Refrigerated Services Survey Recession
Can't Slow PRW Business
But Impacts on Capital Investment
By J.J. PIERCE

Business is up everywhere, though construction and equipment purchasing seem to have slowed in North America. Pace appears to be faster in Asia-Pacific region.

If there's a recession on in North America, you can't prove it by turnover at refrigerated warehouses. Some 51% of a weighted sample in Quick Frozen Foods International's annual Refrigerated Services Survey - twice as much as last year - suggest an upward trend.

It's the same in Asia and the Pacific, where 57% of the weighted sample sees turnover on the increase. Fish, poultry and vegetables get the credit there, whereas in North America the list includes retail and foodservice entrees, meat, seafood, poultry, pizza and bakery.

European response to the survey this year, as last year, was so sparse that it cannot necessarily be considered statistically significant. But none of the European PRWs reported declines in inventory or turnover; while 87.5% and 78.1%, respectively, reported increases.

Construction projects still seem to be booming, despite the recession - at least for the coldest category of warehouses. In Asia, 50.6% of the sample plans new -29° C warehouses, better than last year's 34% rate. In North America it's 21.2%, almost the same as last year. The limited European response was 12.5%, but with 56.3% planning additions.

On the other hand, there are far fewer plans for new construction at -18° and 0° C in Asia and the Pacific Rim. In North America, plans for -18° locations have been cut by more than half, from 51% to 23.8%. On the other hand, 20.5%, up from 13%, plan 0° facilities. And 22.5%, up from a mere nine percent, are building new offices.

Some 40.4% of the North American response (down from 59% a year ago) anticipates a net gain in freezer space, and since that includes even companies that don't plan new warehouses or additions, it has to reflect acquisition plans. In Asia and the Pacific, by contrast, only 4.6% - versus 65% last year - expect a net increase, indicating that most of their construction involves replacement of existing facilities. In Europe, the rate was 56.3%.

Healthy, Dynamic Market
"If there is any slowdown in construction, it is probably a healthy response to a dynamic market," commented Benjamin Milk, vice president of the International Association of Refrigerated Warehouses. "An awful lot of large, state-of-the-art facilities have come on line in the past few years, at a time when the food industry was struggling with the after-effects of consolidation. The bottom line hasn't changed: food companies rely on and partner with the PRW industry because it's cost effective. It's just smart business."

North America also seems to be playing it cautiously in basic equipment purchases. Survey samples vary from year to year, of course, but if construction plan responses this year are valid, then so are equipment plans. Ammonia compressors are in only 44.4% of those plans in 2002, compared to 85% last year, and screw compressors in 37.1%, versus 82%.

It's much the same in materials handling equipment. Just 56.3% of the weighted sample in North America is looking at standard racks, versus 89% a year ago. There are some gains in more alternative systems to make up for that, with 25.8% planning to buy gravity racks (18% a year ago) and 9.3% other types like push-back and drive-in (two percent in 2000). Still, the overall interest is down. Standard racks got an 87.5% response in Europe.

Even lift trucks, in 95% of North American purchasing plans last year, net 76.8% this year. Oddly enough, 73.5% of the warehouses want lift truck batteries, compared to 53% a year ago, and rechargers are in 47% of the plans - almost the same as before. The door isn't open as far as it was a year ago to purchasing doors, either. Automatic doors, the top choice, garnered a 51.7% response this year, versus 72% in 2001 - and other options rated far lower.

Warehouses still need pallets, at least, and 64.2% this year are seeking them, as opposed to 42% last year. Interest in slip sheets (42.3% versus 35%) has also increased, although the same can't be said for metal dock boards. Hardly any North American warehouses, or none at all, require new conveyors, conveyor belts or cranes, but conveyors got a 59.4% response in Europe.

The pace of equipment purchasing is apparently a lot faster in Asia and the Pacific. Some 97.4% of the weighted sample there is going for ammonia compressors, compared to 34% last year. Good old ammonia is apparently cutting into the market for fluorocarbon compressors, which are hard to find in North America - the planned purchase rate is 42.6%, down from 65% a year ago. Ammonia and screw compressors are also overwhelmingly favored in Europe.

Whereas screw compressors are by far the model of choice elsewhere, they are still running second to reciprocating units in Asia and the Pacific - 93.6% to 97%. But the rate for screw compressors was only 34% in 2001. The region is also a stronger market than North America for condensers (54.5%), coils (94.5%) and fans and blowers (97.4%). Some 51.5% of the regional sample is also out to buy refrigerants.

Trucks apparently don't figure much at North American warehouses, which mostly outsource their transportation services. But they're a really big deal in Asia and the Pacific, where 57.7% of the weighted returns include refrigerated trailers and 42.6% refrigerated trucks. Except for a tiny operation that uses fluorocarbons, truck fleets in Asia and the Pacific all use mechanical refrigeration - which is universal in North America.

When it comes to materials handling, Asia and the Pacific are more eclectic than North America or Europe. Standard racks get a 46.8% response, gravity racks 45.9% and automatic racks 50.6%. Some 54% also plan to buy conveyors and 42.6% aim to purchase cranes, both of which are attracting little or no interest elsewhere. Asia and the Pacific are slowing purchases of lift trucks, but nearly everyone in the region still wants batteries and rechargers for them. In Europe, too, fewer warehouses want the lift trucks themselves than the accessories.

Insulation, too, is on the front burner in Asia and the Pacific compared to North America. Some 54.9% of the warehouses there are looking for polyurethane panels, and 50.6% each for foamed-in-place polyure-thane, styrene panels and fiberglas sheets. In North America, the response is only 28.5% for polyure-thane panels, and a mere 5.3% for styrene panels and 1.3% for styrene sheets.

Doors, again, seem to be more on the minds of Asian and Pacific buyers than those in North America. But their tastes are different: only 2.5% want automatic doors, compared to 51.7% in North America, whereas 94% are seeking mechanical doors, versus 21.8%. But 94.5% each like air curtains and plastic strip curtains, way more than anywhere else. The European response is pretty broad, but automatic and mechanical doors get a better response than others.

Some 86.8% of the North American warehouses surveyed have or are part of chains that have Internet web sites. Some are merely informational, others are used to keep track of inventory and order placement, still others are used for customer contact, research, customer service, advertising, sales and marketing and even procurement.

E-mail rather than traditional channels of communication like fax machines is being used significantly by some operators. ESI, WINS and other means of electronic communication are being used by 80.8% of the weighted North American samples, not far below the 86.1% using fax machines. In the small sample from Europe, 93.8% have web sites, and use of computer links is tied at 75% with that for fax machines.
In computer usage and communications, apparent declines this year in North America are doubtless illusory, due to a greater percentage of smaller chains and single operations in the sample. Witness bar coding technology getting only a 58.3% response, compared to 80% a year ago. The same is undoubtedly true in the response for services, where 68.2% this year versus 89% last year report freezing on premises. Just 39.7% say they rent out space to processors.

Given that a major trend in the industry is to custom-build warehousing and distribution facilities for processors, often with on-site processing, it seems unlikely that such services can actually be declining. The same goes for repacking (54.3% versus 74%), renting out office space to customers (59.6% versus 86%) or others (31.8% versus 72%). Only the ever-popular cross-docking (80.1% versus 77%) shows an increase.

In Asia, by contrast, the response rates for computer applications, communications and services seem to be consistent with last year's - save for increases that could be reasonably expected. Some 52.8%, for example, are using direct computer links for communication, as opposed to 37% a year ago, and more than half already are or soon will begin using their computers for energy management, and analysis/marketing.

Direct sales outlets, which can hardly be found in North America or Europe, figure at 42.6% of warehouses in Asia and the Pacific this year. Nearly all do freezing and repacking on premises, although hardly any rent out space to processors; and nearly all rent office space to clients and others. Nearly all are taking part in ISO 9000 and HAACP quality management programs - far more than their counterparts in North America.

In Europe, 93.8% of the small sample does freezing on site, and 82.3% repacking. But hardly any rent out space to processors, although 81.3% rent office facilities to non-customers. Cross docking gets a healthy 68.8% response. Management quality programs are popular (56.3%), and ISO 9000 programs are favored a lot more (87.5) than HAACP (37.5%).