Cold shipping is easier, but does it solve the food industry's challenges?
The demand to ship fresh food overseas is twice as strong as for other items, according to The Wall Street Journal, quoting the independent Drewry maritime research firm. That means more refrigerated containers called "reefers" are needed to safely send fresh produce, seafood and other items across the oceans.
Although reefers comprise just 7% of total container volume, demand for them has jumped by 5% to 6% each year over the past five years — versus 2% to 3% for regular containers, Drewry noted. The trend is driven by the rising middle class in Asia and elsewhere, which is better able to afford imported —and more expensive — foods and beverages.
"For the growing middle class, basic food like rice is no longer enough," Eric Legros, head of reefer operations at French shipping giant CMA CGM, told the newspaper. "They want their fruit, vegetables and fresh meat, and that’s pushing the industry to move more and more products under cold management."
Cold shipping is particularly critical for smaller companies that can't afford to pay for large refrigerated sections on container ships. With the availability of controlled-atmosphere reefers, however, a smaller produce company in South America is able to ship product to the U.S. or Europe and have it arrive in good shape as much as 18 days later, the WSJ reported.
Items such as bananas, apples, pears, cherries, berries, avocados, grapes, meat and seafood are particularly dependent on cold shipping and storage in order to keep their value during and after transportation. Consumers in the U.S. and elsewhere expect to have these items available year-round instead of only on a seasonal basis, and retailers want to be able to offer them to keep shoppers coming back.
Retailers also like to bring in exotic produce when possible to attract adventurous consumers. Specialty global produce — papaya, mango, star fruit, guava and the like — can help grocers build a loyal customer base in a competitive marketplace as shoppers seek out new foods. Exotic offerings brought in by reefer may cost a bit more, but they add special interest to the produce area, which is part of the store perimeter where sales are typically highest.
Most U.S. foods and beverages are shipped around the country by truck, although some items travel by air or rail. Trucking expenses have been steadily increasing due to a longtime driver shortage, and food companies have had to divert more of their budget to handle the additional cost. Food makers and retailers have recently been contending with product shortages, delivery delays and higher prices. Transportation and distribution costs are increasingly being singled out on earnings reports, including Campbell Soup, SpartanNash and B&G Foods.
However, shipping by reefer is not a solution to these issues. Ports are becoming congested — both because there are more ships and containers coming in and industry consolidation is altering shipment patterns. Even if reefers can quickly get out of the port, they need to use a truck or train to get to their final destination. According to figures from the Bureau of Transportation Statistics, trucks are more scarce, trains are longer and ships are bigger. The reefer technology can keep items colder for longer, so until a better logistical solution can be found, at least items can have a bit more time to get where they are going.
Reefers can also help U.S. food exports which, according to The Balance, comprise 9% of all goods shipped to other nations. While some new export deals have been approved, including U.S. pork shipments to Argentina, the U.S. Department of Agriculture's Economic Research Service found that the value of agricultural exports declined in 2015 to a value of $133 billion. With a Chinese trade war in the beginning stages, exports may be cooling even more. The Trump administration, which so far has had a mostly restrictive trade policy, has recently floated getting back into the Trans-Pacific Partnership to open more trade with Asia. Food producers have long championed this move, and the long-haul cold shipments of reefers could help the U.S. capitalize on this kind of trade opportunity.
- The Wall Street Journal Cold Shipping in Hot Demand as the World Craves More Fresh Food