Executive Spotlight: Fred Boehler, Americold
- May 14, 2018
Temperature-controlled warehouse space is a staple for retailers looking to keep product intact. With the rise in popularity of e-commerce and direct delivery, this industrial niche has some real growth potential. Commercial Property Executive sat down with Fred Boehler, CEO of Americold, to discuss the future of temperature-controlled warehouse space, the impact of technology on real estate, and which markets show the greatest potential for this sector.
Tell us a little about your background. How did you get into real estate?
Boehler: Operations and logistics have always been a part of my background, including my education. I have a bachelor’s degree in management science and operations from Wright State University and a master’s in international business from Northern Illinois University. So logistics is kind of in my DNA. Real estate management materialized as the organizations I worked with recognized the benefits of asset ownership—so real estate really chose me!
My role with Americold is the culmination of a career in supply-chain management and real estate: I was senior vice president at SUPERVALU Inc., a leading grocery retailer and wholesaler supplying more than 4,300 stores; I spent 10 years in senior leadership roles at Borders Group Inc., where I oversaw distribution operations, industrial engineering, logistics planning and purchasing; and I spent a decade in senior logistics management roles at Newell Rubbermaid, overseeing logistics and distribution activities.
My experience in operations, retail, the grocery industry and real estate lends well to our temperature-controlled network and assets. I feel we’re ideally positioned for growth, given the heavy reliance on the outsourced component of the temperature-controlled supply chain, where food manufacturers and retailers will leverage our assets as their own infrastructure.
What are some of the challenges you see facing the industry?
Boehler: The most visible element of our industry would be your local grocery retail store, so think how that store’s design has evolved over the last 20-plus years: There’s been a dramatic increase in not only the number of temperature-controlled products but also the amount of choice for individual items. In the past, there may have been half a dozen pizza options, but now aisles can be dedicated to pizza choices for consumers. That’s happened to almost all of the temperature-controlled products. Consequently, the number of temperature-controlled aisles has increased significantly, as has the number of SKUs. All-in-all, a typical grocery store now carries more than 40,000 different items across all product categories.
Presenting them for sale to customers is only part of the equation, as retailers need to consider solutions for restock inventory and just-in-time replenishment, storage of that inventory, and so on and so forth, further up the supply chain. It’s a lot to consider.
Taking a deeper look behind the curtain, the temperature-controlled supply chain is coming under tighter federal regulation at a time when there’s a need for greater product traceability and an accelerated product rotation velocity, which all come at a cost, especially for transportation in the U.S. Food manufacturers are paying two to five times more for transportation than they are for storage. As such, the need for reliable, value-adding, temperature-controlled infrastructure and dependable service is paramount.
But here’s where I believe Americold really differentiates: We already have an established national network of owned assets providing transportation consolidation and value-adding services. We have sites in every major food production and consumption market in the U.S.—around 140 locations—and our experience in grocery supply-chain support cannot be matched. Globally, we select more than 725 million cases of product for our grocery partners alone per year; we believe that’s more than all of our major competitors combined. Our size, scale and common operating platform give us the dexterity to pivot and support changing customer demand patterns within the almost one billion cubic feet of temperature-controlled infrastructure we already have in place. (And) we are able to bring on added capacity to support the growing need for storage options.
What are some of the expectations you have for the temperature-controlled warehouse space?
Boehler: Continued growth and the ability to manage the added complexity that progressing consumer demand will necessitate. For our manufacturers, we need to continue to support the consumption growth of 2 percent per year. In addition, we need to continue to provide capabilities within our infrastructure that effectively and efficiently support the complexity associated with additional SKUs and smaller, more frequent order sizes.
I also expect to see more growth in retailers’ requirements as they look to outsource more of what has traditionally been insourced. We see new market entrants as well as the growth of e-commerce as more examples of changing consumer demand that we can all relate to. We are in a great position to assist these retailers, and as such, it’s the fastest-growing segment of our business.
The channels opening up for consumers—the ability to order groceries online and have them delivered or pick them up is one—add a new dynamic to the retail operations of grocery stores. There’s also a demand for chilled products, perhaps even individually portioned and packaged, which affects a store’s consumer-experience strategy, as more space needs to be dedicated to these products and the supply chain must adapt to accommodate (them). This places increased pressure on onsite temperature-controlled storage, which isn’t typically an area of focus for expansion for retailers.
Fortunately, we’re already well positioned to accommodate the increased storage and more frequent fulfillment requirements of retail-store supply chains no matter how diverse product choices become or (how much) the temperature requirements of those products adjust, because we already have the right network of temperature-controlled assets with industry-leading, state-of-the-art operational management systems, latest-generation IT infrastructure and supply-chain control tools, and a national transportation schedule in place. Returning to my e-commerce example, our network is already supporting e-commerce operations for many of our customers.
What are some future goals you have for the growth of Americold?
Boehler: We will continue to develop and evolve our asset infrastructure, transportation consolidation and value-added capabilities. We’ve spent the last few years bolstering our foundation—aligning our operations and enhancing our support systems—and now we’re in a great position to grow, be it through development projects or acquisitions.
We own 660 acres of undeveloped land adjacent to current assets that’s primed for building expansions and new facilities. We’ve just completed a new construction project in Clearfield, Utah, and have two more underway in Rochelle, Ill., and Middleborough, Mass., that will open in the next 12 months. We currently have $1.2 billion of investment opportunities in customer-driven projects as well as market-driven demand initiatives that we’ve identified in key geographies.
Acquisitions are another area of growth for Americold. This is a fragmented industry. For example, in the U.S. market we have around 140 sites; the No. 10 player has less than eight. So the top-10 group makes up about 52 percent of the total capacity available in the U.S. Forty-eight percent—almost half the business in the U.S.—is being managed by companies that own less than seven sites. This presents a tremendous opportunity for us to bring top performers into the Americold family, integrate people and technologies, and further enhance our asset network.
How is technology driving your business?
Boehler: We’ve invested $60 million in our IT infrastructure over the last few years. We have state-of-the-art management systems to optimize facility operations and associate activities throughout our network, and a single customer-oriented proprietary portal to manage it all: i-3PL. Through i-3PL, our customers have complete control over their orders, reporting and inventory visibility, and they can even schedule trucking appointments and place national holds on product. It’s all available through any web-connected smart device and our i-3PL portal. It’s extremely powerful for our customers to have a dynamic window into their supply chain in order to make critical decisions no matter where they are.
Automation is another form of technology that we are investing in. Whether it’s in a new build or retrofit, we are carefully assessing the profile of business that we have and the role full or semi-automation can play in optimizing our service capabilities and performance for our customers.
Where do you see opportunity for Americold to expand?
Boehler: Differing temperature requirements—chilled or frozen—SKU proliferation, transportation consolidation, etc., could be considered hurdles for some in our industry who are just not as well positioned as we are. We’re actively seeking out prospects with these concerns so that we can introduce them to our solutions.
Consumers are purchasing more products online and looking for delivery options to suit their needs. This can require some very specific capabilities, but we’re performing e-commerce support services for many customers now. The demand increases the need for capacity in temperature-controlled facilities like ours, so we’re excited about the shift. E-commerce only represents about 2 percent of all temperature-controlled retail purchases right now, so while it’s a current buzz phrase, there’s still plenty of room for growth, and we’re ready for it.
It’s important to remember that while we’re certainly focused on food and beverage products, there are a number of other, complementary industries that our assets and network are ideal to support: flowers, the medical industry, pharmaceuticals, chemicals, metals, etc. We have the flexibility to integrate products into our facilities now, or even repurpose assets to support these industries. We can support almost any product requiring a temperature-controlled network. There’s huge opportunity out there for us.
Which geographic markets offer the greatest potential for temperature-controlled warehouse space, and which are most successful now?
Boehler: The more developed markets have been the most successful up to now, but there is an emerging need for temperature-controlled infrastructure in developing markets as consumer buying habits adapt to increasing disposable incomes. We’re monitoring the environments and consumer activities in places like China, India, Africa and South America, developing strategies and awaiting potential triggers.
We partner with some of the largest food producers and retailers globally, and those partnerships allow us to keep our finger on the pulse of customers’ demands as they continue to develop. The growth of our customers will act as a catalyst to pull us into other geographies when the timing is right.
What are your views on the changes happening within the retail market?
Boehler: Current retail infrastructure was built years ago and focused on the trends at the time: fewer options, limited temperature-controlled volumes and infrequent shopping habits. Nowadays, the trends are reversing, and consumers are shopping more frequently and expecting a wider variety of temperature-controlled product choices. Retail store chains are also directly competing against Amazon and the on-site purchasing capabilities on brand sites, too—you can buy perishable products through many channels now. So retailers have to make wise decisions on where to invest: visible avenues such as store formats, websites and shopper-friendly activities, or infrastructure investments that have the potential to reap benefits but won’t be perceptible to shoppers.
We’re seeing the increased desire to outsource the temperature-controlled supply chain and fulfillment requirements to professionals like Americold. It’s a logical decision to integrate a ready-made, well-positioned and established temperature-controlled asset provider into a retailer’s supply chain. Retailers leverage our assets, our network, our systems and our expertise, and that allows them to focus on their own core capabilities and the reason they’re in business: providing a wide variety of products to their customers and encouraging tastier meal times.
Images courtesy of Americold