Growing Importance of Cold Storage for European Markets

The last couple of years have been challenging for every industry present around the world, whether managing a company’s finances, delivering goods from one country to another, or storage of goods. It has been a steep fall for a few or an up rise for others. The Cold Storage industry falls in the later stage, where we saw third-party logistics providers, manufacturers, and last-mile providers, investing heavily in cold chain or cold storage worldwide, especially in the European Market.

We all know that a supply chain is a complex process, and due to the Covid19 pandemic, it was disrupted globally. Due to a lack of truck drivers, border closures, and quarantine requirements, companies could not maintain a product’s shelf life, and hence the focus shifted to implementing Cold storage in the system. Research published on Precedence Research shows us a trend of the growing importance of cold storage in the European Market.

Growth Drivers

The growth of Cold Storage is predicted to be close to 20 per cent CAGR for the European market. It is also believed that cold storage is more expensive than dry storage; the companies will look forward to outsourcing the operation to specialists like Cantek Group, NDL, NewCold Advanced Logistics, and many more. Let us dive into crucial growth drivers and understand why the cold storage industry will flourish in the coming years

The rise in Cold Storage is a dependent factor of the European or Global trade market. Due to increase lead times, companies are relying more on having a cold storage warehouse to improve a product’s life cycle.

A. Trade & Trade Agreements

Trade is one of the most crucial and foremost drivers of growth for cold storage in Europe. Europe having a free trade agreement within the countries of the EU accelerated trade, resulting in the growth of cold storage in Europe. It is believed that the cold chain market in Europe will reach up to 112 billion USD, opening investment opportunities for companies in ancillary industries like cold storage & cold transportation. Not only will trade between the European countries act as a catalyst but also trade between EU and other countries like Vietnam (one of the fastest growing economies) and India have developed cold storage corridors with European Countries.
European Cold Storage & Logistics Association is the voice of European cold storage industry who represent 1000s of cold stores and 60,000 m3 goods in Europe. ECSLA is a focal point in managing current cold storage capability and looks after the growth of cold storage in Europe.
On 17th March 2022, Vietnam and Belgium signed a project called Project Smart Cold Storage, funded by the Belgium Government and Ice-loft company. Ice-loft Company is the leading intelligent cold chain logistics provider in Belgium. This trade agreement improved cold storage capabilities between the two countries to carry out smooth trade between Vietnam and Belgium for perishable goods.
Thus, with an increase in trade and the presence of a complex supply chain in Europe and outside Europe, cold storage will gather importance and companies like Burris Logistics, Henningsen Cold Storage LLP, and Nordic Logistics must take the first-movers advantage and milk the profits from different trades and trade agreements.

B. Market Drivers

The market drivers are the forces of demand & supply. The last few years made us realize the importance of the retail market. The rise in health problems left consumers with no choice but to have fresh food products, beverages, and drinks. For example, global milk production grew by 1.7 %, and as the demand for perishable goods, food items, and beverages rise, the demand for cold storage increases. We can call them complementary market drivers.
The retailers are often behind in maintaining the quality of the products; hence, the growth of Cold Storage in Europe and other parts of the world is inevitable. The fish and meat suppliers would be the market-takers, followed by the dairy industry, pharmaceutical, and processed food items.
Customer preferences, the urge to extend shelf-life, and quality improvement are the three market drivers that would act as catalysts for growth in the cold storage industry.

C. E-Commerce

The supply chain and logistics industry has seen exponential growth in e-commerce. One prime example of the E-commerce and cold storage intersection is billion-dollar company; Amazon Inc. Research by Refrigerated and frozen foods; due to the rise in DTC (Direct to Consumer), there has been an exponential growth in cold storage on a micro-level. Retailers and wholesalers are forming a strategic alliance with 3PL providers. The view of having a cold storage facility at a micro-level is to increase the last-mile experience for the customer and improve the market share.

A paper published by Dr Lichstein explains that cold storage must meet e-commerce needs. The SVP of Walmart also pushed the idea of having an in-built compact modular cold storage warehouse/space within the store. One report from CBRE suggests that the micro-level demand for cold storage will increase to 100 million in the next five years.
Thus, with the rise in e-commerce and online shopping, companies must focus on having their cold storage property or outsource the operation.

Hurdles to the Growth of Cold Storage

There is no growth with challenges. The growth of the cold storage industry in Europe is promising but with hurdles. Owning a cold storage property could be quite costly, and reducing the transportation cost would be an excellent deal. Thus companies try to place warehouses and storage facilities closer to stores. However, with Cold Storage, as it releases GHG affecting the urbanized environment, they are placed far away or in a designated industrial area. Hence, the first hurdle is figuring out a cold storage location for companies and retailers to operate in an urbanized living.
The next hurdle could be a lack of knowledge, thus leading to the question of owning or outsourcing a cold storage facility. If you study the whole idea of cold chain and supply chain storage, there are still debates on which side to lean on; either make cold storage vs buy cold storage. More on this in a separate article. Along with these are many scientific challenges like condensation, heat exposure, and microbial growth in the freeze.

The cold storage industry in Europe is expected to grow in the coming years. Along with the three mentioned above, there are many other factors like technology advancement, VAS (Value-added services) growth in the cold chain, and the company’s vision. If the investors are looking to invest in an industry for future benefits; cold storage could be one of the most acceptable industries to focus on.