The ice men cometh
April 1st 2009

Frozen food is booming, and, says SSI Schaefer's Bob Jane, cold store firms are struggling to keep up with Britain's appetite. Brendan Coyne reports

For whatever reason – busy lives or stockpiling in case the doom mongers turn out to be right – we like our freezers to be full. As equipment suppliers with food retail contracts like to say when quizzed about the current climate's effect on their earnings: "People still need to eat." And, judging by queues in my local supermarket, and burgeoning obesity crises, we are eating quite a lot: Latest figures from the TNS Worldpanel show the UK retail frozen food market grew 6.7 per cent year on year and the sector is now a £5bn market.

Swelling figures From January 08 to January 09, Britons chomped their way through over half a billion pounds worth of potato products (up 6 per cent); £640m of ready meals (which actually shrank by 1.6 per cent); £617m of frozen ice cream (up 3 per cent); and £867m of frozen savoury food (up 10.3 per cent). However, to balance any negative connotations, healthy foods are showing some of the strongest growth: Frozen fish grew almost 8 per cent to £700m and frozen vegetables were up over 10 per cent.

Regardless of consumer food choices, the challenge for cold store firms is to keep up with our appetites. Which is precisely why SSI Schaefer recently set up a cold storage business unit. Bob Jane, SSI Schaefer's business development manager, expects to see an increase in cold store projects, by volume, of "at least 50 per cent over the next two years".

He says the division, led by Benno Reichmuth (head of dynamic systems) in Switzerland (with cold store specialist John Dixon undertaking customer-facing work in the UK), puts all Schaefer know-how into one place, giving cold store customers the benefit of global experience: Over the last 12 years, says Jane, Schaefer has completed 2,500 greenfield installations, 80 per cent of which were cold store, with the remainder either chilled or ambient.

"Cold stores are a big opportunity for us," says Jane, "It's probably unfair to say the market is lagging behind other sectors, but quite a few cold store businesses are family owned. Compared with big, slick 3PL operations, there hasn't been the same level of investment. But combined with the growth in value and volume is the growth in product range – go into any supermarket and you will find hundreds of different frozen options. And the challenge for the industry is how to deal with that." Jane says one option is investing in equipment such as mobile racking, which he claims can deliver a 40 per cent reduction in space compared with static racking or increases capacity. He also says 90 per cent utilisation is not uncommon using mobile racking. But how easy is it convincing cold stores to spend? Buyer's market Despite the global recession – or perhaps even because of it – Jane says enquiry numbers at the cold store business unit are high. "People are taking stock of the situation and their business, and planning both for now and when the upturn comes." And because customers know they can take advantage of lower steel costs (than six months ago) and suppliers keener than ever to win business, prices are equally keen: Terms negotiated now can be fixed for projects that might not even start until next year, and, in the case of major builds, take several more years to complete.

Rise of the machines Jane says firms – cold store and otherwise – are also increasingly looking to cut labour costs. "About 50 per cent of our business now involves some degree of mechanisation or automation," says Jane.

"Five years ago it was mostly static racking, shelving, mezzanines etc. Now it is conveyors, picking equipment, powered systems – that kind of thing. The investment is definitely going into automation for the cost benefits of taking the man out of the operation." Diversification Where the money goes, the market will follow. Jane says, alongside product, Schaefer's customer base is diversifying – moving away from markets such as automotive and into infrastructure, education, utilities, local government – all areas earmarked for investment over the coming years. He says this also gives Schaefer a broader knowledge base from which to draw. But, by launching the cold store business unit, Schaefer confirms its commitment to the industry. Jane says cold storage firms, "always good at talking with each other", should now leverage the buyers' market and take a look at what their competitors are doing to avoid their market share being gobbled up by hungry rivals when the upturn eventually comes around. Naturally, he says, Schaefer is happy to show what can be achieved – from traditional bread and butter work to fully automated installations integrating unmanned reach trucks, which Jane believes is where the market is headed.

Food for thought? For successful suppliers, the frozen food – and broader food retail sector – are more like manna from heaven right now. While other industries may be feeling the crunch, it seems Britain is determined to chew its way out of the economic big chill. The question for cold store operators is who will be drinking who's milkshake come the upturn?

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