The COVID-19 pandemic has significantly changed the way we do business across the globe. The food industry is seeing some of the biggest changes. With restaurants closed or limited by reduced seating, people have had to shift their consumption to products sold in grocery stores. This has created new challenges and opportunities for e-commerce, cold storage, and the cold freight industries.

COVID-19 and the Impact on E-commerce

To avoid exposure to the virus, consumers began shifting their grocery shopping online. While this was commonplace for many goods with the rise of major online retailers like Amazon, there had been little prior momentum in the space of grocery e-commerce.

Before the pandemic, only 4% of grocery sales were made online. This has drastically changed. Grocery delivery companies like Instacart already offered this service, but have since seen an increase in app downloads of over 200% over the last year. With this demand, major retailers and grocery chains such as Walmart and Target are now offering similar services. While this type of shopping has always been popular with younger generations like the Millennials and Gen Z, the pandemic has forced older generations who are less tech-savvy to embrace this method of shopping. According to Gordon Haskett Research Advisors, 41 percent of people said they bought groceries online for the first time during the pandemic.

“Necessity is the mother of invention.”
~ Unknown

Impacts on Cold Storage and Supply Chain

Changes to how people buy groceries are impacting the way these products are stored and distributed. An important thing to note is that despite the rise of e-commerce for food purchases, this does not necessarily mean growth in the market. People are still generally consuming the same amount of food. The shift is happening in the way people consume food and where they purchase it. With restaurants going out of business or operating at reduced capacity, more and more people are buying groceries and cooking at home.

Restaurants and grocery stores are different in the way that they interact with the supply chain. Restaurants typically don’t store food for long periods. They rely upon regular deliveries of fresh ingredients and only order what they will use during the week. Grocery stores on the other hand sell a wide variety of cold and frozen packaged foods and can receive larger deliveries less frequently.

Because of this change, the supply chain has had to adapt to keep costs low. Since transportations of goods account for 70% of the supply chain costs, having cold storage facilities close to consumers helps keep costs down. In 2019, experts had projected that demand for cold storage facilities would increase by up to 70%. This was before the pandemic and demand has only increased more. Companies are making major investments in the expansion and construction of new cold storage facilities. Americold, the world’s largest REIT (Real Estate Investment Trust) specializing in cold storage, plans to invest $500 million in new cold storage construction projects.

Projections for a Post Pandemic Market

While the future of the pandemic remains uncertain, many agree that it will be a long time before the market returns to pre-pandemic conditions. Some assumptions can be made about how the e-commerce and cold storage market will look in the near future.

As vaccine distribution increases and herd immunity improves, restaurants are expected to slowly increase their sales. The supply chain will need to be prepared for this. Fortunately, this will happen at a slower rate than the abrupt halt of dining out in early 2020.

The other uncertainty is the level that people will continue to shop online for groceries. While some people are anxious to return to normal, many have embraced the convenience and ease of having groceries “appear” at their front door. Even the elderly who were likely resistant and only changed because of necessity, might be more comfortable with the technology and continue its use.

Moving Forward

One thing is for certain, the leaders in the cold storage market understand the importance of their role in the distribution of food supplies and will continue to evolve as they always have. Evansville Cold Storage is one of these leaders. Contact us today to handle all of your cold storage needs!