 2,999.0 3,361.8 86.2 1,345.6 1,556.5 638.0 1,336.4 11,950.3 +2.0% 24.7 kg * All data refer to total final human consumption, including retail, catering/foodservice and artisanal/craft, thus excluding industrial consumption and on-farm consumption. +Totals exclude ice cream; Source: Food for Thought (FFT) S.A., Geneva, Switzerland (www.fft.com). 2006 Trends and Industry Relations Committee Agenda
Page 13 Chicken and Wal-Mart Lead Growth In USA Frozen Food Consumption Retail sales surely up at Wal-Mart supercenters, even if supermarket sales lag. Chicken gaining at both supermarkets and fast food chains as healthier and cheaper alternative to red meat. Frozen food consumption in the United States was up again last year, but instead of fancy entrees, chicken was the hot ticket at both retail and foodservice. Most of the growth on the retail side, moreover, seems to have been at Wal-Mart, Bentonville, Arkansas. With the largest retailer in the US opening more and more supercenters that include grocery sections the size of the average supermarket, Wal-Mart is taking an increasing share of the overall grocery market, and some categories that seem to be losing elsewhere may actually be gaining. Information Resources, Inc. (IRI), Chicago, Illinois, shows a 1.8% increase in dollar volume to $20.8 billion, up only slightly from $20.4 billion in 2003 (excluding ice cream). That is nearly all for supermarkets but includes a few discount chains other than Wal-Mart, which won't allow its sales to be reported. "Top 50" performers, as shown in another IRI report on branded volume, accounted for $11.5 billion in sales, including ice cream. Indeed, two of the top five - private label and Breyers - were ice cream. Two more - private label and Tyson - were chicken. And the remaining one was private label seafood. For all the hoopla about healthy frozen foods in general and the Atkins diet in particular, the leading healthy frozen entree brands all got clobbered. Stouffer's Lean Cuisine sales were down 12%, Weight Watchers' Smart Ones 2.5% and Healthy Choice 12.5%. Atkins' alternatives didn't show up in the IRI "Top 50." Moreover, Stouffer's conventional Family Entrees were up 16,5% and Banquet Select Menu and Value Menu dinners 11.7% and 6.7%. True, Swanson's Hungry Man line took a hit, but most likely it lost to other conventional brands. Constant churning of the Lean Cuisine and Healthy Choice lines, with entrees being introduced and then dropped, can't have helped them. Factoring in Wal-Mart Total grocery sales - food, beverages and non-food consumables like paper goods and laundry products - accounted for $251.8 billion last year, according to ACNielsen. Wal-Mart reports about $66 billion in grocery sales, and if the percentage for frozen is about the same (8.9%), Wal-Mart would add about $5.8 billion to make the retail total $26.6 billion. IRI figures show declines in dollar volume and poundage for some basic categories like vegetables. Frozen juice concentrates were off by double digits, but that's nothing new. Frozen dinners and entrees declined 2.1% in dollar terms to $5.475 billion, but were up 0.3% in poundage to 1.973 billion. That may just reflect a trend towards large family sizes - an interpretation reinforced by the fact that unit sales were down 0.4%. Quick Frozen Foods International has taken IRI figures and added a 26% fudge factor for Wal-Mart. Total retail sales, including convenience stores and membership warehouse clubs other than Wal-Mart's Sam's Club, may be considerably higher. On the other hand, warehouse clubs serve commercial clients such as restaurants as well as ordinary consumers, so much of their volume may be properly attributed to the foodservice segment. The Foodservice Front Foodservice sales rose 4.4% to $440.1 billion in 2004, according to the National Restaurant Association (NRA), and that works out to a dollar volume of about $55 billion for frozen foods based on 2003 estimates by QFFI. But other sources suggest it must actually be higher - and that it has been for some time. Overall wholesale frozen food sales were $67.5 billion in 2002, according to the US Economic Census, and markups and other channels of distribution must augment that considerably, especially after two years. 2006 Trends and Industry Relations Committee Agenda
Page 14 Although frozen foods aren't tracked by any government or trade group, foodservice distributor Sysco reported that 33% of its 2004 sales were in frozens. US Foodservice reported 17%, not including frozen meat; and Performance Food 14%. Based on the 2002 Economic Census, and subtracting retail sales, the largest components of foodservice frozen foods appear to be basic commodities like meat, poultry, fish and seafood, vegetables and french fries, as opposed to elaborate dinners, entrees and bakery products. The NRA put full-service restaurant sales at $157.9 billion for 2004, and fast food sales at $123.9 billion. Fast food outlets depend heavily on frozen items like hamburgers, chicken portions and french fries, while full-service restaurants are more likely to use frozen vegetables. Institutional foodservice operations use a lot of frozen beef, poultry, fruits, vegetables and juice concentrates. Chances are that QFFI is erring on the conservative side, and we have adjusted dollar volume estimates for the past five years. Chickening In Frozen poultry is the fastest-growing retail category, with dollar sales up nine percent to $2.2 billion and poundage up 11.5% to 1.136 billion, according to the IRI report. Bulk packs of chicken parts, both plain and flavored - such as Buffalo wings - are the primary factor. Supermarket chains like Kroger, Cincinnati, Ohio, stock open freezers with huge bags of these, and so does Wal-Mart. If Russia becomes more selfsufficient in chicken, producers will have to look increasingly to the domestic market. That may be one reason the industry is pushing poultry products on the foodservice side, though chicken had already been gaining against beef at fast food restaurants because it has a healthier image. According to the National Chicken Council, 42% of all chicken is sold through foodservice outlets, with McDonald's alone accounting for 60% of that - more than 600 million pounds last year, including more than 65 million pounds of its upscale Chicken Selects. Burger King has come out with Chicken Fries and Popeyes has Naked Strips - seasoned chicken strips without breading. Beefing about Beef Frozen beef isn't doing as well. Sales of hamburgers were up only one percent over the 52 weeks ended last May 31, according to NPD Foodworld, whereas sales of chicken strips and nuggets soared 18%. Chicken now accounts for 30% of the menu at McDonald's, versus 20% in 2002. Meanwhile, beef has taken a big hit on the export market, where the US is laboring under a ban on American imports imposed by Japan at the end of 2003 after a single case of Mad Cow Disease was discovered in the State of Washington, and several other countries followed suit. Bone-in US beef exports plummeted from110,181 tons and $377.1 million in value in 2003 to 2,993 tons and $13.5 million last year. Boneless beef exports fell from 280,644 tons and $953.3 million to 22,096 tons and $70.2 million. Beef liver shipments fell from 90,686 tons and $72.2 million to 55,333 tons and $38 million. At press time, the American Meat Institute was pressing once again to lean on the Japanese government to lift the ban, which helped to swell the overall imbalance of frozen food trade - $11.8 billion imports to only $5.5 billion exports. Shrinking Shrimp? It's too early to gauge the long-term impact of punitive tariffs on imported shrimp, imposed late last year to protect a domestic wild catch and processing industry that has since been clobbered by Hurricane Katrina. Asian countries impacted by the tariffs have been looking to other markets, especially Europe. US imports for 2004 were slightly lower for shell-on shrimp than in 2003, but higher for peeled and prepared product in poundage terms. Prices were lower, but tariffs are bound to increase them - or else discourage imports altogether. Without wild-caught domestic shrimp to take up the slack for cheaper farm-raised shrimp imports that fueled the boom of recent years, that boom could turn into a bust.
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VALUE OF ALL U.S. FROZEN FOODS* 1942 THROUGH 2004 (in US dollars) 1942 162,000,000 1943 178,000,000 1944 197,000,000 1945 257,000,000 1946 324,000,000 1947 245,000,000 1948 292,000,000 1949 375,000,000 1950 500,000,000 1951 700,000,000 1952 875,000,000 1953 1,200,000,000 1954x 1,450,000,000 1955 1,700,000,000 1956 2,106,000,000 1957 2,362,000,000
1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973
2,320,000,000 2,749,000,000 3,037,114,000 3,638,600,000 3,960,000,000 4,381,000,000 5,246,000,000 5,765,000,000 6,250,000,000 6,449,000,000 6,990,000,000 7,641,114,000 7,931,000,000 8,128,000,000 9,230,000,000 12,178,000,000
1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
13,087,444,000 14,329,851,000 16,712,044,000 18,824,605,000 20,442,355,000 23,863,360,000 24,718,829,000 27,604,682,000 30,432,419,000 32,854,387,000 36,203,684,000 37,617,930,000 40,899,955,000 44,057,524,000 47,776,662,000 48,692,787,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
51,961,770,000+ 50,280,543,000 51,808,515,000 53,325,000,000 56,853,000,000+ 59,065,000,000 65,021,000,000 67,550,000,000 69,723,000,000 74,132,000,000 76,700,000,000+ 79,400,000,000+ 82,200,000,000+ 85,000,000,000+ 87,104,000,000
*Includes all sales of frozen fruits, vegetables, concentrates, poultry, meats, seafood and prepared foods at conservative prices or at average prices paid by institutions and reprocessors. As a general rule, retail sales made up 65% of the total figure until about 1970. Subsequent sales have shifted towards foodservice and currently domestic sales of frozen products are approximately 31% retail to 69% institutional by value, and 26% retail and 74% institutional by volume. But much of the volume characterized as institutional actually represents products initially frozen but sold in some other form. Source: QUICK FROZEN FOODS INTERNATIONAL +Corrected from previous Almanacs
2006 Trends and Industry Relations Committee Agenda
Page 17 U.S OUTPUT OF COMMERCIAL FROZEN FOODS 1942-2004 (In millions of pounds) (US-made products and imports reprocessed or sold in this country) YEAR FRUIT VEGS. POULTRY MEATS SEAFOOD PREP. (1) (2) (3) 1942 275 220 70 12 41 5 1943 210 300 85 14 53 7 1944 315 285 105 53 10 1945 445 338 124 71 25 1946 540 475 150 12 74 40 1947 347 346 181 15 74 5 1948 377 446 216 20 89 20 1949 360 566 261 50 97 35 1950 475 590 316 75 133 60 1951 420 790 382 85 177 85 1952 420 895 462 125 207 130 1953 542 1,076 559 170 236 195 1954 523 974 676 200 267 280 1955 660 1,140 817 250 307 340 1956 763 1,650 988 300 310 420 1957 671 1,587 1,195 343 319 500 1958 610 1,702 1,445 300 300 540 1959 618 1,626 1,747 300 478 700 1960 660 1,957 2,333 330 506 826 1961 704 2,116 2,345 360 548 966 1962 668 2,261 2,224 450 596 1,152 1963 620 2,231 2,095 536 676 1,448 1964 775 2,619 2,261 696 785 1,950 1965 641 3,050 2,284 765 940 2,146 1966 756 3,415 2,528 842 971 2,354 1967 740 3,361 2,804 920 990 2,726 1968 812 3,775 2,570 930 1,090 3,203 1969 782 3,845 2,577 952 1,197 3,611 1970 743 4,294 2,645 971 1,265 3,696 1971 759 4,528 2,209 990 1,202 3,837 1972 697 5,044 2,318 1,005 1,335 4,081 1973 764 5,216 2,277 1,190 1,404 4,092 1974 756 5,405 2,342 1,222 1,405 3,981 1975 691 5,293 2,195 1,278 1,429 4,508 1976 694 5,384 2,480 1,321 1,647 4,934 1977 759 6,014 2,353 1,369 1,654 5,219 1978 631 6,278 2,428 1,370 1,740 5,387 1979 665 6,712 2,716 1,380 1,764 5,284 1980 753 5,977 2,841 1,410 1,625 5,201 1981 698 6,729 3,134 1,433 1,677 5,184 1982 818 7,221 2,895 1,623 1,686 5,296
CONC. TOTAL (4) 623 669 768 1,003 1,291 968 1,168 140 1,509 300 1,949 440 2,379 550 2,789 678 3,456 783 3,703 807 4,231 919 5,350 980 5,595 760 5,690 1,096 6,565 1,362 7,974 1,463 8,502 1,762 9,113 1,388 9,084 1,657 10,743 1,807 11,633 1,702 12,568 1,760 13,302 1,679 14,059 1,655 14,619 1,775 15,389 2,010 15,535 2,098 16,578 2,360 17,303 2,307 17,418 2,490 17,885 2,611 19,071 2,786 20,154 2,699 20,533 2,891 21,412 3,256 21,063 3,060 21,915 3,054 22,593
2006 Trends and Industry Relations Committee Agenda
Page 18 YEAR FRUIT VEGS. POULTRY MEATS SEAFOOD PREP. CONC. TOTAL (1) (2) (3) (4) 1983 747 6,829 3,150 1,679 1,855 5,535 3,163 22,958 1984 790 7,317 3,100 1,729 2,026 5,799 3,062 23,823 1985 821 7,931 3,413 1,533 2,085 5,878 2,843 24,504 1986 862 7,758 3,358 1,490 2,185 5,955 3,008 24,616 1987 1,151 8,050 3,770 1,488 2,330 6,136 2,931 25,856 1988 1,077 8,440 3,853 1,400 2,343 6,415 3,044 26,572 1989 1,053 8,900 3,965 1,401 2,434 6,626 3,042 27,420 1990 1,118 9,943 4,406 1,372 2,396 6,879 2,794 28,458 1991 992 9,391 4,522 1,383 2,280 6,905 3,397 28,881 1992 1,008 10,275 4,623 1,425 2,383 6,109+ 3,053 28,878+ 1993 1,050 10,667 4,764 1,360 2,416 6,321 3,162 29,849 1994 1,094 12,025 4,932 1,480 2,355+ 6,738 3,640 32,264+ 1995 1,093 12,395 5,159 1,493 2,418 6,866 3,918 33,522 1996 1,018 11,998 5,090 1,500 2,423 10,813 3,651 36,494 1997 1,078 12,337 5,296 1,512 2,597 11,094 3,556 37,470 1998 1,086 12,905 5,248 1,525 2,682 11,420 3,486 38,354 1999 1,145 12,916 5,219 1,560 2,881 14,720 3,304 41,744 2000 1,319 13,572 5,168 1,610 2,460 16,005 3,147 43,281 2001 1,337 16,998 5,621 2,999 3,319 11,062 3,632 44,608 2002 1,395 17,500 5,748 2,904 3,695 12,285 3,869 47,396 2003 1,145 16,059 2,272 3,199 2,300 15,752 3,326 44,053 2004 1,246 12,822 5.332 3,990 3,616 13,669 3,569 44,244 1. Includes potato products and prepared vegetables. 2. Includes frozen cuts, ground beef, hamburger and other raw items. 3. Does not include potatoes (included in vegetables) or fish sticks, fish portions, scallops and breaded shrimp which are included with seafood. 4. Includes estimates of juice drinks, synthetics and other concentrated liquids, as well as juice concentrates. Includes concentrates for chilled juice and other remanufacture. +Corrected figures.
2006 Trends and Industry Relations Committee Agenda
Page 22 Japanese QFF Consumption Rebounds But Market Value Remains Depressed Domestic production inches up, and vegetable imports recover strongly from 2003 slump. But overall Yen value of domestic and imported products alike was off slightly last year. Frozen food consumption rebounded in Japan last year, thanks largely to a renewed influx of imported vegetables. But the value of the market actually fell slightly, largely because those imported vegetables were so much cheaper. Overall consumption as reported by the Japan Frozen Food Association (JFFA) was 2,287,973 tons, 5.2% ahead of 2003. But overall value, at ¥772.641 billion, didn't quite match ¥772.868 billion for the year before. Still, domestic prices were softer than those for imports: home production was up two percent to 1,526,625 tons, but value off 0.9% to ¥673.032 billion. But there appears to be a substantial hidden market in what the JFFA calls "pre-cooked frozen foods" imports. These are usually cited as "small" in its annual reports, but a survey of member firms in 2003 reported a total of 222,825 tons, up 15.3% from 2002, valued at ¥92.38 billion, up 9.1%. As 2003 was a down year for other imports, there may well have been a further increase last year. Even if there wasn't, the total market should be at least 2.51 million tons and ¥865 billion. There may be a healthy eating trend in prepared foods; fried items showed a 1.2% decline to 377,332 tons, while non-fried were up five percent to 917,437. Vegetable imports were up 12% to 761,348 tons, more than enough to offset a sharp decline in domestic production. French fries and other potato products topped the list of imports, up 12.1% to 268,443 tons, mostly from the United States and Canada. But domestic production, although slight, was up 22.2% for french fries, to 8,375 tons. Domestic hamburger production was off 4.2% to 56,713 tons and 4.8% in value to ¥ 27.972 billion. But with the Mad Cow Disease scare and the ban on imports of US beef, hamburger consumption as a whole may have suffered more greatly. Indeed, McDonald's, the country's top hamburger chain, has had rough going since a case of Mad Cow Disease was discovered in Japan in 2002. McDonald's was apparently sourcing hamburgers locally, but a report on the country's foodservice sector by the US Foreign Agricultural Service (FAS) mentions that the chain does import frozen pork patties as well as french fries. Frozen vegetable imports, unlike domestic production, aren't categorized as retail or institutional. But chances are that most of the market for them is institutional, just as it is for domestic products. Even though most Japanese have refrigerator-freezers at home, they are small units without space for a week's worth of frozen food. But eating out is different. According to the FAS, contract feeders like corporate cafeterias like to keep costs down, and frozen vegetables do just that. Frozen vegetables show up at restaurants as well as fast food chains. A small but growing segment of the foodservice market is "Western restaurants," family dining facilities that offer many Western dishes or specialize in country-specific cuisine such as French, Italian and Mexican. Their menus rely heavily on imported food products to provide authenticity as well as taste. Large family restaurants chains such as Skylark, Royal Host, Denny's, Coco's, Tony Roma's and Sizzler's are major users of imported US foods including such items as frozen potatoes, frozen vegetables and beef. Mexican restaurants are even using frozen guacamole. A number of frozen food plants in Japan have closed down; the count of operating units was 819 in 2004 versus 840 in 2003. Some may have relocated to China, which increased frozen vegetable exports to Japan by 18.7% to 327,655 tons.
2006 Trends and Industry Relations Committee Agenda
Page 23 JAPAN: Frozen Food Production and Consumption in 2003 and 2004 Year
2003 2004 Volume 2004/2003 (tons) Institutional Retail 2003 2004 Value 2004/2003 (¥ B) Institutional Retail
Fishery Farm Livestock Prepared Foods Products Products Products Fried Other Food 84,012 100,099 9,373 382,083 873,983 74,783 92,689 9,463 377,332 917,437 81.8 92.6 101.0 98.8 105.0 65,743 72,105 8,062 284,407 524,582 9,040 20,504 1,401 92,925 392,855 74.500 26.615 5.079 182.324 364.753 64.966 26.299 5.206 168.775 375.763 87.2 98.8 102.5 92.6 103.0 56.246 19.951 4.266 117.802 211.831 8.720 6.348 940 50.973 163.932
Confectionery
Imported Frozen Vegetables
Consumption
47,140 54,921 116.5 44,584 10,337 26.191 32.023 122.3 27.243 4.780
679,795 761,348 112.0 N./A N/A 93.406 99.609 106.6 N/A N/A
2,175,485 2,287,973 105.2 N/A N/A 772.868 772.641 100.0 N/A N/A
SubTotal 1,256,066 1,294,769 103.1 808,989 485,780 547.077 544.538 99.5 329.633 214.905
Japan: Volume & Value of Frozen Food in 2002 and 2003 Volume 2003 Tons Fish 33,489 Lobster/Shrimp 12,349 Crabs 3,839 Squid & Octopus 15,351 Shellfish 14,924 Other Fishery Products 4,060 Taro (Satoimo) 1,654 Carrots 6,164 Cob Corn 4,052 Kernel Corn 8,702 Pumpkin 14,271 French Fried Potatoes 6,855 Other Potato Products 22,239 Spinach 7,342 Other Vegetables 26,608 Fruits 2,212 Poultry 3,665 Meats 5,708 Fried Shrimp/Lobster 7,101 Fried Squid 5,657 Fried Oyster 12,494 Fried Fish 18,462 Other Fried Fishery Items 30,892 Croquettes 153,970 Cutlets 67,421 Other Fried Food, Tempura 86,086 Hamburger 59,195 Meatball 30,897 Shao-mai 35,027 Fried Dumpling stuffed with minced pork (Gyoza) 33,709 Harumaki (Spring Roll) 19,591 Food Category
2004 Tons 24,141 13,609 2,917 12,311 16,482 5,323 1,527 4,199 4,260 8,341 13,685 8,375 19,020 7,096 23,397 2,789 4,126 5,337 6,882 4,650 14,793 17,017 29,599 164,892 66,898 72,601 56,713 29,409 45,044
2004/2003 % 72.1 110.2 76.0 80.2 110.4 131.1 92.3 68.1 105.1 95.9 95.9 122.2 85.5 96.6 87.9 126.1 112.6 93.5 96.9 82.2 118.4 92.2 95.8 107.1 99.2 84.3 95.8 95.2 128.6
Value 2003 ¥M 33,639 11,004 5,480 9,562 11,241 3,574 670 895 979 2,128 3,619 1,281 3,204 2,531 10,512 796 1,436 3,643 10,132 3,373 9,320 10,877 20,123 45,629 36,676 46,194 29,384 14,434 15,761
30,276 21,582
89.8 110.2
14,929 11,960 80.1 9,655 9,944 103.0
2004 ¥M 20,948 12,611 4,395 7,665 13,687 5,660 675 753 927 2,005 3,630 1,559 2,818 2,607 10,047 1,278 1,969 3,237 7,216 2,732 8,738 9,689 19,595 48,140 34,054 38,611 27,972 13,409 19,358
2003/2002 % 62.3 114.6 80.2 80.2 121.8 158.4 100.7 84.1 94.7 94.2 100.3 121.7 88.0 103.0 95.6 160.6 137.1 88.9 71.2 81.0 93.8 89.1 97.4 105.5 92.9 83.6 95.2 92.9 122.8
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Page 24
Food Category Pizza Chinese Buns Rice Products Noodles Bread & Dough Kneaded Fish Products Egg Products Gratin Stew, Soup, Sauce, etc. Other Prepared Foods Prepared Foods Total Confectionery
Volume 2003 Tons 19,199 12,082 137,231 247,150 26,577 8,468 31,295 30,291 14,882 168,389 1,256,066 47,140
2004 Tons 22,229 13,392 146,723 256,075 25,433 9,538 34,626 35,469 14,008 176,920 1,294,769 54,921
2004/2003 % 115.8 110.8 106.9 103.6 95.7 112.6 110.6 117.1 94.1 105.1 103.1 116.5
Value 2003 ¥M 13,941 4,379 49,931 54,833 10,009 3,889 13,991 16,252 7,015 106,350 547,077 26,191
2004 ¥M 14,510 5,194 53,559 56,892 8,179 5,076 14,225 19,028 7,255 109,202 544,538 32,023
2003/2002 % 104.1 118.6 107.3 103.8 81.7 130.5 101.7 117.1 103.4 102.7 99.5 122.3
2006 Trends and Industry Relations Committee Agenda
Page 25
IARW-QFFI Survey Business Up at North American PRWs, With More Offering Added Services By J.J. PIERCE, QFFI Associate Editor
About This Annual Survey This analysis is based on 36 responses to Quick Frozen Foods International’s Annual Global Refrigerated Services Survey of members of the International Association of Refrigerated Warehouses and other coldstore operators in North America. More than 179 facilities are represented. The editors wish to thank IARW President and CEO J. William Hudson and his staff for their cooperation in conducting this poll.
Turnover and inventories both up, with new construction limited mostly to the coldest (-29° C) warehouses. RFID technology making rapid gains, and websites are almost universal. Refrigerated warehouse business is brisk in North America, to judge from the annual QFFI/IARW Global Frozen Foods Refrigerated Services Trends Survey. Turnover (sales volume) was seen trending up at 49.1% of the PRWs surveyed this year, compared to 40.9% in 2005, and in the United States it is even higher. That doesn’t mean turnover was up 49.1%, only that operators running 49.1% of the warehouses in the survey indicated that sales were up. It could have been a small increase in each case, but the fact that more of them reported increases this year than last is significant.
Because some PRW operators run only one warehouse and others may have dozens, the numbers crunched by QFFI are based on their location counts; and in the case of those that operate facilities in more than one region, their responses are allocated among regions accordingly. In both tables and text, percentage figures are based on the total number of warehouses. Turnover is up for 61% of PRWs in the weighted response for the Eastern United States, compared to a mere 14.8% a year ago, and 34.9% for those in the Midwest, up from 13.6%. In the US West, an uptick is reported by operators of 56.9% of the warehouses – up from 46%. Only in Canada is traffic mostly about the same as last year, or the overall North American percentage would be higher. But hardly any operators report declining business.
On the other hand, inventories are also way up – 80% of the weighted sample reports that, and the rate is an astounding 94.9% in the US East. Last year, the overall and US East figures were 12.7% and a tiny 3.7%, respectively. Inventories were up 60.5% in the US Midwest and 72.5% in the US West, versus 2006 Trends and Industry Relations Committee Agenda
Page 26 8.6% and 19.8% a year ago. Hardly any operators report either declining or stable inventories – a far cry from last year. Maybe some of the inventory is goods for processing, or that have just been processed. The percentage of locations offering on-site freezing is 86.5% this year, versus 73.7% last year, and repacking services are offered by 68.2% versus 30.7% in 2005. Some 66.5% rent out space for processing, up from 51.7%, and 65.4% rent office space to customers. For some reason, a lot fewer locations in the US West offer repacking, but a lot more are doing so in the East and Midwest. It is hardly uncommon for PRW operators to dedicate or even to build facilities for processors – to produce and package their products as well as storing and shipping them. Most often, this will be for commodities like meat, poultry and seafood, but a few mention bakery products and, beyond the survey, there are other examples of further processed products. But dedicated processing and repacking may be related to other developments. Radio Frequency Identification (RFID) technology, barely a blip on the radar screen a year ago, is now widely used, being available at 41.9% of warehouses represented by the survey. A number of operators that don’t already have RFID plan to install it, and that may be part of the reason 65.4% plan to upgrade computer systems. One reason for that is that Wal-Mart, the largest retailer in the country, has mandated RFID coding for everything sold in its stores, including frozen food. Some 67% reported having bar coding technology, but that is probably far short of reality, because regional percentages in the US were a lot higher last year, and it hardly seems likely that, once having em-braced bar coding technology, any business would abandon it. Most likely the discrepancy reflects a change in the sample base. More warehouses are retaining consultants these days. Overall rate for North America is 54.7%, versus 33.4% a year ago. But the reasons for hiring consultants are quite varied, ranging from safety and security to information technology. Some need help with warehouse management systems, telecommunications and marketing, or even refrigeration technology.
United States Cold Storage Expands Tulare Warehouse United States Cold Storage of California has completed its latest expansion in Tulare. The new building, known as Tulare North, houses a dry and refrigerated storage facility totaling approximately 140,948 square feet. The refrigerated space, designed to maintain temperatures as low as -20°F, provides 2,705,562 cubic feet of storage capacity. The building is fully racked with capacity for 9,592 pallet positions in the freezer storage. It is served by a 50 foot wide refrigerated truck dock providing 12 loading doors, and a 45 foot wide refrigerated rail dock having four rail loading doors. A USDA inspection room is on the premises, along with offices and other ancillary spaces. Overall facilities now consist of approximately 10 million cubic feet of refrigerated space and 3 million cubic feet of dry space. The Tulare distribution program covers most western states with regularly scheduled delivery service.
Ronald P. Vallort, president of Ron Vallort and Associates, Oak Brook, Illinois, sees the most important trends as being the “maximizing of capacity in existing facilities, as very few new facilities are being constructed,” and the trend towards offering “more and more value-added services” such as freezing, repacking and renting out space. Spinning More Websites With 93.3% of warehouses being part of companies with websites, web-based e-mail and FTP systems may be replacing other electronic communications like EDI and WINS, which are down from 75.6% to 67.6%. Systems for direct contact with customers are up from 44.3% to 57%, and direct contact with suppliers from 40% to 55.3%. Yet fax machines are still used by 55.3%.
2006 Trends and Industry Relations Committee Agenda
Page 27
“Sales exposure” is a common justification for websites, but they are also used for customer support, as with order entry global positioning satellite (GPS) tracking of shipments. Improvements to such programs must have a lot to do with the fact that 65.4% of the weighted sample plans upgrades in computer systems this year, with 38% seeking new software and 31.2% new hardware – and 43.5% are adding 2006 Trends and Industry Relations Committee Agenda
Page 28 terminals. Owned mainframes account for 73.7% of all systems, followed by mini-computers at 32.4% and networked microcomputers at 22.9% New construction plans are relatively weak except in the -29° C warehouses, with 38% of the weighted sample planning units in that temperature category, and 19.6% in -18° C units, and only 4.5% in 0° coldstores – compared to 36.5%, 37.8% and 20.7% a year ago. Additions to -29° C warehouses are planned by 26.3% of the weighted sample – up from 20.7%, but only 4.5% in the other two categories, compared to 20.7% each in 2005. Columbia Colstor Expanding Near Site of First Warehouse It began in Quincy, Washington, with Columbia Colstor’s first refrigerated warehouse in 1983. Now the company, since headquartered in Moses Lake, is returning to Quincy with a major expansion. Ground was broken Feb. 20 for the Columbia Colstor International Logistics facility on on Industrial Parkway near the Port of Quincy’s intermodal industrial park. Plans are to complete the project this fall. “We hope to have this up and going for business by the first week of September,” said Don McGraw, president, of the new facility, which will encompass 218,000 square feet, including a freezer that will occupy 151,000 square feet, a refrigerated rail dock at 33,000 square feet, and a 25,000-square-foot dock. The facility will give Columbia Colstor long-needed additional space in the Columbia River Basin and will be a local point to focus on export business. “We’re also going to try to attract other business from other areas coming through this area for export and then in the future, import business coming back into the country,” McGraw said, adding the facility will also eventually serve as an intermodal site for the loading of containers onto rail cars to ship through the ports of Seattle and Tacoma.
Screw compressor purchasing plans are, at 76.5%, up from 63.8% last year. Although plans to buy ammonia compressors are off from 68.4% to 56.9%, this may be only because some harried executives didn’t check off the box because they thought it was too obvious that their equipment runs on ammonia. But there is apparently little interest in reciprocating or packaged compressors. Plans for purchasing condensers (52.5%), coils (29.1%) and fans or blowers (38.5%) are in the same ballpark as a year ago. Vallort surmises that screw compressors are being purchased as replacement units, or for internal expansion at established warehouses. Basic materials handling equipment purchasing plans are strong. Operators representing 66.5% of all locations plan to buy standard racks this year, compared to 70.6% last year. Gravity racks figure at 9.5%, up from 2.8%. Pallets are being sought by 88.1% versus 51.4%. Lift trucks are being sought by 76.5%, compared to lift truck batteries by 72.1%, and rechargers by 67.6%. Some 70.9% of the weighted sample is looking for automatic doors, up a bit from a year ago, but interest in plastic strip curtains is way up – from 14.6% to 44.1%. There is more interest in slip sheets at 27.4%, and metal dock boards at 30.7%,. Insulation seems to be the least of operators’ concerns, but this may mean only that they were passing the category over as they hurriedly filled out the forms. Be that as it may, only 18.4% of the sample overall expressed interest in polyurethane panels, compared to 45.8% a year ago, and the response was minuscule for styrene and glass fiber in any form. That makes sense if fewer warehouses are being built, Vallort opined. Regional Factors There are regional factors, as always. Inventories of raw frozen citrus juices are off at one PRW operation in the Southeast, but seafood more than makes up for that. Beef, pork and seafood are gaining on both stocks and sales for another Southeastern operator. Frozen meats are getting the most increased business at a Northeastern warehouse.
Poultry sales are up at one public refrigerated warehouse in the South, but another nearby reports poultry turnover decreasing. Fruit, vegetables and meat are all doing well for another operator in the Southeast.
2006 Trends and Industry Relations Committee Agenda
Page 29 At one company in the upper Midwest, pork and pasta stocks are up, while turnover is off in beef but up in pork. Finished retail goods are up in both inventory and turnover at another, while bulk raw vegetable inventories are down. Yet another reports an increase in baked goods inventories. Out West, one operator reports seafood inventories and turnover (in retail packs) up, dairy inventories down. But for another in the same area, fruits and vegetables are the hottest things going. Seafood and poultry are up in stocks at one company, frozen bread at another. And foodservice products are the big thing at yet another.
PRW operators in Canada didn’t single out any product trends in turnover or inventory, but one in the Caribbean mentioned that meat inventories were down, whereas those for poultry and fish were up – and turnover was up in chicken.
2006 Trends and Industry Relations Committee Agenda
Page 30
Quick Frozen Foods International hopes to have more data in its July issue on trends in Europe and Asia. Returns thus far are too few and too incomplete for meaningful analysis. From scattered forms already in hand, it appears that new construction is going at an even slower pace in Europe than in the United States and Canada, especially in -29° C facilities, and that inventory and turnover are more commonly staying the same or even declining.
2006 Trends and Industry Relations Committee Agenda
Page 31 Summary of Refrigerated Space and Trends
NEWS RELEASE
Refrigerated Warehouse Space Continues Upward Trend in U.S. and Much of the World Alexandria, VA, July 2006 -- The USDA Agricultural Statistics Board’s recently published results of the agency’s 44th biennial Capacity of Refrigerated Warehouses survey. The 2006 Capacity of Refrigerated Warehouses report shows that the public refrigerated warehouse (PRW) industry continues to dominate the overall cold storage industry in the U.S. According to USDA, PRWs accounted for 75.9% of general storage space in 2005, up from 74.5% in 2003. Conversely, private and semi-private space declined from 25.4% to 24.1%. During a time when PRW space was growing from 2.357 billion cubic feet (66.8 million cubic meters) to 2.436 billion cubic feet (69 million cubic meters), private and semi-private space declined from 802.4 million cubic feet (23 million cubic meters) to 771.7 million cubic feet (22 million cubic meters). PRW capacity first exceeded private and semi-private capacity in 1991 and, with minor exceptions, the gap between public and private space has grown steadily since that time. Today, PRWs operate nearly 1.7 billion cubic feet (48 million cubic meters) more than their private counterparts. Outside of the U.S., IARW monitors public refrigerated capacity in 26 nations and regions. In those places, capacity increased in nine places while it remained flat in fourteen nations. (Data in three other areas was insufficient to draw any conclusions.) Areas showing the greatest increases were the Middle East (650%), Netherlands (650%), and Finland (350%). The full USDA report can be obtained on the web at http://usda.mannlib.cornell.edu/reports/nassr/other/pcs-bbc/rfwh0106.pdf. Note that the USDA reports capacity only in cubic feet of refrigerated space. It does not report volume or turns. Earlier logistics practices were largely focused on the use of PRWs for longer-term storage. Today’s dynamic distribution logistics systems rely on information technology, cross-docking and other methods to achieve higher velocity and reduced storage times. As a result, growth in the use of PRW space is even greater than it appears based on straightforward review of capacities.
2006 Trends and Industry Relations Committee Agenda
Page 32
Comparison of U.S. Public and Private Refrigerated Warehouse Growth Gross Capacity Growth 1955-2005 (Million Cubic Feet)
3,000
2,500
2,000
Public Private
1,500
1,000
500
0 '55 '57 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
Number of Facilities Growth 1955-2005
1000 900 800
Public Private
700 600 500 '55 '57 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
2006 Trends and Industry Relations Committee Agenda
Page 33
Public Refrigerated Warehouse Data
Year 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Number of Facilities 713 767 792 820 800 808 817 792 771 714 701 672 668 654 698 692 723 724 773 781 745 807 798 815 827 821
Gross Space (Million Cubic Feet) 464 503 528 554 596 646 701 730 740 799 846 861 911 956 1,028 1,110 1,286 1,392 1,573 1,678 1,742 2,044 2,147 2,252 2,357 2,436
Average Gross Size (Thousand Cubic Feet) 651 656 667 676 745 799 858 922 960 1,119 1,207 1,281 1,364 1,462 1,473 1,605 1,779 1,923 2,035 2,149 2,338 2,533 2,690 2,763 2,850 2,970
Freezer Space % of Total 61% 66% 66% 69% 71% 72% 74% 76% 77% 79% 80% 79% 82% 82% 81% 80% 80% 81% 82% 82% 83% 83% 83% 82% 84% 84%
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Private and Semi-Private Refrigerated Warehouse Data
Year 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Number of Facilities 533 554 586 676 702 773 760 757 781 843 856 818 886 932 914 901 887 824 770 749 688 657 673 675 655 681
Gross Space (Million Cubic Feet) 120 143 156 193 219 254 276 296 347 399 420 438 531 540 573 589 676 603 624 659 675 683 757 789 802 772
Average Gross Size (Thousand Cubic Feet) 225 258 266 286 312 329 363 391 444 473 491 535 599 579 627 654 762 732 810 880 981 1,040 1,125 1,169 1,224 1,130
Freezer Space % of Total 60% 54% 57% 59% 63% 61% 64% 67% 67% 66% 65% 64% 63% 64% 62% 64% 59% 61% 62% 61% 63% 59% 61% 61% 61% 57%
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Change in Gross Public Capacity by U.S. State, 2003-2005*
State Alabama Arkansas California Colorado Delaware Florida Georgia Idaho Illinois Iowa Maryland Massachusetts Michigan Minnesota Missouri New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania South Carolina Tennessee Texas Utah Virginia Washington Wisconsin Other States U.S. Total
2003 1,000 cu. ft. 27,532 55,044 309,960 15,276 12,156 108,730 123,623 33,737 92,732 68,865 21,680 64,578 66,888 48,850 100,511 73,258 59,599 53,096 61,789 10,925 69,001 133,637 22,848 24,803 139,625 25,792 43,446 145,221 127,399 202,135 2,342,736
2005 1,000 cu. ft. 26,855 72,663 274,173 16,220 15,356 115,302 113,674 36,639 125,086 78,344 20,604 70,719 67,005 51,789 106,187 73,252 59,089 47,568 55,812 11,228 73,101 133,029 20,463 25,783 129,610 20,954 41,168 146,390 136,006 271,703 2,435,773
Gain/Loss 1,000 cu. ft. Percent (677) (3) 17,619 32 (35,787) (12) 944 6 3,200 26 6,572 6 (9,949) (8) 2,902 9 32,354 35 9,479 14 (1,076) (5) 6,141 10 117 0 2,939 6 5,676 6 (6) (0) (510) (1) (5,528) (10) (5,977) (10) 303 3 4,100 6 (608) (0) (2,385) (10) 980 4 (10,015) (7) (4,838) (19) (2,278) (5) 1,169 1 8,607 7 93,037
* Excludes states listed in “Other States” for either 2003 or 2005.
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Page 36 IARW supplements the USDA data with the following international data taken from a variety of industry sources.
Refrigerated Capacity by Country
Country Australia Austria Belgium Brazil Canada Denmark Eastern Europe Finland France Germany Great Britain Greece India Ireland Italy Japan Middle East Netherlands New Zealand Norway Poland Portugal Spain Sweden Switzerland Turkey USA
2004 Million Cubic Million Cubic Meters Feet 5.24 185.00 0.65 22.00 1.60 56.50 2.20 77.70 6.34 223.70 1.80 63.60 1.00 35.30 0.40 14.10 5.40 190.70 6.50 229.50 4.40 155.40 0.90 31.80 * * 1.30 45.90 3.00 105.90 27.46 969.60 0.40 14.10 1.20 36.00 * * 1.50 53.00 0.30 10.60 0.60 21.20 2.50 88.30 0.90 31.80 0.50 17.70 0.30 10.60 66.80 2,357.10
2006 Million Cubic Million Cubic Meters Feet 6.00 211.88 0.80 22.65 1.60 56.50 2.70 95.35 6.79 239.90 1.80 63.60 1.00 35.30 1.80 50.97 5.40 190.70 8.70 246.36 4.40 155.40 0.90 31.80 * * 1.30 45.90 3.00 105.90 27.69 977.84 3.00 105.90 9.00 254.85 * * 1.50 53.00 0.30 10.60 0.60 21.20 2.90 82.12 0.90 31.80 0.50 17.70 0.30 10.60 68.98 2,435.80
* Figures not available at time of printing
For more PRW industry information, visit the “About Us” section of the IARW website at www.iarw.org.
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Logistics 2006—The World Turned Upside Down Resource Guest: Ben Gordon, BG Strategic Advisors
Benjamin Gordon is Managing Director of BG Strategic Advisors, a leading firm providing supply chain companies with CEO-level advisory services in the areas of strategy, technology and finance. BG Strategic Advisors is particularly sought after for M&A advisory services in the supply chain sector. Clients include top-tier companies from Wall Street, private equity, and the logistics industry. In the past year, BG Strategic Advisors worked on 12 logistics deals totaling over $2.1 billion of transaction value. Benjamin is responsible for leading key client engagements and setting the direction of the firm. Prior to BG Strategic Advisors, Benjamin founded 3PLex, the Internet solution enabling third-party logistics companies to automate their business. Benjamin raised $28 million from blue-chip investors including Morgan Stanley, Goldman Sachs, BancBoston Ventures, CNF, and Ionian. 3PLex has since been sold to Maersk. Prior to 3PLex, Benjamin led strategy projects in transportation and technology at Mercer Management Consulting, where he developed one of the first e-marketplace strategies for a logistics client. Previously, Benjamin worked with the CEO of Automotive Management, Inc. (AMI) to grow its logistics operations. Benjamin also worked as a venture capitalist with the BRM Group, where he assessed business-to-business e-commerce companies. Benjamin is a recognized expert on logistics, and has been quoted extensively by national media including The New York Times, Business Week, ABC, Lehrer New Hour, Journal of Commerce, Transport Topics, Supply Chain Management Quarterly, and Traffic World. Benjamin has been a featured speaker at the Council of Logistics Management, NASSTRAC, the Transportation Intermediaries Association, AMB, eyefortransport, and other industry events. Benjamin has served for three years as Chairman of the 3PL Summit, the largest annual conference focused on CEOs and leaders of the logistics industry. Benjamin is also an Advisory Board member of the Logistics Quarterly, a Board member of Nations Express, and an advisor to dozens of CEOs in the logistics sector. Benjamin is an active civic leader who is committed to giving back to the community. As founder and chairman of GesherCity, he has boosted young adult volunteerism in the greater Boston area. In seven years, the organization has grown to over 20,000 members in seven locations. Benjamin also serves on the Board of the JCCA, the Board of Governors of the Middle East Forum, and various other community organizations. Benjamin received a Masters in Business Administration from Harvard Business School and a Bachelor of Arts degree from Yale College.
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Customer Perspective on the Dynamic Trends Facing the PRW Industry Resource Guest: Gary A. MacNew, Rich Products Corporation Gary MacNew is Vice President, Customer Service & Logistics at Rich Products Corporation in Buffalo, New York. Rich Products is a privately owned manufacturer of frozen non-dairy toppings and icings and breads, rolls, cakes, and other bakery products. He is a career logistician, and has worked for KimberlyClark, Church & Dwight, American Home Products, and Reckitt & Colman, in transportation, warehousing, planning, forecasting, and customer service. He led a major Supply Chain Transformation initiative for Reckitt & Colman in Canada and worked in the development of customer satisfaction, demand planning and perfect order processes for Reckitt & Colman globally. Most recently, his work at Rich Products has included several SAP implementations, introduction of a Transportation Management System, construction of two frozen distribution centers, integration of two business units and a Supply Chain transformation initiative. He is a 1976 graduate (BSBA) of Bucknell University in Lewisburg, Pennsylvania and is a 1986 graduate (MBA) of Rutgers University in Newark, New Jersey. He serves on the board as Treasurer of the Canadian American Border Trade Alliance.
Rich Products Corporation Company Profile Rich Products Corporation is a privately owned $2.0 billion manufacturer of frozen food with a diversified portfolio. The company was founded by Robert Rich, Sr. with the introduction of frozen non-dairy toppings and icings. The company is headquartered in Buffalo, New York and has manufacturing operations in New York, Tennessee, California, Georgia, Virginia, Illinois, and California. The company has international operations in Canada, Brazil, South Africa, China, Thailand, United Kingdom, Italy, and India. The company’s main sales channels are to Food Service operators, and to consumers through Retail grocers and Club Stores. More information is available at the company’s website – www.rich.com.
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Critical Trends – Regional Reports This is an open discussion of issues facing this industry. Chapter officers have been asked to survey selected chapter members in order to offer a regional perspective; results are below. During this discussion, various topics may be assigned to other committees for their consideration during their upcoming meetings.
2006 Trends Survey Results 1. Construction Trends (a) Please describe any recent or expected PRW construction, which you may know about (company, location, size). a. Iowa Cold Storage – Altoona, Iowa completed 100,000 sf freezer expansion in June 2006. Mitland – Ottumwa, Iowa in progress – expanding freezer facility – 40,000 sf b. The following buildings were opened in the year 2005-6 Preferred Warehouse – Newark, NJ Newark Refrigerated Warehouse – Newark, NJ Mullica Cold Storage – southern NJ Burris – Maryland U.S. Cold Storage – Pennsylvania Conestoga – Montreal Millard – Toronto
Estimate 30,000 pallet positions 9,200 pallet positions 5,000 pallet positions 10,000 pallet positions 15,000 pallet positions 5,000 pallet positions 10,000 pallet positions
c. Mallard expansion, Toronto; Conestoga expansion, Toronto; Westco, Calgary (150K sf); Liberty, Calgary; Versacold, Edmonton. d. None to speak of in Northern CA e. In the upcoming year, Preferred Freezers expects to build in Philadelphia and Baltimore. U.S. Cold Storage is expanding their building in Bethlehem. Versacold is building a 20,000 pallet position freezer to service Wakefern in Scranton but closing 8 million cubic feet in Secaucus. f. Flint River is building a new facility in Savannah, GA scheduled to open July ’06. g. Interstate Warehousing expanded its Newport News, VA facility. Carolina Cold Storage is expanding its Tar Heel, NC facility. Flint River is opening a new facility in Savannah, GA. h. Eskimo Cold Storage; Gainesville, Georgia + 15,000 pallets i. SCS, Port of Seattle, 304, 000 sq. ft. (b) What is the current cost of construction in your region or area (per sq. ft.) including racking and refrigeration but excluding land? a. b. c. d. e. f. g. h.
$85.00 $110 to $200 per square foot depending on location, land conditions, etc. $110 sq. ft $91.04 sq. ft. $110 sq. ft. $110 sq. ft. $85 sq. ft. $110 sq. ft. 2006 Trends and Industry Relations Committee Agenda
Page 42 2. Consolidation Trends If there is PRW consolidation (mergers/acquisitions) in your area, how is it affecting the industry? a. Trends seem to point construction in rural areas away from unions in urban areas to low ball existing warehouses and acquire their customers with lower storage costs creating unfair playing field. b. Versacold purchased P&O, which affected several facilities; Mullica Hills purchased T&T in South Jerse c. The recent purchase of P&O by Versacold has not yet had an effect. d. N/a Georgia 3. Labor Trends What are the prevailing labor trends in your region (labor pool, contact negotiations, strikes, emerging issues, etc.)? a. Shortage of skilled warehouse labor – forklift operators, checkers, etc. will need to increase wages by at least 10% b. Union warehouses are closing and non-union warehouses opening so the work force is becoming increasingly non-union. Wage rates are increasing reflecting strong labor demand and somewhat limited supply. The supply of CDL drivers and operating engineers is extremely poor. Many firms are tending to contract forklift maintenance to dealers and increasing amounts of refrigeration work is being done by contractors or dealers. c. Labor pool is tightening up. d. Since the beginning of 2005 up through today, it has been difficult finding reliable and qualified employees. e. Difficult to find quality labor. f. Finding quality labor continues to be a challenge. g. Georgia – Spanish labor pool is getting soft. Big concern on laws affecting immigration. W/o labor pool is drying up. h. Union contract renewals with labor asking for higher wages and extremely higher contributions for pensions due to mismanagement of pension fund investments. i. Some cold storages in the Puget Sound have or are renegotiating their labor contracts. Due to Boeing’s generosity, we are expected to follow suit with wages and benefits. No contracts have been signed as of this date. 4. Food Industry/Economic Trends (a) Comment on general food industry conditions in your area and how they affect the PRW industry. a. There have been unusual meat cycles this past year, especially in the pork industry. Very small harvest numbers in most Midwestern packing plants in 2006. b. Eastern Pennsylvania seems to be the focus of a great deal of development on the one hand; on the other hand warehousing and trucking are looking back towards the major cities because of the double digit inflation in transportation costs. Imports are growing at 10-15 percent a year substituting for domestic production. c. Concerns over CDN $ as food processing companies are losing production to US. Finding it harder to add value as labour rates increase. d. Growth has been slow but steady to the point where some warehouses are reaching capacity before the summer season begins. e. High retail food costs at grocery stores. Curtails extra buying by consumers thus reducing the need to have reserves in storage. Some large retail grocers also downsizing operations. More just in time inventory management and direct ships. 2006 Trends and Industry Relations Committee Agenda
Page 43 f. A.I. slowed throughout earlier in the year but the markets are starting to pick-up. g. High level of throughput. (b) Comment on PRW occupancy in your area (and any important issues affecting occupancy). a. Most freezers have less than 85% occupancy. b. Occupancies are down reflecting the rather heavy building activity. c. Over-occupancy is not an issue in Trenton. Clients are building their own DCs and have a strong perception that they need to be in the GTA. d. Most warehouses will fill before summer’s end. The holidays will be a challenge due to the lack of available space. e. Just ½ of 2006 occupancy was very high. Some relief in June with volumes expected to increase in September for holiday related items. f. Occupancy related to poultry products was high earlier in the year due to A.I. g. Occupancy down from 2005 by approximately 20-25% due to competition, cost of energy, cost of labor and benefits, just in time inventory, direct ships. (c) What is the outlook for PRWs in your area over the next 6-12 months? a. Any available space should fill up by early-mid fall, due to an estimated increase in hog numbers. b. If the building activity doesn’t continue at this pace, there should be a slight improvement. c. The outlook is promising, however, competitors continue to add space making the focus on service and value added activities. d. Down 50%. e. No change expected. (d) What is the outlook for PRWs in your area over the next 2-3 years? a. b. c. d.
Down 25-50% If building activity doesn’t continue, demand will absorb some surplus capacity. A few may expand, the majority will remain status quo. Volumes expected to increase in the next 2-3 years due to new steamship lines calling the Port of Jacksonville.
5. Customer Practice Trends (a) Describe any emerging customer practices with respect to product movement. a. The requirement to use heat-treated pallets for exports to most countries. b. Homeland Security provisions particularly in the ports are becoming oppressive slowing down the movement of freight and making it more expensive and uncertain. c. Faster turns and less inventory on hand. Shipments from production plant direct to customers with a min. order size. d. More tracking of KP1’s – truck appointments, turns at both shipping docks and consignee docks. More manufacturers date-code tracking. e. Increased amount of cross docks to minimize storage costs. f. Increased demand for physical inventories at our cost. (b) Describe any emerging customer practices with respect to information technology or EDI.
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Page 44 a. Several customers are requiring EDI capability in order to do business with them; PRW pays for upgrade. b. Customers want every form of information technology available – at no cost. c. Global Systems (SAP); Outsourcing facets of business such as payables. d. More use of SAP systems. e. Increased request for customers to manage inventories, orders, etc via web access system. f. Customers are more interested in incorporating and utilizing technology in the supply chain. g. More customers leaning towards EDI. h. Increased request for on line viewing of inventory and stock status; increased demand for EDI even though they may not use it. (c) Are there any other emerging customer practices likely to impact the PRW industry? a. Customers are building fewer freezers but continue to build coolers. The cost of building freezers has become outrageous. b. Customization for the end user (restacking, labeling, ASNs, RFD, ER.) c. RFID Requirements for specific customers. (d) Is there much customer consolidation in your region and if so, how is it affecting the PRW industry in your region? a. Not much lately. b. Supervalue bought Allisons; AWI bought White Rose. c. Certain customers have consolidated into fewer warehouses creating higher occupancy levels early in the year. d. Not aware of any customer consolidation in our area. e. Some consolidation of seafood companies; doesn’t seem to affect the overall availability of product. 6. Transportation Trends What developments or problems are you seeing in your area with respect to transportation? (trucking, hours of service, railroads, shipping, other) a. There is real concern from customers as to having enough trucking capacity to handle peak needs this coming fall. They are looking at moving their product to different locations to offset the lack of available trucks to handle the outbound needs. b. Trucking costs are escalating at double-digit rates and driver shortages are getting worse. Truckers do whatever they want; they do or don’t deliver or come in on time; some destinations are almost impossible to give quotes on. Generally trucking service quality is going down and costs up. c. Problems – rail yards too far, higher fuel costs developments – trucking companies adding more services (restacking, cross docking, storage, consolidation) d. Carriers are becoming more difficult to find for 2nd and 3rd quarters of the year. e. Trucks are still tight, rates are continually increasing as fuel rises. f. The truck driver shortage has had a negative affect on the availability of trucks. g. Customers could possibly take more advantage of warehouses with rail sidings, possibly cutting their freight costs. h. Terrible rail service, hours of service is making us better planners, high fuel surcharge rates.
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7. Other What other trends or developments are you seeing in your area (new products, new processes, building codes, etc.)? a. In certain areas in the northeast ammonia is taking an increasing beating as a refrigerant particularly large charges. Some states are all looking at various forms of chemical regulations. Obviously, energy costs are out of control. b. HACCP becoming standard requirement; refrigerated docks. c. Nothing at this time.
Other Business Nomination of 2007 Chair and Vice Chair/Recorder
2006 Trends and Industry Relations Committee Agenda
Paul Dennis, Chairman Brenda Goble, Vice Chairman/Recorder Mark Blanchard, IARW Board Liaison Pat Floyd, WFLO Board Liaison Bill Hudson, Staff Liaison 2006 Committee Roster .............................................................................................................................. 2 Committee Statement of Purpose ............................................................................................................... 4 Review IARW and WFLO Strategic Plans Minutes of the 2005 Committee Meeting .................................................................................................... 5 2005 Global Frozen Foods Almanac .......................................................................................................... 8 IARW-QFFI Survey ................................................................................................................................... 25 Summary of Refrigerated Space and Trends............................................................................................ 31 Logistics 2006—The World Turned Upside Down .................................................................................... 37 Resource Guest: Ben Gordon, BG Strategic Advisors Customer Perspective on the Dynamic Trends Facing the PRW Industry................................................ 40 Resource Guest: Gary MacNew, VP of Customer Service and Logistics, Rich Products Corporation Critical Trends—Regional Reports ........................................................................................................... 41 Other Business Nomination of 2007 Chair and Vice Chair/Recorder
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2006 Trends and Industry Relations Committee Roster Larry Adams, Burris Refrigerated Logistics, Inc. Doug Bailey, SSA Global Mike Barisse, Merchants Terminal Corporation Tom Berger, Daifuku Stan Bigford, Trenton Cold Storage, Inc. Sandi Bishop, Sodus Cold Storage Company, Inc. James Black, Gleeson Constructors, L.L.C. John Blair, Trenton Cold Storage, Inc. Mark Blanchard, NOCS Hank Bonar, Bonar Engineering and Construction Terry Brown, ICS Logistics, Inc. Bob Burris, Burris Logistics Ben Campbell, ICS Logistics Jeff Carden, Merchants Terminal Corporation Gino Carlone, Atlas Cold Storage Milton Chrissovergis, The Stellar Group Joe Couto, Headwater Technology Solutions Brian Davis, Imperial Freezer Services LLC Raymond de Graaf, Integrated Global Low Temp Operations Phils., Inc. Paul Dennis, Atlas Cold Storage David Dickson, Atlas Cold Storage John Dittrick, Inland Cold Storage Tim Dorn, Atlas Cold Storage Len Ebersberger, Refrigerated Warehouse Consultants, Inc. Ernie Ferguson, Merchants Terminal Corporation Brad Flinn, Bellingham Cold Storage Co. Patrick Floyd, Total Logistic Control, LLC Anthan Fuller, Loop Cold Storage Co. Stephen Galati, Mattioni, Ltd Bonnie Geise, SCS Refrigerated Services, LLC Brenda Goble, Industrial Cold Storage Inc. Ben Gordon, BG Strategic Advisors Drew Greenberg, Newport-St. Paul Cold Storage Tim Groff, Atlas Cold Storage Rolfe Haas, NAI James E. Hanson Harry Halpert, Merchants Terminal Corporation Jeff Hartman, Atlas Cold Storage Bill Hendricksen, Inland Cold Storage, Inc. Mike Henningsen, Henningsen Cold Storage Co. John Horvath, Horvath & Lieber PC Joe Howard, Lockton Companies Bill Hudson, Association Staff Ken Hudson, Inland Cold Storage Pat Hughes, RCS Chester, Inc. Chris Issakides, Energy Wise Lighting, Inc. Mike Jahncke, Virginia Polytechnic Institute Eben James, Trenton Cold Storage Limited Andy Janson, Hanson Logistics
Bruce Jayne, Hall's Warehouse Corporation Tom Jones, Refrigerated & Frozen Foods Magazine Gary Jones, Frozen Assets Cold Storage, LLC Darryl Kawano, Unicold Corporation Gene Klein, SYSCO Dan Kline, Columbia Colstor, Inc. Brian Kyle, Burris Logistics John Langeveld, Landstar Logistics Larry Laurin, Conestoga Cold Storage Merle Lemmen, Atlas Cold Storage Pete Lepschat, Henningsen Cold Storage Co. Robb Lockie, Spire Group Limited Elizabeth Lowe, Parke Industries Tony Lucarelli, Henningsen Cold Storage Co. Anita Lydiard, SCS Refrigerated Services Archie MacDonald, Spire Group Limited Dave MacLean, Atlas Cold Storage Ian MacNair, Spire Group Limited Gary MacNew, Rich Products Corporation Kevin Margeson, Commercial Warehousing, Inc. Maves, Maves International Software Chuck McCarthy, Imperial Freezer Services Mike McClendon, Richmond Cold Storage John McGuire, Loop Cold Storage Randy McMaster, ICS Logistics Lodi Meza, Inland Cold Storage Ian Miller, Trenton Cold Storage Inc. Rod Minogue, Atlas Cold Storage John Miranda, Baltimore Aircoil Company Stan Moya, United States Cold Storage of Terry Myers, Hall's Companies Charlie Newell, Minnesota Freezer Warehouse Co. Mike Oberg, Terminal Freezers, Inc. Patti Paris, Columbia Colstor, Inc. Laurier Pedneault, Congébec Inc. Jamie Peracchi, Food Tech Structures, LLC Connie Phipps, IARW Insurance Service Frank Plant, San Diego Cold Storage Tom Poe, Crystal Distribution Services, Inc. Cheri Puvogel, Lockton Companies Fred Radcliffe, Radcliffe Systems Inc. Larry Rauch, Los Angeles Cold Storage Co. Jim Reits, Hanson Logistics Dennis Rhodes, ICS Logistics Al Rickard, Association Vision Howard Roberts, John Bate & Associates Ltd Rose, W.R. Rose and Companies - Ashland Cold Storage Corey Rosenbusch, Association Staff
2006 Trends and Industry Relations Committee Agenda
Page 3 Bob Ross, Food Tech Structures, LLC Jerome Scherer, United States Cold Storage, Inc. Don Schlimme, University of Maryland Don Schoenl, Nordic Cold Storage, LLC Janice Scott, Commercial Cold Storage, Inc. Ryan Silberman, Henderson Cold Storage Jeff Spence, ICS Logistics, Inc. Ray Tarnowski, Philadelphia Warehousing & Cold Storage Co. James Tateyama, Unicold Corporation
Doug Thomas, Bellingham Cold Storage Co. Garry Tilburn, Reed Boardall Cold Storage LTD Ron Vallort, Ron Vallort and Associates, Ltd. Derk Van Mackelenbergh, Eurofrigo B. V./Nichirei Corp. Bill Vargo, Nordic Cold Storage LLC Joe Vickers, ICS Logistics Darren Warren, ICS Logistics Nancy Waterman, Bellingham Cold Storage John Williams, Jamison Door Co.
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Trends and Industry Relations Committee Statement of Purpose
Examines, in general terms, what is happening in the public refrigerated warehousing/logistics industry today and factors which are likely to impact PRWs in the future. Also attempts to forecast opportunities and threats facing the industry and oversees industry marketing programs and industry/trade press relations.
Note: Please pay special attention to the committee statements of purpose this year. Each one has been edited to make concise statements that can be used on the website and in promotional materials for the Assembly of Committees.
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Minutes of the 2005 Trends and Industry Relations Committee Meeting
Officers
2005
2006
Chair
Michael Black (for Paul Dennis)
Paul Dennis
Vice Chair/Recorder
Brenda Goble (for Michael Black)
Michael Black
IARW Board Liaison
Larry Adams
TBD
WFLO Board Liaison
Patrick Floyd
TBD
Staff Liaison
Bill Hudson
Bill Hudson
Sunday, July 24, 2005, 1:30 pm, Salon A The Four Seasons Hotel, Washington, DC, USA
Chairman Michael Black, P&O Logistics called the meeting to order at 1:30pm. 1. Committee Roster Michael Black, Chairman Brenda Goble, Vice Chairman/Recorder Larry Adams, IARW Board Liaison Patrick Floyd, WFLO Board Liaison Bill Hudson, Staff Liaison Members Present [listed alphabetically without companies] Larry Adams Bruce Jayne Steve Andre Ken Johnson Angelo Antoci Tom Jones Doug Bailey Darryl Kawano Mike Barisse Kevin Kendall Tom Berger Gene Klein Stan Bigford Joe Knausdorf Sandi Bishop Eugene Kogan Jim Black Sal Labruno Michael Black Larry Laurin Mike Bolander Merle Lemmen Sam Bradshaw Randy Lewis Frank Breen Danelle Lindman Jeff Carden Rick Loesel Scott Chapman Elizabeth Lowe Joe Couto Tony Lucarelli Wayne Cullen Chuck McCarthy Brian Davis Mike McClendon Clement Deliso Jr. Ian Milller Clement Deliso Sr. John Miranda John Dittrick Stan Moya Len Ebersberger Charlie Newell Dave Eden Thomas Newell Ken Evans Humphrey Nolan Ernie Ferguson Nicholas Obbink 2006 Trends and Industry Relations Committee Agenda
Page 6 Patrick Floyd John Fountain Anthan Fuller Bonnie Geise Ann Girvin Brenda Goble Alicia Gouveia Patrick Gouveia Joe Grealy Andrew Grienberg Jean Gueguen Steve Hall Harry Halpert Dell Hamilton Dave Hendricks Bill Hendricksen Mike Henningson Sheryl Hershey Dan Hopf John Horvath Joe Howard Bill Hudson Ken Hudson Eben James Andy Janson David Kessler
Patti Paris Nick Peck Jamie Peracchi Vinny Perricone Connie Phipps Frank Plant Barbara Platt Cheri Puvogel Dan Quinn J.R. Randall Larry Rauch Jim Reits Howard Roberts Bob Ross John Ryan Jerome Scherer Donald Schlimme Janice Scott Kitty So Keith Sunderlal James Tateyama Ron Vallort Gerard Von Dohlen Bill Wiley John Williams David Williamson
Resource Guests: James Sumner, USAPEEC Mark Roberti, RFID Journal 2. Committee Statement of Purpose – Michael Black reviewed the Statement of Purpose for the IARW-WFLO Trends and Industry Relations Committee. 3. Minutes of the 2004 Meeting – Minutes were reviewed and approved. 4. 2004 Global Frozen Foods Articles – Michael Black highlighted several interesting points and urged the committee to read the articles thoroughly at their leisure. 5. IARW-QFFI Survey – Bill Hudson urged the members to participate in the Quick Frozen Foods Survey if they had not already done so. 6. Summary of Refrigerated Space and Trends – Michael Black lead a discussion on the increase in private cooler space versus PRW’s. He also highlighted the fact that PRW’s now account for 74.6% of total refrigerated space and 80 % of total freezer space. 7. Global Trade – Impact on Business – Jim Sumner, President, USAPEEC Jim provided the committee with an overview of the USAPEEC organization and the services they offer. The main points of his presentation were: -Update on Avian influenza and BSE -Review of chicken, egg, and turkey market conditions and worldwide competition -Vietnamese Poultry Donation 2006 Trends and Industry Relations Committee Agenda
Page 7 8. Justifying RFID Implementation – Mark Roberti, Editor, RFID Journal -Explanation of RFID, types and usage -Customers using RFID -Uses for RFID -Benefits of Usage 9. Transportation Trends – Michael Black lead a discussion on the transportation trends affecting our industry. -Container shortages -Increased Fuel Cost -Driver Shortages 10. Chapter Reports – Each chapter representative gave a report on specific issues affecting their region such as construction, mergers and acquisitions, and occupancy. 11. Nomination of 2006 Chairman and Vice Chairman/Recorder - Paul Dennis, Atlas Cold Storage as Committee Chairman and Michael Black, P & O Cold Logistics as Vice Chairman/Recorder, were reelected. Meeting adjourned at 4:50 pm. Respectfully submitted, Brenda Goble ICS Logistics Vice Chairman/Recorder
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2005 Global Frozen Foods Almanac Pizza Leads European Tonnage Growth, But Seafood, Meat Bring in More Euros By J.J. PIERCE, QFFI Associate Editor Ice cream sales slump in 2004, due to a cool and rainy summer. Poultry volume unknown except for Germany and Sweden. Bake-off bread products gain substantial market share in Scandinavia. Meet the new challenger for frozen food consumption leadership in Europe: it's Ireland, at 46.6 kilograms per capita, just a little short of Sweden at 46.9 kg but ahead of the United Kingdom and Denmark at 45.5 and 45.2. Irish consumption grew by 14% last year to 186,400 tons, according to Food for Thought (FFT), a Geneva, Switzerland-based food and drink research group. Pizza was the star performer among product categories last year in 22 countries tracked by FFT, with a 9.3% increase to 638,000 tons. This followed a slight decline in 2003. Yet ready meals, which held steady in 2003, showed a 2.7% decline in 2004, to 1,336,400 tons. In euro value terms, however, fish and seafood and convenience meats far outweighed other frozen food categories. These are high-ticket items compared to vegetables or french fries; fish and seafood products average 7.40 euros a kilogram, and convenience meats 6.81, versus 1.41 euros for potato products. Ice cream sales, not included by Quick Frozen Foods International in tonnage totals, as volume is given in liters, was down 2.7% to 3.362 billion liters and 4.4% to 14.824 euros. In Germany, the largest single ice cream market, volume was off 9.1% to 610.4 million liters and 7.6% to 2.788 billion euros. But there was an increase in Spain, 3.6% to 321.8 million liters and 6.7% to 1.527 billion euros. Overall consumption was up two percent to 11,950,300 tons, exclusive of poultry. Among the gainers were frozen potato products at 5.2% to 2,999,000 tons and frozen fruits at 6.5% to 171,800. Yet bakery products were off 0.3% to 1,201,100. Vegetables scored a slight 0.2% gain, to 2,617,700. As in prior years, FFT's figures don't necessarily agree with those from other sources, but the number of other sources is dwindling. Germany, where the Deutsches Tiefkuhlinsitut (dti) was the only national industry group to issue a comprehensive report, showed a total consumption of 2,715,385 tons without poultry (compared to 2,566,000 for FFT) and 3,022,365 with poultry. Sweden reported a growth index rather than actual tonnage, but put last year's per capita consumption at 46.7 kg. Chances are that Germany has overtaken the United Kingdom as the largest frozen food market in Europe if poultry is counted. Number three is still France, at 1,553,900 tons excluding poultry. But number four is Spain at 1,204,900 tons, and since Spain has a considerably smaller population it has a higher per capita consumption - 36 kg versus 25.8. In terms of value, Food for Thought put the market at 51.109 billion euros without ice cream and 65.917 billion euros with it. But besides ice cream, the most valuable segments were fish and seafood at 11.630 billion euros, up 4.8%; and convenience meats at 9.163 billion, up 2.9%. Potato products may remain the largest in tonnage terms, at nearly three million; but in euros they're relatively small potatoes at 4.312 billion even though they scored an impressive 6.6% gain. With only Germany releasing a full report of its own, Food for Thought has put out a Western European Database as well as tables of raw figures for 15 older EU members plus Norway and Switzerland. Among its findings are that Unilever is the market leader in Western Europe at 16.6%, followed by Nestle© at eight percent. That might change if Unilever goes through with its oft-rumored plan to divest its Birds Eye frozen food operation in the UK. The UK, France and Germany combined account for 53% of the Western Europe market, including ice cream, in euro value terms, FFT reported, compared to 52% of the population. The top five, with Spain and Italy added, account for 74% of the frozen food sales and 77% of the population. Euro growth since 1999 has been highest in Germany, with an average of 4.95%, followed by Italy at 3.4% and Spain at 2.98%. But factoring in inflation, FFT says, it's a whole different story: leaders in "real" growth are Norway at 5.2%, Sweden at 4.5% and Austria at 3.7%. 2006 Trends and Industry Relations Committee Agenda
Page 9 There's a similar pattern in category segments, FFT found. In current euros, the leaders since 1999 have been fish at 3.28%, ready meals at 2.88% and vegetables at 2.21%. But in constant euros, the relatively small category of fruit has led at 10.6% a year, followed by fish at 2.9% and potato products at 2.3%. Fish, appearing on both lists as well as leading in total euros, bears closer examination. In Germany, the dti showed a tonnage increase of 9.1% to 262,601, while revising its sub-categories from 2003. The largest increases were in raw fillets and fish dishes, but breaded fish also did well. What didn't do well was fish sticks. Molluscs and shellfish, once a separate category, have been lumped in with "other fish and seafood," but probably account for most of that sub-category's 9.1% growth. FFT puts euro value for German fish and seafood at 2.832 billion, up 5.7%. For other major countries, frozen fish and seafood tonnage and value work out as follows: • Spain: 356,000 tons (largest in EU), up 4.1%; 2.227 billion euros, up 7.2%. • UK: 253,700 tons, up 1.0%; 2.257 billion euros, down 0.1%. • France, 177,600 tons, down 0.1%; 1.553 billion euros, up 0.1%. Much of the growth is in smaller countries. In Sweden, frozen fish sales were up four percent to 371 million euros and 4.6% to 57,700 tons. Greece recorded a 15.7% increase in value to 192.7 million euros and a 12.4% gain in tonnage to 51,700. But in some countries, it was all a matter of price. Ireland showed a 21.2% increase in euro volume to 134.3 million, but tonnage was up only 2.7% to 30,900. Polish frozen fish sales were up 13.8% to 251.4 million euros, but tonnage fell. Italy reported retail frozen fish and seafood tonnage for 2004 at 81,151, up three percent from 2003. But the gain was all in shellfish and molluscs, up 32.1% to 28,569. Raw fish was down sharply at 29,189, and breaded products barely gained at all. Overall retail consumption in Italy, according to the Istituto Italiano Alementi Surgelati, was 486,851 tons, up 2.8%. But the organization put the increase at 3.1%, and the percentage changes it gives for categories and sub-categories don't jibe with figures in its 2003 report. For what they're worth, category figures include: Vegetables, 203,882 (single 119,737, mixed 70,960, prepared 4,845, other 8,340); Potato products, 60,213 (fries 54,455, other 5,758); Fish and seafood, 81,151 (raw 29,189, breaded 23,392, molluscs and shellfish 28,569); Meat, 3,451 (hamburger 2,413, other 1,038); Poultry, 6,568; Bakery products, 7,665; Pizza and snacks, 60,461 (pizza 31,444, mini-pizza 2,869, savory snacks 26,148); Prepared foods, 57,204 (primary, 32,900; secondary, 9,813; side dishes, 14,490); Desserts, 3,178; Fruits, 709; Other, 2,389. Although it doesn't give any breakdown by country, Food for Thought estimates the overall retail frozen food and ice cream market for Western Europe at 43.2 billion euros and the foodservice market at 20.3 billion. In Sweden, the Dijupfrysnings Byran breaks out a third segment, bake-off - bread and related items to be baked in stores, foodservice establishments or at home - which reached 45,360 tons last year compared to 213,973 for retail and a little over 160,000 for foodservice. Bake-off products such as bread and pastries are distributed in frozen form to the industrial foodservice trade and the retail/in-store sector as well as to HoReCa (hotels, restaurants and catering), according to BakeMark, a Swedish pioneer in the category that also markets its products in Norway, Denmark and Finland. Another Swedish company, Vaasan & Vaasan Group, claims to have "a new highly popular home bake-off concept." Home bake-off is said to be extremely successful in Finland, where the "retail bake-off category is the second largest product group within the frozen food department after ice cream." Bake-off crosses the boundary between retail and catering. In Sweden, it dwarfs retail tonnage for frozen bakery products that stay frozen (7,635 tons), and was second last year only to ready meals (55,869 tons). Other retail figures in Sweden included 36,654 tons for poultry, 31,791 for vegetables, 31,754 for potato products, 20,306 for fish, 14,204 for meat, 10,643 for shellfish, 3,177 for fruits and berries (fastest gainer, at 20.8%) and 1,940 for vegetarian products. Foodservice consumption is 30.9% meat, 22.1% potato products, 11.6% poultry, 10% ready dishes, 8.8% vegetables and 8.2% fish.
2006 Trends and Industry Relations Committee Agenda
Page 10 Poland has the largest tonnage in Eastern Europe at 270,700, but the increase was only 0.1% and the per capita rate was a mere 7 kg. Tonnage in the Czech Republic was off 2.3% to 58,400 and 5.7 kg per capita. Hungary had the largest per capita consumption at 12.7 kg, close to that of Portugal and Italy in Western Europe.
1. includes processed poultry parts. *changed from 2003 Source: Deutsches Tiefkuhlinstitut (dti) 2006 Trends and Industry Relations Committee Agenda
Page 11 EUROPEAN TOTAL FROZEN FOOD MARKETS MEASURED BY VOLUME IN 2004* (Ton '000s/million liters) Countries
Frozen Frozen Frozen Frozen Ice Frozen Frozen Frozen Frozen Frozen Grand Pastry Fruit Vegetables Potatoes Cream Soup Convenience Fish Pizza Ready Total+ Products Meat Meals
Per Change Capita Consumption
Austria 14.0 5.6 50.0 37.5 55.0 0.0 30.3 18.3 15.1 12.3 183.1 +3.3% 22.6 kg Belgium/Lux 31.7 0.4 51.0 143.5 83.0 5.6 42.5 21.4 8.1 21.6 325.8 +0.1% 31.6 kg Bulgaria 1.3 1.8 2.0 8.0 7.3 0.0 1.5 0.5 1.4 2.2 18.7 +57.1% 2.5 kg Czech 5.0 1.8 13.0 14.4 61.4 0.5 3.8 12.8 4.4 2.7 58.4 -2.3% 5.7 kg Republic Denmark 52.5 1.5 35.5 35.7 49.8 7.6 17.0 40.0 3.9 50.5 244.2 +0.1% 45.2 kg Finland 51.0 3.7 27.3 19.3 69.1 0.7 8.0 9.9 9.5 11.6 141.0 +8.7% 27.1 kg France 87.4 7.3 541.9 440.8 364.7 4.5 130.1 177.8 38.7 125.4 1,553.9 +1.6% 25.8 kg Germany 515.5 78.8 440.5 384.2 610.4 14.7 244.1 262.6 234.0 392.1 2,566.5 +0.1% 31.2 kg Greece 16.5 1.4 36.4 42.5 92.0 0.0 5.5 51.7 6.5 0.6 161.1 +5.4% 15.0 kg Hungary 1.6 7.9 67.4 24.9 34.0 0.9 8.2 6.9 4.8 4.1 126.7 -7.0% 12.7 kg Ireland 1.7 0.4 31.0 89.9 42.2 0.0 19.2 30.9 8.8 4.5 186.4 +14.0% 46.6 kg Italy 15.1 2.0 390.5 101.8 590.0 41.7 68.4 99.0 52.3 68.3 839.1 +3.0% 14.5 kg Netherlands 15.4 1.1 45.4 128.0 135.7 2.1 98.3 20.5 20.4 31.0 362.2 +3.0% 22.4 kg Norway 46.3 2.8 18.3 24.6 54.9 0.7 52.9 22.0 28.2 8.1 203.9 +5.7% 14.3 kg Poland 12.3 20.3 31.6 75.2 102.0 3.0 37.0 55.1 25.9 10.3 270.7 +0.1% 7.0 kg Portugal 9.7 0.8 23.9 34.4 67.6 0.2 10.8 30.7 5.0 17.7 133.2 +4.7% 13.2 kg Romania 0.0 0.00 9.1 6.7 17.3 0.0 14.7 4.6 0.4 2.2 37.7 -0.1% 1.7 kg Slovakia 0.0 0.5 5.0 14.0 20.0 0.2 1.8 4.0 2.0 2.4 29.9 +3.5% 5.4 kg Spain 92.1 13.0 308.8 132.0 321.8 0.6 81.0 356.0 15.5 205.9 1,204.9 +4.3% 30.0 kg Sweden 43.2 3.9 53.5 87.0 113.7 0.8 76.0 57.7 21.7 73.7 417.5 +5.3% 46.9 kg Switzerland 19.8 5.5 32.4 54.6 54.0 0.4 8.4 20.4 11.5 15.0 168.0 +3.0% 23.0 kg United 169.0 11.3 401.2 1,100.0 415.9 2.0 386.1 253.7 119.9 274.2 2,737.4 +1.3% 45.5 kg Kingdom Total 1,201.1 171.8 2,615.7 2,999.0 3,361.8 86.2 1,345.6 1,556.5 638.0 1,336.4 11,950.3 +2.0% 24.7 kg * All data refer to total final human consumption, including retail, catering/foodservice and artisanal/craft, thus excluding industrial consumption and on-farm consumption. +Totals exclude ice cream; Source: Food for Thought (FFT) S.A., Geneva, Switzerland (www.fft.com). 2006 Trends and Industry Relations Committee Agenda
Page 13 Chicken and Wal-Mart Lead Growth In USA Frozen Food Consumption Retail sales surely up at Wal-Mart supercenters, even if supermarket sales lag. Chicken gaining at both supermarkets and fast food chains as healthier and cheaper alternative to red meat. Frozen food consumption in the United States was up again last year, but instead of fancy entrees, chicken was the hot ticket at both retail and foodservice. Most of the growth on the retail side, moreover, seems to have been at Wal-Mart, Bentonville, Arkansas. With the largest retailer in the US opening more and more supercenters that include grocery sections the size of the average supermarket, Wal-Mart is taking an increasing share of the overall grocery market, and some categories that seem to be losing elsewhere may actually be gaining. Information Resources, Inc. (IRI), Chicago, Illinois, shows a 1.8% increase in dollar volume to $20.8 billion, up only slightly from $20.4 billion in 2003 (excluding ice cream). That is nearly all for supermarkets but includes a few discount chains other than Wal-Mart, which won't allow its sales to be reported. "Top 50" performers, as shown in another IRI report on branded volume, accounted for $11.5 billion in sales, including ice cream. Indeed, two of the top five - private label and Breyers - were ice cream. Two more - private label and Tyson - were chicken. And the remaining one was private label seafood. For all the hoopla about healthy frozen foods in general and the Atkins diet in particular, the leading healthy frozen entree brands all got clobbered. Stouffer's Lean Cuisine sales were down 12%, Weight Watchers' Smart Ones 2.5% and Healthy Choice 12.5%. Atkins' alternatives didn't show up in the IRI "Top 50." Moreover, Stouffer's conventional Family Entrees were up 16,5% and Banquet Select Menu and Value Menu dinners 11.7% and 6.7%. True, Swanson's Hungry Man line took a hit, but most likely it lost to other conventional brands. Constant churning of the Lean Cuisine and Healthy Choice lines, with entrees being introduced and then dropped, can't have helped them. Factoring in Wal-Mart Total grocery sales - food, beverages and non-food consumables like paper goods and laundry products - accounted for $251.8 billion last year, according to ACNielsen. Wal-Mart reports about $66 billion in grocery sales, and if the percentage for frozen is about the same (8.9%), Wal-Mart would add about $5.8 billion to make the retail total $26.6 billion. IRI figures show declines in dollar volume and poundage for some basic categories like vegetables. Frozen juice concentrates were off by double digits, but that's nothing new. Frozen dinners and entrees declined 2.1% in dollar terms to $5.475 billion, but were up 0.3% in poundage to 1.973 billion. That may just reflect a trend towards large family sizes - an interpretation reinforced by the fact that unit sales were down 0.4%. Quick Frozen Foods International has taken IRI figures and added a 26% fudge factor for Wal-Mart. Total retail sales, including convenience stores and membership warehouse clubs other than Wal-Mart's Sam's Club, may be considerably higher. On the other hand, warehouse clubs serve commercial clients such as restaurants as well as ordinary consumers, so much of their volume may be properly attributed to the foodservice segment. The Foodservice Front Foodservice sales rose 4.4% to $440.1 billion in 2004, according to the National Restaurant Association (NRA), and that works out to a dollar volume of about $55 billion for frozen foods based on 2003 estimates by QFFI. But other sources suggest it must actually be higher - and that it has been for some time. Overall wholesale frozen food sales were $67.5 billion in 2002, according to the US Economic Census, and markups and other channels of distribution must augment that considerably, especially after two years. 2006 Trends and Industry Relations Committee Agenda
Page 14 Although frozen foods aren't tracked by any government or trade group, foodservice distributor Sysco reported that 33% of its 2004 sales were in frozens. US Foodservice reported 17%, not including frozen meat; and Performance Food 14%. Based on the 2002 Economic Census, and subtracting retail sales, the largest components of foodservice frozen foods appear to be basic commodities like meat, poultry, fish and seafood, vegetables and french fries, as opposed to elaborate dinners, entrees and bakery products. The NRA put full-service restaurant sales at $157.9 billion for 2004, and fast food sales at $123.9 billion. Fast food outlets depend heavily on frozen items like hamburgers, chicken portions and french fries, while full-service restaurants are more likely to use frozen vegetables. Institutional foodservice operations use a lot of frozen beef, poultry, fruits, vegetables and juice concentrates. Chances are that QFFI is erring on the conservative side, and we have adjusted dollar volume estimates for the past five years. Chickening In Frozen poultry is the fastest-growing retail category, with dollar sales up nine percent to $2.2 billion and poundage up 11.5% to 1.136 billion, according to the IRI report. Bulk packs of chicken parts, both plain and flavored - such as Buffalo wings - are the primary factor. Supermarket chains like Kroger, Cincinnati, Ohio, stock open freezers with huge bags of these, and so does Wal-Mart. If Russia becomes more selfsufficient in chicken, producers will have to look increasingly to the domestic market. That may be one reason the industry is pushing poultry products on the foodservice side, though chicken had already been gaining against beef at fast food restaurants because it has a healthier image. According to the National Chicken Council, 42% of all chicken is sold through foodservice outlets, with McDonald's alone accounting for 60% of that - more than 600 million pounds last year, including more than 65 million pounds of its upscale Chicken Selects. Burger King has come out with Chicken Fries and Popeyes has Naked Strips - seasoned chicken strips without breading. Beefing about Beef Frozen beef isn't doing as well. Sales of hamburgers were up only one percent over the 52 weeks ended last May 31, according to NPD Foodworld, whereas sales of chicken strips and nuggets soared 18%. Chicken now accounts for 30% of the menu at McDonald's, versus 20% in 2002. Meanwhile, beef has taken a big hit on the export market, where the US is laboring under a ban on American imports imposed by Japan at the end of 2003 after a single case of Mad Cow Disease was discovered in the State of Washington, and several other countries followed suit. Bone-in US beef exports plummeted from110,181 tons and $377.1 million in value in 2003 to 2,993 tons and $13.5 million last year. Boneless beef exports fell from 280,644 tons and $953.3 million to 22,096 tons and $70.2 million. Beef liver shipments fell from 90,686 tons and $72.2 million to 55,333 tons and $38 million. At press time, the American Meat Institute was pressing once again to lean on the Japanese government to lift the ban, which helped to swell the overall imbalance of frozen food trade - $11.8 billion imports to only $5.5 billion exports. Shrinking Shrimp? It's too early to gauge the long-term impact of punitive tariffs on imported shrimp, imposed late last year to protect a domestic wild catch and processing industry that has since been clobbered by Hurricane Katrina. Asian countries impacted by the tariffs have been looking to other markets, especially Europe. US imports for 2004 were slightly lower for shell-on shrimp than in 2003, but higher for peeled and prepared product in poundage terms. Prices were lower, but tariffs are bound to increase them - or else discourage imports altogether. Without wild-caught domestic shrimp to take up the slack for cheaper farm-raised shrimp imports that fueled the boom of recent years, that boom could turn into a bust.
2006 Trends and Industry Relations Committee Agenda
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2006 Trends and Industry Relations Committee Agenda
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VALUE OF ALL U.S. FROZEN FOODS* 1942 THROUGH 2004 (in US dollars) 1942 162,000,000 1943 178,000,000 1944 197,000,000 1945 257,000,000 1946 324,000,000 1947 245,000,000 1948 292,000,000 1949 375,000,000 1950 500,000,000 1951 700,000,000 1952 875,000,000 1953 1,200,000,000 1954x 1,450,000,000 1955 1,700,000,000 1956 2,106,000,000 1957 2,362,000,000
1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973
2,320,000,000 2,749,000,000 3,037,114,000 3,638,600,000 3,960,000,000 4,381,000,000 5,246,000,000 5,765,000,000 6,250,000,000 6,449,000,000 6,990,000,000 7,641,114,000 7,931,000,000 8,128,000,000 9,230,000,000 12,178,000,000
1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
13,087,444,000 14,329,851,000 16,712,044,000 18,824,605,000 20,442,355,000 23,863,360,000 24,718,829,000 27,604,682,000 30,432,419,000 32,854,387,000 36,203,684,000 37,617,930,000 40,899,955,000 44,057,524,000 47,776,662,000 48,692,787,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
51,961,770,000+ 50,280,543,000 51,808,515,000 53,325,000,000 56,853,000,000+ 59,065,000,000 65,021,000,000 67,550,000,000 69,723,000,000 74,132,000,000 76,700,000,000+ 79,400,000,000+ 82,200,000,000+ 85,000,000,000+ 87,104,000,000
*Includes all sales of frozen fruits, vegetables, concentrates, poultry, meats, seafood and prepared foods at conservative prices or at average prices paid by institutions and reprocessors. As a general rule, retail sales made up 65% of the total figure until about 1970. Subsequent sales have shifted towards foodservice and currently domestic sales of frozen products are approximately 31% retail to 69% institutional by value, and 26% retail and 74% institutional by volume. But much of the volume characterized as institutional actually represents products initially frozen but sold in some other form. Source: QUICK FROZEN FOODS INTERNATIONAL +Corrected from previous Almanacs
2006 Trends and Industry Relations Committee Agenda
Page 17 U.S OUTPUT OF COMMERCIAL FROZEN FOODS 1942-2004 (In millions of pounds) (US-made products and imports reprocessed or sold in this country) YEAR FRUIT VEGS. POULTRY MEATS SEAFOOD PREP. (1) (2) (3) 1942 275 220 70 12 41 5 1943 210 300 85 14 53 7 1944 315 285 105 53 10 1945 445 338 124 71 25 1946 540 475 150 12 74 40 1947 347 346 181 15 74 5 1948 377 446 216 20 89 20 1949 360 566 261 50 97 35 1950 475 590 316 75 133 60 1951 420 790 382 85 177 85 1952 420 895 462 125 207 130 1953 542 1,076 559 170 236 195 1954 523 974 676 200 267 280 1955 660 1,140 817 250 307 340 1956 763 1,650 988 300 310 420 1957 671 1,587 1,195 343 319 500 1958 610 1,702 1,445 300 300 540 1959 618 1,626 1,747 300 478 700 1960 660 1,957 2,333 330 506 826 1961 704 2,116 2,345 360 548 966 1962 668 2,261 2,224 450 596 1,152 1963 620 2,231 2,095 536 676 1,448 1964 775 2,619 2,261 696 785 1,950 1965 641 3,050 2,284 765 940 2,146 1966 756 3,415 2,528 842 971 2,354 1967 740 3,361 2,804 920 990 2,726 1968 812 3,775 2,570 930 1,090 3,203 1969 782 3,845 2,577 952 1,197 3,611 1970 743 4,294 2,645 971 1,265 3,696 1971 759 4,528 2,209 990 1,202 3,837 1972 697 5,044 2,318 1,005 1,335 4,081 1973 764 5,216 2,277 1,190 1,404 4,092 1974 756 5,405 2,342 1,222 1,405 3,981 1975 691 5,293 2,195 1,278 1,429 4,508 1976 694 5,384 2,480 1,321 1,647 4,934 1977 759 6,014 2,353 1,369 1,654 5,219 1978 631 6,278 2,428 1,370 1,740 5,387 1979 665 6,712 2,716 1,380 1,764 5,284 1980 753 5,977 2,841 1,410 1,625 5,201 1981 698 6,729 3,134 1,433 1,677 5,184 1982 818 7,221 2,895 1,623 1,686 5,296
CONC. TOTAL (4) 623 669 768 1,003 1,291 968 1,168 140 1,509 300 1,949 440 2,379 550 2,789 678 3,456 783 3,703 807 4,231 919 5,350 980 5,595 760 5,690 1,096 6,565 1,362 7,974 1,463 8,502 1,762 9,113 1,388 9,084 1,657 10,743 1,807 11,633 1,702 12,568 1,760 13,302 1,679 14,059 1,655 14,619 1,775 15,389 2,010 15,535 2,098 16,578 2,360 17,303 2,307 17,418 2,490 17,885 2,611 19,071 2,786 20,154 2,699 20,533 2,891 21,412 3,256 21,063 3,060 21,915 3,054 22,593
2006 Trends and Industry Relations Committee Agenda
Page 18 YEAR FRUIT VEGS. POULTRY MEATS SEAFOOD PREP. CONC. TOTAL (1) (2) (3) (4) 1983 747 6,829 3,150 1,679 1,855 5,535 3,163 22,958 1984 790 7,317 3,100 1,729 2,026 5,799 3,062 23,823 1985 821 7,931 3,413 1,533 2,085 5,878 2,843 24,504 1986 862 7,758 3,358 1,490 2,185 5,955 3,008 24,616 1987 1,151 8,050 3,770 1,488 2,330 6,136 2,931 25,856 1988 1,077 8,440 3,853 1,400 2,343 6,415 3,044 26,572 1989 1,053 8,900 3,965 1,401 2,434 6,626 3,042 27,420 1990 1,118 9,943 4,406 1,372 2,396 6,879 2,794 28,458 1991 992 9,391 4,522 1,383 2,280 6,905 3,397 28,881 1992 1,008 10,275 4,623 1,425 2,383 6,109+ 3,053 28,878+ 1993 1,050 10,667 4,764 1,360 2,416 6,321 3,162 29,849 1994 1,094 12,025 4,932 1,480 2,355+ 6,738 3,640 32,264+ 1995 1,093 12,395 5,159 1,493 2,418 6,866 3,918 33,522 1996 1,018 11,998 5,090 1,500 2,423 10,813 3,651 36,494 1997 1,078 12,337 5,296 1,512 2,597 11,094 3,556 37,470 1998 1,086 12,905 5,248 1,525 2,682 11,420 3,486 38,354 1999 1,145 12,916 5,219 1,560 2,881 14,720 3,304 41,744 2000 1,319 13,572 5,168 1,610 2,460 16,005 3,147 43,281 2001 1,337 16,998 5,621 2,999 3,319 11,062 3,632 44,608 2002 1,395 17,500 5,748 2,904 3,695 12,285 3,869 47,396 2003 1,145 16,059 2,272 3,199 2,300 15,752 3,326 44,053 2004 1,246 12,822 5.332 3,990 3,616 13,669 3,569 44,244 1. Includes potato products and prepared vegetables. 2. Includes frozen cuts, ground beef, hamburger and other raw items. 3. Does not include potatoes (included in vegetables) or fish sticks, fish portions, scallops and breaded shrimp which are included with seafood. 4. Includes estimates of juice drinks, synthetics and other concentrated liquids, as well as juice concentrates. Includes concentrates for chilled juice and other remanufacture. +Corrected figures.
2006 Trends and Industry Relations Committee Agenda
Page 22 Japanese QFF Consumption Rebounds But Market Value Remains Depressed Domestic production inches up, and vegetable imports recover strongly from 2003 slump. But overall Yen value of domestic and imported products alike was off slightly last year. Frozen food consumption rebounded in Japan last year, thanks largely to a renewed influx of imported vegetables. But the value of the market actually fell slightly, largely because those imported vegetables were so much cheaper. Overall consumption as reported by the Japan Frozen Food Association (JFFA) was 2,287,973 tons, 5.2% ahead of 2003. But overall value, at ¥772.641 billion, didn't quite match ¥772.868 billion for the year before. Still, domestic prices were softer than those for imports: home production was up two percent to 1,526,625 tons, but value off 0.9% to ¥673.032 billion. But there appears to be a substantial hidden market in what the JFFA calls "pre-cooked frozen foods" imports. These are usually cited as "small" in its annual reports, but a survey of member firms in 2003 reported a total of 222,825 tons, up 15.3% from 2002, valued at ¥92.38 billion, up 9.1%. As 2003 was a down year for other imports, there may well have been a further increase last year. Even if there wasn't, the total market should be at least 2.51 million tons and ¥865 billion. There may be a healthy eating trend in prepared foods; fried items showed a 1.2% decline to 377,332 tons, while non-fried were up five percent to 917,437. Vegetable imports were up 12% to 761,348 tons, more than enough to offset a sharp decline in domestic production. French fries and other potato products topped the list of imports, up 12.1% to 268,443 tons, mostly from the United States and Canada. But domestic production, although slight, was up 22.2% for french fries, to 8,375 tons. Domestic hamburger production was off 4.2% to 56,713 tons and 4.8% in value to ¥ 27.972 billion. But with the Mad Cow Disease scare and the ban on imports of US beef, hamburger consumption as a whole may have suffered more greatly. Indeed, McDonald's, the country's top hamburger chain, has had rough going since a case of Mad Cow Disease was discovered in Japan in 2002. McDonald's was apparently sourcing hamburgers locally, but a report on the country's foodservice sector by the US Foreign Agricultural Service (FAS) mentions that the chain does import frozen pork patties as well as french fries. Frozen vegetable imports, unlike domestic production, aren't categorized as retail or institutional. But chances are that most of the market for them is institutional, just as it is for domestic products. Even though most Japanese have refrigerator-freezers at home, they are small units without space for a week's worth of frozen food. But eating out is different. According to the FAS, contract feeders like corporate cafeterias like to keep costs down, and frozen vegetables do just that. Frozen vegetables show up at restaurants as well as fast food chains. A small but growing segment of the foodservice market is "Western restaurants," family dining facilities that offer many Western dishes or specialize in country-specific cuisine such as French, Italian and Mexican. Their menus rely heavily on imported food products to provide authenticity as well as taste. Large family restaurants chains such as Skylark, Royal Host, Denny's, Coco's, Tony Roma's and Sizzler's are major users of imported US foods including such items as frozen potatoes, frozen vegetables and beef. Mexican restaurants are even using frozen guacamole. A number of frozen food plants in Japan have closed down; the count of operating units was 819 in 2004 versus 840 in 2003. Some may have relocated to China, which increased frozen vegetable exports to Japan by 18.7% to 327,655 tons.
2006 Trends and Industry Relations Committee Agenda
Page 23 JAPAN: Frozen Food Production and Consumption in 2003 and 2004 Year
2003 2004 Volume 2004/2003 (tons) Institutional Retail 2003 2004 Value 2004/2003 (¥ B) Institutional Retail
Fishery Farm Livestock Prepared Foods Products Products Products Fried Other Food 84,012 100,099 9,373 382,083 873,983 74,783 92,689 9,463 377,332 917,437 81.8 92.6 101.0 98.8 105.0 65,743 72,105 8,062 284,407 524,582 9,040 20,504 1,401 92,925 392,855 74.500 26.615 5.079 182.324 364.753 64.966 26.299 5.206 168.775 375.763 87.2 98.8 102.5 92.6 103.0 56.246 19.951 4.266 117.802 211.831 8.720 6.348 940 50.973 163.932
Confectionery
Imported Frozen Vegetables
Consumption
47,140 54,921 116.5 44,584 10,337 26.191 32.023 122.3 27.243 4.780
679,795 761,348 112.0 N./A N/A 93.406 99.609 106.6 N/A N/A
2,175,485 2,287,973 105.2 N/A N/A 772.868 772.641 100.0 N/A N/A
SubTotal 1,256,066 1,294,769 103.1 808,989 485,780 547.077 544.538 99.5 329.633 214.905
Japan: Volume & Value of Frozen Food in 2002 and 2003 Volume 2003 Tons Fish 33,489 Lobster/Shrimp 12,349 Crabs 3,839 Squid & Octopus 15,351 Shellfish 14,924 Other Fishery Products 4,060 Taro (Satoimo) 1,654 Carrots 6,164 Cob Corn 4,052 Kernel Corn 8,702 Pumpkin 14,271 French Fried Potatoes 6,855 Other Potato Products 22,239 Spinach 7,342 Other Vegetables 26,608 Fruits 2,212 Poultry 3,665 Meats 5,708 Fried Shrimp/Lobster 7,101 Fried Squid 5,657 Fried Oyster 12,494 Fried Fish 18,462 Other Fried Fishery Items 30,892 Croquettes 153,970 Cutlets 67,421 Other Fried Food, Tempura 86,086 Hamburger 59,195 Meatball 30,897 Shao-mai 35,027 Fried Dumpling stuffed with minced pork (Gyoza) 33,709 Harumaki (Spring Roll) 19,591 Food Category
2004 Tons 24,141 13,609 2,917 12,311 16,482 5,323 1,527 4,199 4,260 8,341 13,685 8,375 19,020 7,096 23,397 2,789 4,126 5,337 6,882 4,650 14,793 17,017 29,599 164,892 66,898 72,601 56,713 29,409 45,044
2004/2003 % 72.1 110.2 76.0 80.2 110.4 131.1 92.3 68.1 105.1 95.9 95.9 122.2 85.5 96.6 87.9 126.1 112.6 93.5 96.9 82.2 118.4 92.2 95.8 107.1 99.2 84.3 95.8 95.2 128.6
Value 2003 ¥M 33,639 11,004 5,480 9,562 11,241 3,574 670 895 979 2,128 3,619 1,281 3,204 2,531 10,512 796 1,436 3,643 10,132 3,373 9,320 10,877 20,123 45,629 36,676 46,194 29,384 14,434 15,761
30,276 21,582
89.8 110.2
14,929 11,960 80.1 9,655 9,944 103.0
2004 ¥M 20,948 12,611 4,395 7,665 13,687 5,660 675 753 927 2,005 3,630 1,559 2,818 2,607 10,047 1,278 1,969 3,237 7,216 2,732 8,738 9,689 19,595 48,140 34,054 38,611 27,972 13,409 19,358
2003/2002 % 62.3 114.6 80.2 80.2 121.8 158.4 100.7 84.1 94.7 94.2 100.3 121.7 88.0 103.0 95.6 160.6 137.1 88.9 71.2 81.0 93.8 89.1 97.4 105.5 92.9 83.6 95.2 92.9 122.8
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Page 24
Food Category Pizza Chinese Buns Rice Products Noodles Bread & Dough Kneaded Fish Products Egg Products Gratin Stew, Soup, Sauce, etc. Other Prepared Foods Prepared Foods Total Confectionery
Volume 2003 Tons 19,199 12,082 137,231 247,150 26,577 8,468 31,295 30,291 14,882 168,389 1,256,066 47,140
2004 Tons 22,229 13,392 146,723 256,075 25,433 9,538 34,626 35,469 14,008 176,920 1,294,769 54,921
2004/2003 % 115.8 110.8 106.9 103.6 95.7 112.6 110.6 117.1 94.1 105.1 103.1 116.5
Value 2003 ¥M 13,941 4,379 49,931 54,833 10,009 3,889 13,991 16,252 7,015 106,350 547,077 26,191
2004 ¥M 14,510 5,194 53,559 56,892 8,179 5,076 14,225 19,028 7,255 109,202 544,538 32,023
2003/2002 % 104.1 118.6 107.3 103.8 81.7 130.5 101.7 117.1 103.4 102.7 99.5 122.3
2006 Trends and Industry Relations Committee Agenda
Page 25
IARW-QFFI Survey Business Up at North American PRWs, With More Offering Added Services By J.J. PIERCE, QFFI Associate Editor
About This Annual Survey This analysis is based on 36 responses to Quick Frozen Foods International’s Annual Global Refrigerated Services Survey of members of the International Association of Refrigerated Warehouses and other coldstore operators in North America. More than 179 facilities are represented. The editors wish to thank IARW President and CEO J. William Hudson and his staff for their cooperation in conducting this poll.
Turnover and inventories both up, with new construction limited mostly to the coldest (-29° C) warehouses. RFID technology making rapid gains, and websites are almost universal. Refrigerated warehouse business is brisk in North America, to judge from the annual QFFI/IARW Global Frozen Foods Refrigerated Services Trends Survey. Turnover (sales volume) was seen trending up at 49.1% of the PRWs surveyed this year, compared to 40.9% in 2005, and in the United States it is even higher. That doesn’t mean turnover was up 49.1%, only that operators running 49.1% of the warehouses in the survey indicated that sales were up. It could have been a small increase in each case, but the fact that more of them reported increases this year than last is significant.
Because some PRW operators run only one warehouse and others may have dozens, the numbers crunched by QFFI are based on their location counts; and in the case of those that operate facilities in more than one region, their responses are allocated among regions accordingly. In both tables and text, percentage figures are based on the total number of warehouses. Turnover is up for 61% of PRWs in the weighted response for the Eastern United States, compared to a mere 14.8% a year ago, and 34.9% for those in the Midwest, up from 13.6%. In the US West, an uptick is reported by operators of 56.9% of the warehouses – up from 46%. Only in Canada is traffic mostly about the same as last year, or the overall North American percentage would be higher. But hardly any operators report declining business.
On the other hand, inventories are also way up – 80% of the weighted sample reports that, and the rate is an astounding 94.9% in the US East. Last year, the overall and US East figures were 12.7% and a tiny 3.7%, respectively. Inventories were up 60.5% in the US Midwest and 72.5% in the US West, versus 2006 Trends and Industry Relations Committee Agenda
Page 26 8.6% and 19.8% a year ago. Hardly any operators report either declining or stable inventories – a far cry from last year. Maybe some of the inventory is goods for processing, or that have just been processed. The percentage of locations offering on-site freezing is 86.5% this year, versus 73.7% last year, and repacking services are offered by 68.2% versus 30.7% in 2005. Some 66.5% rent out space for processing, up from 51.7%, and 65.4% rent office space to customers. For some reason, a lot fewer locations in the US West offer repacking, but a lot more are doing so in the East and Midwest. It is hardly uncommon for PRW operators to dedicate or even to build facilities for processors – to produce and package their products as well as storing and shipping them. Most often, this will be for commodities like meat, poultry and seafood, but a few mention bakery products and, beyond the survey, there are other examples of further processed products. But dedicated processing and repacking may be related to other developments. Radio Frequency Identification (RFID) technology, barely a blip on the radar screen a year ago, is now widely used, being available at 41.9% of warehouses represented by the survey. A number of operators that don’t already have RFID plan to install it, and that may be part of the reason 65.4% plan to upgrade computer systems. One reason for that is that Wal-Mart, the largest retailer in the country, has mandated RFID coding for everything sold in its stores, including frozen food. Some 67% reported having bar coding technology, but that is probably far short of reality, because regional percentages in the US were a lot higher last year, and it hardly seems likely that, once having em-braced bar coding technology, any business would abandon it. Most likely the discrepancy reflects a change in the sample base. More warehouses are retaining consultants these days. Overall rate for North America is 54.7%, versus 33.4% a year ago. But the reasons for hiring consultants are quite varied, ranging from safety and security to information technology. Some need help with warehouse management systems, telecommunications and marketing, or even refrigeration technology.
United States Cold Storage Expands Tulare Warehouse United States Cold Storage of California has completed its latest expansion in Tulare. The new building, known as Tulare North, houses a dry and refrigerated storage facility totaling approximately 140,948 square feet. The refrigerated space, designed to maintain temperatures as low as -20°F, provides 2,705,562 cubic feet of storage capacity. The building is fully racked with capacity for 9,592 pallet positions in the freezer storage. It is served by a 50 foot wide refrigerated truck dock providing 12 loading doors, and a 45 foot wide refrigerated rail dock having four rail loading doors. A USDA inspection room is on the premises, along with offices and other ancillary spaces. Overall facilities now consist of approximately 10 million cubic feet of refrigerated space and 3 million cubic feet of dry space. The Tulare distribution program covers most western states with regularly scheduled delivery service.
Ronald P. Vallort, president of Ron Vallort and Associates, Oak Brook, Illinois, sees the most important trends as being the “maximizing of capacity in existing facilities, as very few new facilities are being constructed,” and the trend towards offering “more and more value-added services” such as freezing, repacking and renting out space. Spinning More Websites With 93.3% of warehouses being part of companies with websites, web-based e-mail and FTP systems may be replacing other electronic communications like EDI and WINS, which are down from 75.6% to 67.6%. Systems for direct contact with customers are up from 44.3% to 57%, and direct contact with suppliers from 40% to 55.3%. Yet fax machines are still used by 55.3%.
2006 Trends and Industry Relations Committee Agenda
Page 27
“Sales exposure” is a common justification for websites, but they are also used for customer support, as with order entry global positioning satellite (GPS) tracking of shipments. Improvements to such programs must have a lot to do with the fact that 65.4% of the weighted sample plans upgrades in computer systems this year, with 38% seeking new software and 31.2% new hardware – and 43.5% are adding 2006 Trends and Industry Relations Committee Agenda
Page 28 terminals. Owned mainframes account for 73.7% of all systems, followed by mini-computers at 32.4% and networked microcomputers at 22.9% New construction plans are relatively weak except in the -29° C warehouses, with 38% of the weighted sample planning units in that temperature category, and 19.6% in -18° C units, and only 4.5% in 0° coldstores – compared to 36.5%, 37.8% and 20.7% a year ago. Additions to -29° C warehouses are planned by 26.3% of the weighted sample – up from 20.7%, but only 4.5% in the other two categories, compared to 20.7% each in 2005. Columbia Colstor Expanding Near Site of First Warehouse It began in Quincy, Washington, with Columbia Colstor’s first refrigerated warehouse in 1983. Now the company, since headquartered in Moses Lake, is returning to Quincy with a major expansion. Ground was broken Feb. 20 for the Columbia Colstor International Logistics facility on on Industrial Parkway near the Port of Quincy’s intermodal industrial park. Plans are to complete the project this fall. “We hope to have this up and going for business by the first week of September,” said Don McGraw, president, of the new facility, which will encompass 218,000 square feet, including a freezer that will occupy 151,000 square feet, a refrigerated rail dock at 33,000 square feet, and a 25,000-square-foot dock. The facility will give Columbia Colstor long-needed additional space in the Columbia River Basin and will be a local point to focus on export business. “We’re also going to try to attract other business from other areas coming through this area for export and then in the future, import business coming back into the country,” McGraw said, adding the facility will also eventually serve as an intermodal site for the loading of containers onto rail cars to ship through the ports of Seattle and Tacoma.
Screw compressor purchasing plans are, at 76.5%, up from 63.8% last year. Although plans to buy ammonia compressors are off from 68.4% to 56.9%, this may be only because some harried executives didn’t check off the box because they thought it was too obvious that their equipment runs on ammonia. But there is apparently little interest in reciprocating or packaged compressors. Plans for purchasing condensers (52.5%), coils (29.1%) and fans or blowers (38.5%) are in the same ballpark as a year ago. Vallort surmises that screw compressors are being purchased as replacement units, or for internal expansion at established warehouses. Basic materials handling equipment purchasing plans are strong. Operators representing 66.5% of all locations plan to buy standard racks this year, compared to 70.6% last year. Gravity racks figure at 9.5%, up from 2.8%. Pallets are being sought by 88.1% versus 51.4%. Lift trucks are being sought by 76.5%, compared to lift truck batteries by 72.1%, and rechargers by 67.6%. Some 70.9% of the weighted sample is looking for automatic doors, up a bit from a year ago, but interest in plastic strip curtains is way up – from 14.6% to 44.1%. There is more interest in slip sheets at 27.4%, and metal dock boards at 30.7%,. Insulation seems to be the least of operators’ concerns, but this may mean only that they were passing the category over as they hurriedly filled out the forms. Be that as it may, only 18.4% of the sample overall expressed interest in polyurethane panels, compared to 45.8% a year ago, and the response was minuscule for styrene and glass fiber in any form. That makes sense if fewer warehouses are being built, Vallort opined. Regional Factors There are regional factors, as always. Inventories of raw frozen citrus juices are off at one PRW operation in the Southeast, but seafood more than makes up for that. Beef, pork and seafood are gaining on both stocks and sales for another Southeastern operator. Frozen meats are getting the most increased business at a Northeastern warehouse.
Poultry sales are up at one public refrigerated warehouse in the South, but another nearby reports poultry turnover decreasing. Fruit, vegetables and meat are all doing well for another operator in the Southeast.
2006 Trends and Industry Relations Committee Agenda
Page 29 At one company in the upper Midwest, pork and pasta stocks are up, while turnover is off in beef but up in pork. Finished retail goods are up in both inventory and turnover at another, while bulk raw vegetable inventories are down. Yet another reports an increase in baked goods inventories. Out West, one operator reports seafood inventories and turnover (in retail packs) up, dairy inventories down. But for another in the same area, fruits and vegetables are the hottest things going. Seafood and poultry are up in stocks at one company, frozen bread at another. And foodservice products are the big thing at yet another.
PRW operators in Canada didn’t single out any product trends in turnover or inventory, but one in the Caribbean mentioned that meat inventories were down, whereas those for poultry and fish were up – and turnover was up in chicken.
2006 Trends and Industry Relations Committee Agenda
Page 30
Quick Frozen Foods International hopes to have more data in its July issue on trends in Europe and Asia. Returns thus far are too few and too incomplete for meaningful analysis. From scattered forms already in hand, it appears that new construction is going at an even slower pace in Europe than in the United States and Canada, especially in -29° C facilities, and that inventory and turnover are more commonly staying the same or even declining.
2006 Trends and Industry Relations Committee Agenda
Page 31 Summary of Refrigerated Space and Trends
NEWS RELEASE
Refrigerated Warehouse Space Continues Upward Trend in U.S. and Much of the World Alexandria, VA, July 2006 -- The USDA Agricultural Statistics Board’s recently published results of the agency’s 44th biennial Capacity of Refrigerated Warehouses survey. The 2006 Capacity of Refrigerated Warehouses report shows that the public refrigerated warehouse (PRW) industry continues to dominate the overall cold storage industry in the U.S. According to USDA, PRWs accounted for 75.9% of general storage space in 2005, up from 74.5% in 2003. Conversely, private and semi-private space declined from 25.4% to 24.1%. During a time when PRW space was growing from 2.357 billion cubic feet (66.8 million cubic meters) to 2.436 billion cubic feet (69 million cubic meters), private and semi-private space declined from 802.4 million cubic feet (23 million cubic meters) to 771.7 million cubic feet (22 million cubic meters). PRW capacity first exceeded private and semi-private capacity in 1991 and, with minor exceptions, the gap between public and private space has grown steadily since that time. Today, PRWs operate nearly 1.7 billion cubic feet (48 million cubic meters) more than their private counterparts. Outside of the U.S., IARW monitors public refrigerated capacity in 26 nations and regions. In those places, capacity increased in nine places while it remained flat in fourteen nations. (Data in three other areas was insufficient to draw any conclusions.) Areas showing the greatest increases were the Middle East (650%), Netherlands (650%), and Finland (350%). The full USDA report can be obtained on the web at http://usda.mannlib.cornell.edu/reports/nassr/other/pcs-bbc/rfwh0106.pdf. Note that the USDA reports capacity only in cubic feet of refrigerated space. It does not report volume or turns. Earlier logistics practices were largely focused on the use of PRWs for longer-term storage. Today’s dynamic distribution logistics systems rely on information technology, cross-docking and other methods to achieve higher velocity and reduced storage times. As a result, growth in the use of PRW space is even greater than it appears based on straightforward review of capacities.
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Comparison of U.S. Public and Private Refrigerated Warehouse Growth Gross Capacity Growth 1955-2005 (Million Cubic Feet)
3,000
2,500
2,000
Public Private
1,500
1,000
500
0 '55 '57 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
Number of Facilities Growth 1955-2005
1000 900 800
Public Private
700 600 500 '55 '57 '59 '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
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Public Refrigerated Warehouse Data
Year 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Number of Facilities 713 767 792 820 800 808 817 792 771 714 701 672 668 654 698 692 723 724 773 781 745 807 798 815 827 821
Gross Space (Million Cubic Feet) 464 503 528 554 596 646 701 730 740 799 846 861 911 956 1,028 1,110 1,286 1,392 1,573 1,678 1,742 2,044 2,147 2,252 2,357 2,436
Average Gross Size (Thousand Cubic Feet) 651 656 667 676 745 799 858 922 960 1,119 1,207 1,281 1,364 1,462 1,473 1,605 1,779 1,923 2,035 2,149 2,338 2,533 2,690 2,763 2,850 2,970
Freezer Space % of Total 61% 66% 66% 69% 71% 72% 74% 76% 77% 79% 80% 79% 82% 82% 81% 80% 80% 81% 82% 82% 83% 83% 83% 82% 84% 84%
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Private and Semi-Private Refrigerated Warehouse Data
Year 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Number of Facilities 533 554 586 676 702 773 760 757 781 843 856 818 886 932 914 901 887 824 770 749 688 657 673 675 655 681
Gross Space (Million Cubic Feet) 120 143 156 193 219 254 276 296 347 399 420 438 531 540 573 589 676 603 624 659 675 683 757 789 802 772
Average Gross Size (Thousand Cubic Feet) 225 258 266 286 312 329 363 391 444 473 491 535 599 579 627 654 762 732 810 880 981 1,040 1,125 1,169 1,224 1,130
Freezer Space % of Total 60% 54% 57% 59% 63% 61% 64% 67% 67% 66% 65% 64% 63% 64% 62% 64% 59% 61% 62% 61% 63% 59% 61% 61% 61% 57%
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Change in Gross Public Capacity by U.S. State, 2003-2005*
State Alabama Arkansas California Colorado Delaware Florida Georgia Idaho Illinois Iowa Maryland Massachusetts Michigan Minnesota Missouri New Jersey New York North Carolina Ohio Oklahoma Oregon Pennsylvania South Carolina Tennessee Texas Utah Virginia Washington Wisconsin Other States U.S. Total
2003 1,000 cu. ft. 27,532 55,044 309,960 15,276 12,156 108,730 123,623 33,737 92,732 68,865 21,680 64,578 66,888 48,850 100,511 73,258 59,599 53,096 61,789 10,925 69,001 133,637 22,848 24,803 139,625 25,792 43,446 145,221 127,399 202,135 2,342,736
2005 1,000 cu. ft. 26,855 72,663 274,173 16,220 15,356 115,302 113,674 36,639 125,086 78,344 20,604 70,719 67,005 51,789 106,187 73,252 59,089 47,568 55,812 11,228 73,101 133,029 20,463 25,783 129,610 20,954 41,168 146,390 136,006 271,703 2,435,773
Gain/Loss 1,000 cu. ft. Percent (677) (3) 17,619 32 (35,787) (12) 944 6 3,200 26 6,572 6 (9,949) (8) 2,902 9 32,354 35 9,479 14 (1,076) (5) 6,141 10 117 0 2,939 6 5,676 6 (6) (0) (510) (1) (5,528) (10) (5,977) (10) 303 3 4,100 6 (608) (0) (2,385) (10) 980 4 (10,015) (7) (4,838) (19) (2,278) (5) 1,169 1 8,607 7 93,037
* Excludes states listed in “Other States” for either 2003 or 2005.
2006 Trends and Industry Relations Committee Agenda
4
Page 36 IARW supplements the USDA data with the following international data taken from a variety of industry sources.
Refrigerated Capacity by Country
Country Australia Austria Belgium Brazil Canada Denmark Eastern Europe Finland France Germany Great Britain Greece India Ireland Italy Japan Middle East Netherlands New Zealand Norway Poland Portugal Spain Sweden Switzerland Turkey USA
2004 Million Cubic Million Cubic Meters Feet 5.24 185.00 0.65 22.00 1.60 56.50 2.20 77.70 6.34 223.70 1.80 63.60 1.00 35.30 0.40 14.10 5.40 190.70 6.50 229.50 4.40 155.40 0.90 31.80 * * 1.30 45.90 3.00 105.90 27.46 969.60 0.40 14.10 1.20 36.00 * * 1.50 53.00 0.30 10.60 0.60 21.20 2.50 88.30 0.90 31.80 0.50 17.70 0.30 10.60 66.80 2,357.10
2006 Million Cubic Million Cubic Meters Feet 6.00 211.88 0.80 22.65 1.60 56.50 2.70 95.35 6.79 239.90 1.80 63.60 1.00 35.30 1.80 50.97 5.40 190.70 8.70 246.36 4.40 155.40 0.90 31.80 * * 1.30 45.90 3.00 105.90 27.69 977.84 3.00 105.90 9.00 254.85 * * 1.50 53.00 0.30 10.60 0.60 21.20 2.90 82.12 0.90 31.80 0.50 17.70 0.30 10.60 68.98 2,435.80
* Figures not available at time of printing
For more PRW industry information, visit the “About Us” section of the IARW website at www.iarw.org.
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Logistics 2006—The World Turned Upside Down Resource Guest: Ben Gordon, BG Strategic Advisors
Benjamin Gordon is Managing Director of BG Strategic Advisors, a leading firm providing supply chain companies with CEO-level advisory services in the areas of strategy, technology and finance. BG Strategic Advisors is particularly sought after for M&A advisory services in the supply chain sector. Clients include top-tier companies from Wall Street, private equity, and the logistics industry. In the past year, BG Strategic Advisors worked on 12 logistics deals totaling over $2.1 billion of transaction value. Benjamin is responsible for leading key client engagements and setting the direction of the firm. Prior to BG Strategic Advisors, Benjamin founded 3PLex, the Internet solution enabling third-party logistics companies to automate their business. Benjamin raised $28 million from blue-chip investors including Morgan Stanley, Goldman Sachs, BancBoston Ventures, CNF, and Ionian. 3PLex has since been sold to Maersk. Prior to 3PLex, Benjamin led strategy projects in transportation and technology at Mercer Management Consulting, where he developed one of the first e-marketplace strategies for a logistics client. Previously, Benjamin worked with the CEO of Automotive Management, Inc. (AMI) to grow its logistics operations. Benjamin also worked as a venture capitalist with the BRM Group, where he assessed business-to-business e-commerce companies. Benjamin is a recognized expert on logistics, and has been quoted extensively by national media including The New York Times, Business Week, ABC, Lehrer New Hour, Journal of Commerce, Transport Topics, Supply Chain Management Quarterly, and Traffic World. Benjamin has been a featured speaker at the Council of Logistics Management, NASSTRAC, the Transportation Intermediaries Association, AMB, eyefortransport, and other industry events. Benjamin has served for three years as Chairman of the 3PL Summit, the largest annual conference focused on CEOs and leaders of the logistics industry. Benjamin is also an Advisory Board member of the Logistics Quarterly, a Board member of Nations Express, and an advisor to dozens of CEOs in the logistics sector. Benjamin is an active civic leader who is committed to giving back to the community. As founder and chairman of GesherCity, he has boosted young adult volunteerism in the greater Boston area. In seven years, the organization has grown to over 20,000 members in seven locations. Benjamin also serves on the Board of the JCCA, the Board of Governors of the Middle East Forum, and various other community organizations. Benjamin received a Masters in Business Administration from Harvard Business School and a Bachelor of Arts degree from Yale College.
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Customer Perspective on the Dynamic Trends Facing the PRW Industry Resource Guest: Gary A. MacNew, Rich Products Corporation Gary MacNew is Vice President, Customer Service & Logistics at Rich Products Corporation in Buffalo, New York. Rich Products is a privately owned manufacturer of frozen non-dairy toppings and icings and breads, rolls, cakes, and other bakery products. He is a career logistician, and has worked for KimberlyClark, Church & Dwight, American Home Products, and Reckitt & Colman, in transportation, warehousing, planning, forecasting, and customer service. He led a major Supply Chain Transformation initiative for Reckitt & Colman in Canada and worked in the development of customer satisfaction, demand planning and perfect order processes for Reckitt & Colman globally. Most recently, his work at Rich Products has included several SAP implementations, introduction of a Transportation Management System, construction of two frozen distribution centers, integration of two business units and a Supply Chain transformation initiative. He is a 1976 graduate (BSBA) of Bucknell University in Lewisburg, Pennsylvania and is a 1986 graduate (MBA) of Rutgers University in Newark, New Jersey. He serves on the board as Treasurer of the Canadian American Border Trade Alliance.
Rich Products Corporation Company Profile Rich Products Corporation is a privately owned $2.0 billion manufacturer of frozen food with a diversified portfolio. The company was founded by Robert Rich, Sr. with the introduction of frozen non-dairy toppings and icings. The company is headquartered in Buffalo, New York and has manufacturing operations in New York, Tennessee, California, Georgia, Virginia, Illinois, and California. The company has international operations in Canada, Brazil, South Africa, China, Thailand, United Kingdom, Italy, and India. The company’s main sales channels are to Food Service operators, and to consumers through Retail grocers and Club Stores. More information is available at the company’s website – www.rich.com.
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Critical Trends – Regional Reports This is an open discussion of issues facing this industry. Chapter officers have been asked to survey selected chapter members in order to offer a regional perspective; results are below. During this discussion, various topics may be assigned to other committees for their consideration during their upcoming meetings.
2006 Trends Survey Results 1. Construction Trends (a) Please describe any recent or expected PRW construction, which you may know about (company, location, size). a. Iowa Cold Storage – Altoona, Iowa completed 100,000 sf freezer expansion in June 2006. Mitland – Ottumwa, Iowa in progress – expanding freezer facility – 40,000 sf b. The following buildings were opened in the year 2005-6 Preferred Warehouse – Newark, NJ Newark Refrigerated Warehouse – Newark, NJ Mullica Cold Storage – southern NJ Burris – Maryland U.S. Cold Storage – Pennsylvania Conestoga – Montreal Millard – Toronto
Estimate 30,000 pallet positions 9,200 pallet positions 5,000 pallet positions 10,000 pallet positions 15,000 pallet positions 5,000 pallet positions 10,000 pallet positions
c. Mallard expansion, Toronto; Conestoga expansion, Toronto; Westco, Calgary (150K sf); Liberty, Calgary; Versacold, Edmonton. d. None to speak of in Northern CA e. In the upcoming year, Preferred Freezers expects to build in Philadelphia and Baltimore. U.S. Cold Storage is expanding their building in Bethlehem. Versacold is building a 20,000 pallet position freezer to service Wakefern in Scranton but closing 8 million cubic feet in Secaucus. f. Flint River is building a new facility in Savannah, GA scheduled to open July ’06. g. Interstate Warehousing expanded its Newport News, VA facility. Carolina Cold Storage is expanding its Tar Heel, NC facility. Flint River is opening a new facility in Savannah, GA. h. Eskimo Cold Storage; Gainesville, Georgia + 15,000 pallets i. SCS, Port of Seattle, 304, 000 sq. ft. (b) What is the current cost of construction in your region or area (per sq. ft.) including racking and refrigeration but excluding land? a. b. c. d. e. f. g. h.
$85.00 $110 to $200 per square foot depending on location, land conditions, etc. $110 sq. ft $91.04 sq. ft. $110 sq. ft. $110 sq. ft. $85 sq. ft. $110 sq. ft. 2006 Trends and Industry Relations Committee Agenda
Page 42 2. Consolidation Trends If there is PRW consolidation (mergers/acquisitions) in your area, how is it affecting the industry? a. Trends seem to point construction in rural areas away from unions in urban areas to low ball existing warehouses and acquire their customers with lower storage costs creating unfair playing field. b. Versacold purchased P&O, which affected several facilities; Mullica Hills purchased T&T in South Jerse c. The recent purchase of P&O by Versacold has not yet had an effect. d. N/a Georgia 3. Labor Trends What are the prevailing labor trends in your region (labor pool, contact negotiations, strikes, emerging issues, etc.)? a. Shortage of skilled warehouse labor – forklift operators, checkers, etc. will need to increase wages by at least 10% b. Union warehouses are closing and non-union warehouses opening so the work force is becoming increasingly non-union. Wage rates are increasing reflecting strong labor demand and somewhat limited supply. The supply of CDL drivers and operating engineers is extremely poor. Many firms are tending to contract forklift maintenance to dealers and increasing amounts of refrigeration work is being done by contractors or dealers. c. Labor pool is tightening up. d. Since the beginning of 2005 up through today, it has been difficult finding reliable and qualified employees. e. Difficult to find quality labor. f. Finding quality labor continues to be a challenge. g. Georgia – Spanish labor pool is getting soft. Big concern on laws affecting immigration. W/o labor pool is drying up. h. Union contract renewals with labor asking for higher wages and extremely higher contributions for pensions due to mismanagement of pension fund investments. i. Some cold storages in the Puget Sound have or are renegotiating their labor contracts. Due to Boeing’s generosity, we are expected to follow suit with wages and benefits. No contracts have been signed as of this date. 4. Food Industry/Economic Trends (a) Comment on general food industry conditions in your area and how they affect the PRW industry. a. There have been unusual meat cycles this past year, especially in the pork industry. Very small harvest numbers in most Midwestern packing plants in 2006. b. Eastern Pennsylvania seems to be the focus of a great deal of development on the one hand; on the other hand warehousing and trucking are looking back towards the major cities because of the double digit inflation in transportation costs. Imports are growing at 10-15 percent a year substituting for domestic production. c. Concerns over CDN $ as food processing companies are losing production to US. Finding it harder to add value as labour rates increase. d. Growth has been slow but steady to the point where some warehouses are reaching capacity before the summer season begins. e. High retail food costs at grocery stores. Curtails extra buying by consumers thus reducing the need to have reserves in storage. Some large retail grocers also downsizing operations. More just in time inventory management and direct ships. 2006 Trends and Industry Relations Committee Agenda
Page 43 f. A.I. slowed throughout earlier in the year but the markets are starting to pick-up. g. High level of throughput. (b) Comment on PRW occupancy in your area (and any important issues affecting occupancy). a. Most freezers have less than 85% occupancy. b. Occupancies are down reflecting the rather heavy building activity. c. Over-occupancy is not an issue in Trenton. Clients are building their own DCs and have a strong perception that they need to be in the GTA. d. Most warehouses will fill before summer’s end. The holidays will be a challenge due to the lack of available space. e. Just ½ of 2006 occupancy was very high. Some relief in June with volumes expected to increase in September for holiday related items. f. Occupancy related to poultry products was high earlier in the year due to A.I. g. Occupancy down from 2005 by approximately 20-25% due to competition, cost of energy, cost of labor and benefits, just in time inventory, direct ships. (c) What is the outlook for PRWs in your area over the next 6-12 months? a. Any available space should fill up by early-mid fall, due to an estimated increase in hog numbers. b. If the building activity doesn’t continue at this pace, there should be a slight improvement. c. The outlook is promising, however, competitors continue to add space making the focus on service and value added activities. d. Down 50%. e. No change expected. (d) What is the outlook for PRWs in your area over the next 2-3 years? a. b. c. d.
Down 25-50% If building activity doesn’t continue, demand will absorb some surplus capacity. A few may expand, the majority will remain status quo. Volumes expected to increase in the next 2-3 years due to new steamship lines calling the Port of Jacksonville.
5. Customer Practice Trends (a) Describe any emerging customer practices with respect to product movement. a. The requirement to use heat-treated pallets for exports to most countries. b. Homeland Security provisions particularly in the ports are becoming oppressive slowing down the movement of freight and making it more expensive and uncertain. c. Faster turns and less inventory on hand. Shipments from production plant direct to customers with a min. order size. d. More tracking of KP1’s – truck appointments, turns at both shipping docks and consignee docks. More manufacturers date-code tracking. e. Increased amount of cross docks to minimize storage costs. f. Increased demand for physical inventories at our cost. (b) Describe any emerging customer practices with respect to information technology or EDI.
2006 Trends and Industry Relations Committee Agenda
Page 44 a. Several customers are requiring EDI capability in order to do business with them; PRW pays for upgrade. b. Customers want every form of information technology available – at no cost. c. Global Systems (SAP); Outsourcing facets of business such as payables. d. More use of SAP systems. e. Increased request for customers to manage inventories, orders, etc via web access system. f. Customers are more interested in incorporating and utilizing technology in the supply chain. g. More customers leaning towards EDI. h. Increased request for on line viewing of inventory and stock status; increased demand for EDI even though they may not use it. (c) Are there any other emerging customer practices likely to impact the PRW industry? a. Customers are building fewer freezers but continue to build coolers. The cost of building freezers has become outrageous. b. Customization for the end user (restacking, labeling, ASNs, RFD, ER.) c. RFID Requirements for specific customers. (d) Is there much customer consolidation in your region and if so, how is it affecting the PRW industry in your region? a. Not much lately. b. Supervalue bought Allisons; AWI bought White Rose. c. Certain customers have consolidated into fewer warehouses creating higher occupancy levels early in the year. d. Not aware of any customer consolidation in our area. e. Some consolidation of seafood companies; doesn’t seem to affect the overall availability of product. 6. Transportation Trends What developments or problems are you seeing in your area with respect to transportation? (trucking, hours of service, railroads, shipping, other) a. There is real concern from customers as to having enough trucking capacity to handle peak needs this coming fall. They are looking at moving their product to different locations to offset the lack of available trucks to handle the outbound needs. b. Trucking costs are escalating at double-digit rates and driver shortages are getting worse. Truckers do whatever they want; they do or don’t deliver or come in on time; some destinations are almost impossible to give quotes on. Generally trucking service quality is going down and costs up. c. Problems – rail yards too far, higher fuel costs developments – trucking companies adding more services (restacking, cross docking, storage, consolidation) d. Carriers are becoming more difficult to find for 2nd and 3rd quarters of the year. e. Trucks are still tight, rates are continually increasing as fuel rises. f. The truck driver shortage has had a negative affect on the availability of trucks. g. Customers could possibly take more advantage of warehouses with rail sidings, possibly cutting their freight costs. h. Terrible rail service, hours of service is making us better planners, high fuel surcharge rates.
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7. Other What other trends or developments are you seeing in your area (new products, new processes, building codes, etc.)? a. In certain areas in the northeast ammonia is taking an increasing beating as a refrigerant particularly large charges. Some states are all looking at various forms of chemical regulations. Obviously, energy costs are out of control. b. HACCP becoming standard requirement; refrigerated docks. c. Nothing at this time.
Other Business Nomination of 2007 Chair and Vice Chair/Recorder
2006 Trends and Industry Relations Committee Agenda
