In 2013, Fred Boehler joined Americold Realty Trust, the world’s largest owner of temperature-controlled warehouses, as executive vice president and chief operating officer, after years spent in logistics with the supermarket retailer Supervalu and the bookstore chain Borders. One of Boehler’s first tasks was to integrate the properties and operations of Versacold International, which AmeriCold acquired in 2010. Versacold was the second largest cold storage operator and itself was a rollup of several major players in the industry. That integration wasn’t going well, but Boehler and his team made it work. The next year, Boehler was named president and in late 2015, added CEO to his title. Boehler early this year oversaw the company going public, an IPO that raised $360 million in capital.
Americold now owns and operates 156 temperature-controlled warehouses globally, of which 144 are in the US, with more buildings on the horizon.
AJOT: How are the demands on your industry changing?
Boehler: The demand for temperature-controlled services continues to grow. If you think about the grocery store you used to shop 15 years ago and look at that same grocery store today, what you see is expansion in fresh and frozen. All that needs to be temperature-controlled.
AJOT: With this growing number of products available at the supermarket, how does that affect what you do and where you do it?
Boehler: The biggest change that’s occurred is the SKU proliferation. Go back 20 years and think about the pizza aisle in your frozen-food section. You had maybe three different brands and maybe three different flavors of those brands. You had a lot of quantity of limited SKUs. Now you go and you look at that same eight-foot set, you see dozens and dozens of different manufacturers and dozens and dozens of different flavors. What that means when you back up to the supply chain, instead of delivering full pallets of pepperoni pizza or cheese pizza to the retailer, you’re now having to deliver a case of pepperoni, a case of buffalo chicken, a case of mozzarella, a case of Margherita, a lot more touches, less bulk. What that means to my operations, I can’t have [just] bulk storage, I need to have more pick faces, more labor, because I’m not just selecting cases and hopping on a forklift and selecting 100 cases at once. Because we need more labor, how can we be more efficient? That starts to introduce automation.
AJOT: How are you tackling that issue of automation and technology?
Boehler: Americold is investing in, building out some automated sites, but doing so in a fashion that we’re not doing automation for automation’s sake. We’re building automation because we believe it produces a return for us. We’ll take certain SKUs and put them in automation and certain SKUs still belong in conventional.
AJOT: How do you determine that?
Boehler: When we engage with a customer, we get all their data. We look at all their volume metrics and how their products flow. We run that through those different algorithms, it tells us, with this type of technology, with these kinds of efficiencies, these SKUs will benefit, these SKUs won’t.
Where people go wrong with automation, they try to throw everything onto automation, they end up overbuilding and overspending and therefore don’t get the returns on their investment.
AJOT: Is what you’re saying that you can take an existing cold storage plant and retrofit part of it with automation and leave part of it conventional?
Boehler: That’s right. Right now, outside Chicago, we’re taking an existing facility and adding on to that a facility a 140-foot [high] automation expansion, all AS/RS technology. So, we’re moving a portion of the SKUs that we already have into that environment. And we’ve introduced additional technology that will go into the conventional space. That will automatically, with robotics, de-palletize, take layers of cartons off of pallets and put them on another pallet.
People ask me about older sites versus newer. We’ve run facilities that are very old. All our sites, whether sitting in Sikeston, Missouri or Chicago, have a purpose, and are pretty cool.
AJOT: Do you see more outsourcing by food retailers of their cold storage distribution?
Boehler: Retailers, by the nature of who they are, have always tended to be more insource heavy, especially grocers. The problem was that they built that infrastructure decades ago. The frozen side of the grocery has grown much faster than the dry side.
They have a choice: Do they want to spend capital on investing in infrastructure or do they need to invest their capital in store fronts given that retail is the most competitive it’s ever been? With that said, it’s really hard to outsource retail business because you need somebody who gets it. With retailers, there’s no forgiveness.
AJOT: Americold is a company built largely on acquisitions. Going forward, what’s your philosophy on build versus buy?
Boehler: It’s a healthy mix. We’re now at a stage where we can acquire and integrate much more easily than anyone else in the market. At the same time, we’re going to continue to develop. So, we built in the last year, three new facilities. We’ve got a development pipeline over a billion dollars. We just recently announced a major opportunity to build major retail infrastructure for a very large retailer in Australia. These will be big, automated retail facilities that we’ll own and operate on their behalf.
There are tons of development opportunities out there, a mix between customer driven, built to suit, as well as market driven opportunities. We get very healthy returns off those development projects. With acquisitions, you get in-place cash flow. Usually, when you’re buying someone, you’re not buying open space, because there is none, you’re buying the business. You apply your synergies and best practices to get an arbitrage off that acquisition.
