The cold storage industry has become hot in Arkansas, with expansion of facilities across the state expected to continue over the next several years.
An Arkansas-based cold storage company and national storage provider recently announced investments of nearly $ 100 million in the state to meet growing customer demand. The expansions are part of a trend sweeping the world, with industry analysts predicting a compound annual growth rate of 13.4% through 2027 for the industry.
Global cold storage construction has been estimated at $ 7.9 billion in 2020 and $ 19 billion by 2027, according to analysis by Research and Markets, an international marketing research firm that covers the industry. .
Maumelle’s Cypress Cold Storage and Atlanta’s Americold Realty Trust are contributing to growth with expansions in Arkansas. And Cypress is already planning his next move in the state. The company has purchased land in Springdale and is in the process of designing another cold storage facility that will likely be close to 200,000 square feet.
“There is no doubt about the continued growth of the industry,” said Michael McAfee, president of Cypress. “We don’t see any change in that. Northwest Arkansas probably isn’t our last new facility.”
The expansions align with the state’s focus on the restaurant industry as a primary target for business recruitment and economic development efforts in Arkansas, says Commerce Secretary Mike Preston .
“Food processing is an industry that we are targeting in Arkansas, from crop production and distribution and storage to manufacturing,” Preston said. “These companies are making significant investments and that means employment opportunities for the Arkansans. These are good economic victories for our state.”
There is a wire from Arkansas that connects cold storage providers to their customers. Americold has 10 storage facilities in the state and one of its largest customers is Conagra Brands, which has two manufacturing plants in Arkansas. Cypress’s biggest customer is Tyson Foods, and it serves Turkey Hill Dairy, which has taken over production of Yarnell’s Ice Cream in Searcy.
Cypress plans to inaugurate the land at the Springdale facility in the coming months and begin operations next year. This follows the company’s announcement in May that it is investing $ 13 million and adding 88,400 square feet to double the size of the Maumelle warehouse.
The coronavirus pandemic’s grip on the economy, forcing restaurants and other businesses to shut down as workers camped out at home, has led to an increase in online grocery orders and deliveries, trends that have led to an increase in online grocery orders and deliveries. fueled cold storage demand as packaged food producers like Conagra increased production at factories, including its two Arkansas factories.
Conagra, an $ 11 billion international packaged food supplier, has factories in Fayetteville and Russellville that produce frozen meals, including brands such as Healthy Choice, Marie Callender’s, Banquet, Hungry Man, EVOL, PF Chang’s and Bertolli. . The Chicago-based company provides products to restaurants, retailers, commercial customers and food service providers.
“Our products were in high demand before the pandemic and have become even more popular as more meals are consumed at home,” said company spokesperson Daniel Hare. “We are running our facilities at full capacity to produce enough food and with that comes an increased need for cold storage.”
Conagra has approximately 1,450 employees in Russellville and another 550 in Fayetteville.
The increased demand for Conagra products led Americold to announce two weeks ago that it would invest $ 84 million and create 30 jobs at its cold storage facility in Russellville. With the expansion, Americold will add 13 million cubic feet to the facility, creating space for approximately 42,000 pallets for product storage.
The expansion is driven by the storage needs of Conagra, one of Americold’s major customers, the company said. “The Russellville facility will be highly automated to provide long-term critical infrastructure to one of our key strategic customers and one of the leading branded food companies in North America,” said Fred Boehler, president and chief executive officer of Americold, in a press release. announcing the expansion.
The company declined to provide comments or other details for this article.
While covid-induced lifestyle changes have fueled Americold’s expansion, Cypress’s growth is not necessarily linked to the pandemic, according to McAfee, who says the company is “centric. Arkansas ”with an emphasis on working directly with about five major clients.
Cypress receives processed food items such as chicken nuggets and patties from customers like Tyson, which are then shipped to fast food restaurants. “We store it, store it for them, and deliver it for consumption by consumers,” McAfee said.
Refrigerated and frozen products are shipped to chains such as McDonald’s, Wendy’s, and Taco Bell. “We have a diverse customer base and we have a variety of products in our building,” said McAfee, noting that Cypress stocks products including chicken, vegetables, ice cream, waffles and tortillas.
The company prides itself on remaining agile and flexible so that it can respond quickly to changing customer needs. “We are very focused on a handful of customers and provide them with premium service,” McAfee said.
Cypress also operates a smaller warehouse, with a storage capacity of approximately 6,000 pallets, in the Dark Hollow area of North Little Rock, an area east of Interstate 30 and north of the Union Railway. Pacific.
Maumelle’s facility, which includes separate rooms to handle different temperature and storage requirements, has increased its pallet storage from 7,000 to 18,000 with the expansion. Cypress has increased the daily handling of goods from 2 million pounds per day to around 4.5 million pounds per day.
Americold and Cypress noted that advanced automation will be part of expanded production operations, which will be more efficient and less energy-intensive, which, besides labor, is the most significant expense associated with cold storage. .
For example, although Cypress doubles the size of the Maumelle plant, electricity costs will only increase by 20%, McAfee said.
Automation is the key to growing and realizing greater savings in the cold storage industry, according to a research report from Jones Lang LaSalle, or JLL, a global commercial real estate services company.
“Companies are adopting and heavily relying on technology designed to streamline cold supply chains,” JLL said in the report.
To achieve further cost savings, Cypress plans to install solar panels in its storage warehouses to achieve even greater cost savings and help customers implement their sustainability initiatives.
“This is something that could also give us a competitive advantage because all of our customers have green initiatives,” McAfee added. “This will help our customers achieve their environmental goals.”
Environmental, social and governance reports are today a requirement for clients and investors in several sectors.
JLL notes that going green is a growing trend for cold storage facilities, many of which need upgrading, given that 78% of cold stores were built before 2000, according to the research report.
“The energy required to keep produce cool can represent more than a quarter of the building’s operating costs,” the report notes. “Greener practices and energy savings could cut these costs by almost half.”
The expansion of cold rooms in Arkansas is expected to fuel employment opportunities for years to come, according to Preston.
“These are investments that are going to last a while; they are not making this investment to close or move anytime soon,” he added. “They are going to provide good, long-term, sustainable jobs.”