New PRW construction plans ease off as economy slows; inventories firm.
As economy slows plans for construction and acquisition, frozen food stocks stabilize. Despite bans, CFC-based refrigeration systems are still on the drawing boards for some cold stores.
Lewis Carroll's Alice discovered one of the realities of the business world on her visit in Looking Glass land, when the Red Queen led her across the chessboard landscape on a merry chase that got nowhere. "It takes all the running you can do, to keep in the same place," she was told. "If you want to get someplace else, you must run at least twice as fast as that!"
That's the name of the game for most of the freezer storage operators who responded to Quick Frozen Foods International's annual survey, who find themselves running against an economic wind. Even in ordinary circumstances equipment and facilities must be maintained and upgraded continually just to stay current. The so-called Gulf War and the concurrent recession heavily burdened the world's economies, resulting in many businesses lapsing into a conservative mood insofar as making major investments.
Yet this occurred just at a time when some splendid new opportunities were opening up -- opportunities that would require considerable fiscal and physical investment and redirection of energies. The outlook for some of these opportunities and the current status of the effort is discussed in considerable depth elsewhere in the pages of this issue of QFFI. Here we will concentrate on the view of the refrigerated warehouse segment of the industry.
Inventories and Turnover
Readers of this magazine are primarily interested in the status of the frozen food products, so QFFI asked PRW operators to rate their experience with their inventories of retail, foodservice (catering), bulk and government (intervention) frozen food stocks, and also for both inventories and turnover of the overall FF category.
There was a considerable increase in the proportion who claimed all FF inventories as holding steady, and little change among those who saw them as either gaining or decreasing. The worldwide ratio seeing no change rose from 44.9% last year to 52.1%, while an even third see an increase, compared to 31.9% last year, and just over 10% in both years perceived inventories as declining. In some contrast, while there were also many more who saw turnover as stable, at 50% compared to 37.7% in 1990, there were fewer this year than last who found it increasing, at only 25% compared to 47.8%, and a few more (10.4% from 7.3%) who see turnover falling off.
These proportions vary considerably from region to region. Responses from the East Coast states, for instance, show little change in the ratio of those at status quo in inventories, at 35.7% compared to 37.5% last year, and no change at all regarding turnover, with an even half considering them stable. In this area 14.3% inventories and none for turnover. But there were 42.9% there who perceive inventories as increasing, relative to just 25% in 1990, and this pattern was almost reversed for inventories, with only 21.4% seeing gains for turnover and 42.9% seeing inventories on the rise. Since the ideal situation for a warehouse not itself in an expansion or cut-down phase is for inventories and turnover to pretty much balance out, this suggests a not wholly comfortable climate on the U.S. East Coast.
The West Central and Mountain region is experiencing a similar dichotomy, with an even stronger drop among those seeing increases in turnover, from 61.5% to just 20%, and 40% with gaining inventories compared to 23.1% last year. However, close to twice as many are seeing steady turnover, at 60% compared to 30.8% last year, with some gain among those reporting steady inventories, from 53.9% to 60%. None here reported declining inventories this year, where 23.1% did before, but 20% did show a fall-off in turnover as opposed to 7.7% last year.
In between, the East North Central region reports a similar gain in stable inventories, at 66.7% compared to nearly 54% last year, while those showing steady turnover more than halved, from 46.2% to 22.2%. Both inventories and turnover were noted as falling off by 11.1%, an increase from none for inventories and from 7.7% for turnover, but gains in inventory were reported by fewer, at 22.2% compared to 38.5% last year, and turnover picked up for more, with 44.4% so noting compared to 38.5% in 1990.
Among those on the Pacific side, there were major increases on behalf of steady inventories and turnover, rising from 20% each last year to 54.6% for inventories and to 63.6% for turnover. For inventories, those reporting declines and those reporting increases were evenly divided at 18.2% this year, where none had reported declines before and 60% had noted increases. Turnover showed a similar pattern, though about the same ratio showed declines at 10% to 9.1% this year, while those with increases fell from 50% to 18.2%.
About half of the respondents from the rest of the world noted turnover as steady, with none showing declines and 25% showing gains; for inventories, there were 62.5% who are indicating stable stocks, 37.5% noting increases, and again none finding them slipping.
Breaking out FF stocks by sales groupings instead of regionally, our trend responses show 54.2% of retail products as steady, 27.1% increasing somewhat, and 2.1% showing heavy gains; 8.3% see them as slipping and none as in a more serious decline. This was a strong gain for the status quo, which was reported at just 24.6% last year, but only slight changes from those who saw them gaining or declining last year. The balance, then, for retail frozens remains on the growth side.
The same may be said of the foodservice/catering category, if perhaps a little less conservatively. There was also an increase here among those regarding this group as maintaining stability, from 21.7% to 41.7%, while 31.3% see it as gaining somewhat, no significant change from last year's 30.4%, and 4.2% see them as growing strongly, very close to the previous 4.4%. Only 4.2% see any degree of slippage here and none see anything stronger, both proportions down from 1990.
Bulk product has a more mercurial potential, to judge from this year's responses. While there is a similar growth among those seeing its inventories as stable, rising from 27.5% to 43.8% of all responses, there are also 25% who see it as gaining, compared to just 14.5% last year, and 4.2% who see stronger increases compared to 2.9% before. However, there is also a substantial element, at 12.5%, who see bulk product as slipping, and another 2.1% who think they're losing harder than that; both figures are very close to last year's.
As will be seen from remarks made elsewhere in this issue, government-owned food stocks, classified in Europe as intervention stock, have affected capacity overseas considerably in the last few years. In this report we don't break out the regional aspects of the trend data on this category to specific percentages, but it can be said that the international responses are patterned similarly albeit slightly more conservatively, with greater weight to declining levels.
Beginning with stable inventories, only 22.9% so indicated, though this is an increase from last year; just 12.5% noted some increases, and none anything stronger, where in 1990 the latter trend points were marked by 1.5% each. Somewhat decreasing inventories in this category were reported by 16.7% this year, and strongly falling stock by 8.3%, but these were both heavy changes from last year's respective 20.3% and 23.2% responses.
To properly store frozen product, refrigeration equipment must be maintained in good order and occasionally augmented. In recent years the equipment and refrigerants employed have come under scrutiny for reasons unrelated to their primary uses.
Despite the relatively recent scientific accord on the deleterious environmental impact of chlorofluorocarbon refrigerants (CFCs), there are still those who contest the findings (just as the tobacco industry takes issue against surveys linking smoking to cancer and heart disease, and finds staunch supporters among smokers who do not wish to give up the habit). Some of these join the resistance to efforts to implement the changes needed to lessen that impact, but as is often the case much of that resistance comes from those who have honest economic difficulties in effecting those often expensive modifications.
For many of the respondents to this year's survey, the question has already long been resolved, so that the question, "Has the CFC controversy forced you to make changes, either in existing setup or in future plans?" mostly resulted in the "no changes" response or no response -- 60.4% all told -- while 27.1% indicated that it was not applicable. Only 8.3% said "yes," and of those only half elaborated.
"Future plans include limiting and/or removing CFC related refrigeration equipment," wrote one respondent, and another specified changes from R12 to R22 refrigerants as the continuation of a policy already under way for five years, including the phasing out of R502 some three years ago. Another acknowledged that several units currently in operation used Freon 502 but that a new freezer under construction would use ammonia refrigeration.
Some new developments in this area that may make future compliance with the general CFC ban much simpler to implement are discussed beginning on page 178.
Plans for the acquisition of new freezer equipment by some respondents to this survey would appear to flout the anti-CFCs sentiment, however. Proposed compressor purchases show a decrease in ammonia systems from last year's 62.3% to 47.9% this time, while fluorocarbon types are on the shopping lists of 15.5% compared to just 4.4% in 1990. What's more, these changes are reflected all across the board, with only cold storages in the East North Central region of the U.S. indicating no plans to acquire fluorocarbon compressors.
The East Coast percentage of those acquiring ammonia systems is the only one showing an increase over 1990, and it's insignificant, moving from 56.3% to 57.1%, though it retains the distinction of having this year's highest regional proportion with ammonia systems on its drawing boards. East North Central dropped the furthest, from 76.9 last year to 33.3%, followed by West Central & Mountain, which fell from 61.5 to 45%; the Pacific region slipped less than five points from 50 to 45.5% this year. The North American average comes out to 47.5%, compared to 64.3% in 1990. The average of the responses from the other far corners of the world works out to an even 50%, only slightly under last year's 53.8%.
If there is anything good to say about this, it is that at least ammonia systems continue to sustain the substantially higher proportion of planned acquisitions, over fluorocarbon systems. The latter amassed a North American response of 10%, compared to 5.4% last year, while 25% of the overseas contingent will be getting them soon. In 1990, none there so indicated.
Regionally, fluorocarbon units will be acquired by 20% of the West Central and Mountain respondents, up from 7.7%; by 14.3% of those on the East Coast, compared to 12.5% last year, and by 9.1% of the Pacific warehousemen, none of whom wanted any last year.
Among the 18.8% who checked off refrigerants as among their planned acquisitions, 10.4% specifically wrote in |ammonia,' 2.1% wrote in NH3, and others wrote in R22, R717 and R502.
If the warehousemen were to select between screw compressors and reciprocating, 37% of the worldwide total would go for the former and 22.9% for the latter, with a little overlap among them. Also asked about packaged or central station units, there was a smaller overall response, with just 2.1% looking for the packaged units and 4.2% for a central station system. Because of a change in the questionnaire regarding these compressor types, there is no comparison from 1990 possible for them this time.
The North American response was 32.5% for screw compressors and 25% for reciprocating, with a roughly parallel response across the regions, but cold stores from other parts of the world were even more heavily in favor of the screw compressor type at 62.5%, compared to 12.5% for reciprocating. It was also from among this group that the only responses for the packaged units came (also 12.5% of them), none in North America. But the contrary was the case with the central stations, as the only responses for this type came from 14.3% of the operators in the East Coast states.
For whatever reasons a refrigerated warehouse operator may acquire one type of freezing system or another, economic or environmental, one type of equipment purchase that can be wholly practical either way, though generally better installed in the initial construction process rather than after the fact, is the heat recovery system. In the light of the reduced construction plans to be discussed shortly, it is good to see that there was a slight increase in the planned acquisition of such systems, from 7.3% of all respondents in 1990 to 8.3% this year. In North America the change is even better, rising from 5.4% to 10%; the difference coming from the fact that whereas last year 15.4% of the respondents from elsewhere in the world had checked this item, this time none did.
The strongest regional response came from the West Central and Mountain operators, 20% of them compared to none last year; Pacific respondents held approximately firm at 9.1% compared to 10% last year, and 7.1% of those on the East Coast will get such a system, after a zero response in 1990. Those in the East North Central region apparently got theirs last year, when 7.7% said they would; none plan to this time.
Other freezing equipment inquired about include condensers, fans and blowers, and coils, in order of international preference. Condensers garnered a 35.4% interest, down from nearly 48% last year, while fans and blowers matched last year's response at 33.3%, and coils slipped from 29 to 25%.
New Warehouse Construction
When asked about their perceptions of new construction going on, 27.1% of the respondents worldwide saw little change in the development of public space, 22.9% saw some increase and 10.4% thought it would be growing strongly. Only 4.2% thought there might be some slowdown, and another 4.2% thought it might be declining. Compared to last year's views, these responses would suggest some trend toward a decline in new public storage.
Private space construction was seen by only 18.8% as stable, a considerable drop from 1990's 36.2%, but the trend would appear to be for increased growth, as 12.5% see some gain and 6.3% considerable development. Last year these were 13.4% and only 1.5% respectively. On the declining side, only 2.1% indicated some drop and none saw anything stronger than that, compared to 1.5% and 2.9% in 1990.
Frozen foods are best kept in temperatures of zero degrees Farenheit (- 18 [degrees] Celcius) or under, and the questionnaire deals mainly with freezer storages maintained at that level, but QFFI seeks to discover a general sense of the cold storage industry and inquired also about cooler storage maintained at up to 32 [degrees] F (0 [degree] C). Other construction and renovation plans including office space were also asked about.
New zero-degree warehouses are planned by 18.8% of all respondents, which is down from last year's 27.5%, and only 2.1% intend new cooler construction compared to 10.1% in 1990. Even fewer, at 14.6%, will be building additions to present freezer space, compared to 26.1%, though cooler space will be expanded by 6.3% of them, slightly more than the 4.4% so noting a year ago. However, renovations of current refrigerated storage in both temperature ranges will be undertaken by more respondents than last year, with 12.5% fixing up their zero-degree cubage, and 6.3% their 32-degree space, compared to just 7.3% and 2% respectively as reported here a year ago.
The disappointing new building totals are largely because respondents in two of the U.S. regions -- the Pacific and the East North Central, had no plans to do any new warehouse construction at all, though the latter region's substantial addition plans held up with a slight increase from 30.8 to 33.3%.
Of those in the vast West Central and Mountain area, 20% decided to build new freezer space, down from 30.8%, and it was left to a strong 42.9% of those from the East Coast to bump up their intended new freezer construction, from 31.3%. This was also the only region to plan new coolers, at 7.1%, though this was less than last year's 15.5%.
Additions to zero-degree storage are planned by 9.1% of those surveyed in the Pacific states, a sharp drop from 1990's 30%, but a third of those in the East North Central region will do so as well, which is a small increase over its previous 30.8% response. The East Coast showed some strength, with 14.3% enlarging both freezer and cooler space; this was a drop from the 18.8% adding to 0 [degree] space last year, but none then planned to augment their coolers.
Renovation plans were anticipated only by operators on the two coasts, with 9.1% from the Pacific region so indicating for both freezers and coolers, compared to 10% for 0 [degree] storage last year but none for 32 [degrees] space, while on the East Coast it was a gain for both types of storage, rising from 12.5 to 14.3% refurbishing freezers, and from none to 7.1% overhauling coolers.
These, together with Canada's representation, brought the North American response to 20% for new freezers and 2.5% for new coolers, which were down from 32.1% and 8.9% respectively. Expansion plans were down for this portion of the world, from 28.8% to 17.5%, but refurbishment intentions, though small, were improved, at 12.5% for 0 [degree] space, compared to 7.3% last year, and 6.3% for the 32 [degrees] space, from only 2% in 1990.
None of the respondents from the rest of the world plan to erect new cooler space, but 12.5% do intend to add new freezer space, an increase over the 7.7% reported last year. Enlargement of current space is not planned overseas at all, but 37.5% of the foreign respondents do plan to renovate their freezers, better than double last year's 15.4%, while 12.5% will make repairs on their cooler storages, also somewhat more than the 7.7% proportion who so reported in 1990. It is important in comparing these with last year's data to remember that these respondents represent a somewhat different mix of areas from those who replied last year, and any inferences drawn must take that into account.
When QFFI asked about respondent's own perceptions of the direction of storage space demands, most felt they were fairly stable or increasing slightly for all types -- freezer, cooler, dry and convertible. Indeed, 43.8% checked the demand for freezer space as stable, 35.4% as gaining somewhat, and 12.5% as showing a decided increase, compared to 1990's responses of 37.7%, 27.5% and 10.1% respectively. Only 8.3% felt there was any decline, though this was up a little from last year's 5.8%, but none in either year considered there was any serious falloff.
For cooler space, there was little change among those who were experiencing status quo, with 33.3% this year and 31.9% last time, but 37.5% were seeing some gain where 24.6% checked that level last year. This was possibly a leveling off from 1990, as those seeing a sharp increase in cooler demand dropped from 10.1% last year to just 2.1% this time. However, there were also indications of decline in this kind of storage, as 10.4% indicated some slippage and 6.3% a heavier drop, both of which were more than last year's respective 8.7 and 1.5% responses.
Demand for convertible space was seen by 41.7% as stable, much stronger than last year's 24.7%, and 16.7% felt some increase in the call for such space, compared to 11.6% in the 1990 survey. There was little change in those seeing heavier gains here, at 4.2% this year from 4.4% last, nor was there significant change among those seeing declines, though both figures dropped, from 2.9% to 2.1% for a trivial loss of interest and from 1.5% to nothing for a more severe decline.
When asked about dry storage, less than half of those surveyed responded. Stability continued to reign, but not by consensus, although over half of those who did respond, or 27.1% of all respondents, did indicate that demand for dry storage was holding steady. This was about the same proportion as last year. However, fewer this year perceived some increase, with 10.4% so noting compared to 15.9% last year, and none saw any strong gains where at least 2.1% had done before. On the other hand, the down side did see more responses, with slight declines in demand garnering 6.3% of the responses and 4.2% showing a stronger falloff; last year there were 5.8% and 2.9% respectively.
The demand for leased public space was felt by 37.5% to be stable, an improvement from 30.4% in 1990, but there was little change of any significance among those who saw it as increasing, from last year's 13% to 12.5% for minor gains and 2.9% to 2.1% for a stronger buildup. There were 6.3% who thought there might be some slippage, certainly more than last year's 1.5%, but this may represent a slight easement as the 5.8% who last year thought it was sliding sharply dropped to but 2.1% this time.
Any business operation requires administration facilities, and as a company grows, or even to maintain a steady pace, it sometimes becomes necessary or desirable to improve on its office space, change its location or add new locations, or even to build brand new offices. This year, economic conditions appear to preclude any major activity in this area and, worldwide, only 4.2% of all the respondents intend to build new offices and half that to add to current office space, compared to 13% and 8.7% respectively in 1990's plans. Renovation will be undertaken by 6.3%, which is little real change from the 5.8% so indicating last year.
The specifically North American outlook is similar, with 5% planning new office construction and 2.5% expanding their office facilities, both declines from 12.5% and 7.1% respectively, while 5% will renovate, an increase over 1990's 1.8%. Renovations will also be undertaken by 12.5% of the remaining international cold store operators, who plan no new office construction or expansions. Last year 15.4% had such plans across the board.
All the new building is being done on the East Coast, where 14.3% so indicated, and all the expansion activity is taking place among the Pacific region's operators, with 9.1% of them checking this item. With the exception of the West Central and Mountain region, where no office construction or renovation of any sort was planned in either year, all areas dropped in such intentions from last year's survey. Office renovations, however, will be attended to by 11.1% of the East North Central respondents and 7.1% of those on the East Coast, which are improvements over their respective 7.7% and 6.3% responses in 1990.
Also mentioned in the intended construction plans were several references to new or additional dry storage (one specified that it would be temperature controlled), a new blast freezer running at -30 [degrees] F, and a transloading dock. Several intend to build or expand processing areas, including blanching and IQF freezing and a central repack station.
With the lull in warehouse construction, buying plans for such major and relatively permanent cold storage elements as standard racks declined a little, but were augmented for those items subject to continual wear and tear and requiring occasional replacement as lift trucks and their batteries, as well as pallets and dock boards, also perennial purchase favorites.
Lift truck batteries took top honors this year, with 79.2% of the worldwide respondents planning to buy them, compared to 60.9% last time; lift trucks themselves fell from first to second place with 75%, which was nevertheless a proportional increase over last year's 71.1%. Battery rechargers for these mainstays of the industry were added to the survey for the first time this year and gathered a respectable 45.8% response.
Pallets are in the buying plans of 64.6% worldwide, ahead of last year's 55.1%, but, as already indicated, the next ranking item, standard racks, slipped several points, from 63.8% to 54.2%, still a significant proportion. Specialized varieties of racks never got over a 4.2% response, which was hit by both gravity racks and automatic racks. There were also some write-ins, however; and specifically mentioned more than once were |pushback' racks.
Totaled together, the planned purchase of the variety of doors and curtains used in warehouse operations would be overwhelming, but taken as individual items or types, plastic leads the category at 45.8% of all respondents, a slight gain from 1990's 42%, followed by automatic doors, for which 43.8% will be looking this year, a very slight dip from last year's 44.9%. Mechanical doors are at a distant third with just 18.8% checking them, quite a bit down from 27.5% tallied last year; manual doors are next at 14.6%, also less than the previous 18.8%, and, finally, only 6.3% will invest in air curtains which is a bit of a pickup from 1990's 5.8%.
Metal dock boards garnered a 27.1% response, a little way down from 37.7% last year, while the purchase of slip sheets, for which some systems are specialized, will hold steady at 14.6%. Conveyor systems were checked off by only 4.2%; conveyor belts alone got half that much.
In regard to materials handling, the trends inquiry showed a strong feeling that palletization was steady or gaining, with 56.3% indicating this as stable, considerably more than the 30.4% who saw it that way last year, while 25% think of it as somewhat on the increase, compared to another 30.4% previously, and 15.5% as strongly rising, compared to 11.6%. Only a little over 4% thought it was slipping a little this year, to under 3% last year; but none either time felt that it was falling off in any serious degree.
In some contrast, slip sheeting was seen as steady by 27.1%, slightly gaining by 12.5%, and 4.2% think it's making strong progress, but 8.3% see it slipping and another 8.3% as in trouble. In the previous survey, just 23.2 felt it was steady but 18.8% saw it as on the way up; however only 1.5% thought it was moving fast -- and, at 8.7%, there appears to have been essentially no change in those who thought it was losing out, either slowly or quickly.
Modularization was perceived as steady by 29.0 and slightly gaining by 10.4%, both of which are little changed from last year. At 4.2% there are a few more that see it as gaining rapidly, from 1.5% last year. There are also more who see it dropping a little, at 6.3% compared to 4.4%; however, whereas last year there were 2.9% who saw modularization as going down the tubes, none indicated they felt that way this time.
The greatest indication of growth was registered on behalf of stretch wrap, with 56.3% showing it as on the upturn where 47.9% did last year; there was little change in those who saw it as burgeoning, however, with less than a percentage point's gain from 11.6 to 12.5%. And while there are more who perceive it as falling off a little, at 4.2% to 1.5% before, none on either occasion saw stretch wrap as dropping away.
Transporting product to and from the storage environment could be thought of as within the context of materials handling, but although comparatively few of those surveyed were in the market for the means to do this on their own behalf, there does seem to be some strength. About 20.8% did indicate the intent to acquire refrigerated trucks, and 18.8% (with some overlap) checked refrigerated trailers/containers.
A look at the trend table shows that 54.2% see the use of common carriers as holding to the status quo, compared to 44.9% last year, whereas 41.7% checked contract haulers as steady, also a fair gain over 1990's 30.4%.
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|Title Annotation:||Warehousing World; refrigerated warehouses; Exclusive Annual Survey|
|Publication:||Quick Frozen Foods International|
|Date:||Apr 1, 1991|
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