For the last several years, food shippers and distributors have moved toward a faster and more flexible distribution model. Distribution all along the cold chain from the supplier to the retailer is adapting to this change. Issues contributing to this sea change include:
- Demand for fresh food offers as well as fresh produce availability all twelve months of the year
- Convenience for dual-income households and millennials who shop online for fresh food, frozen food, and meal kits
- Mass customization resulting in increasing SKU requirements
- Expectation of a quick response and faster delivery requires cold storage in urban areas closer to the consumer
- Increasing trend to buy online and BOPIS (Buy Online, Pick up in Store) grocery purchases
The onset of the pandemic has only accelerated this change.
According to FMI, “last year shoppers reported online grocery spend represented 10.5% of all grocery spending, according to Trends. That figure rose to 14.5% in February of 2020 and surged to 27.9% in the March/April period.”
In its June 23rd report, FMI also reports on the components of this online grocery spend, “... there was somewhat of a reversal in shopper hesitation about buying perishables online. Back in February Trends data showed, for example, fresh produce ranked 15th and fresh meats 19th in a list of 26 categories often bought online. “However, by mid-April, the situation had changed dramatically,” the report said. “Fresh produce moved into the top 10, with 12% saying they had just purchased fresh produce online for the very first time. Similar proportions said the same about fresh meat, refrigerated dairy and frozen foods, each seeing many first-time online buyers.”
These increases may have an outsize impact on the cold chain as consumers choose frozen food over fresh food. According to Nielsen data, the demand for frozen foods in brick-and-mortar shops grew 24% over the week ending June 20. As a result, not only is the online and grocery spend affected, but cold chain impacts are also in play. These affects may decrease as the economy begins to normalize, but the pandemic has accelerated the trend.
Cold chain participants must have speed and flexibility for fast, customizable delivery. They must be ready to adapt to these new expectations. Companies will need to expand cold storage in an already tight market to provide capacity for more inventory on hand. To make this possible, they must develop a new understanding of demand signals. To manage this effort, they will need more visibility across the organization and all supply chain partners.