The food industry is undergoing significant disruption from COVID-19, as U.S. consumers increasingly have groceries delivered directly to their homes (D2C) or are buying online and picking up in-store (BOPIS). According to Adobe’s Digital Economy Index, the U.S. grocery industry had a 100% increase in daily online sales between March 13 and 15, compared with the baseline period of March 1 to 11.1 Furthermore, a Brick Meets Click/Shopper Kit survey found that 46% of respondents will continue to purchase goods online after the pandemic subsides.2
Considering that 95% of food produced in or imported to the U.S. goes through third-party distribution centers before reaching consumers, this shift undoubtedly will impact the cold storage sector. CBRE Research explored the relationship between e-commerce grocery growth and cold storage warehouse capacity in its Food on Demand Series: Cold Storage Logistics Unpacked report, concluding that an additional 75 million to 100 million sq. ft. of freezer/cooler space will be needed to meet demand for D2C food delivery and BOPIS.3 The COVID-19 pandemic is accelerating this trend.
Although they typically dictate how frequently consumers eat out, economic conditions don’t dramatically impact the demand for cold storage space either way. Food moves in and out of warehouses whether its destination is a restaurant, grocery store or the consumer. Since restaurants are down to 10% to 20% of capacity and are only fulfilling delivery orders, there’s been a shift to grocery that has forced distributors to adjust supply chains. U.S. food sales have risen steadily since 2000 except for a minor blip in 2009, including food purchased in grocery stores and restaurants (Figure 1). Although the near-term impact is a decrease in restaurant sales, grocery sales likely will have a disproportionate uptick in 2020.