Major players are dominating the cold storage market nationally, but Arkansas still has plenty of room for local businesses to thrive.
The cold storage industry has seen significant growth in recent years, attracting real estate investment trusts into the market. Lineage Logistics of Novi, Michigan, a REIT owned by Bay Grove LLC, raised $4.44 billion in its initial public offering in late July, valuing the company at more than $18 billion.
Lineage, the world’s largest cold storage warehouse company, operates more than 480 facilities worldwide, although the closest ones to Arkansas are in Stilwell, Oklahoma, and Memphis. No. 2 Americold Logistics of Atlanta has more than 240 facilities, including 10 in Arkansas. Together the two REITs are estimated to control more than 60% of the cold storage market.
That dominance may scare off smaller companies in the market but, so far, some in-state players are making a go.
Cypress Cold Storage of Maumelle, owned by John Conner III of Newport, recently opened a $60 million, 207,000-SF facility in Springdale. It is the company’s third warehouse in the state, and the success of all three has the company eyeing a move to a fourth location outside the state.
Cypress Cold Storage CEO Tony Nichols said industry consolidation in recent years posed a serious question for companies such as Cypress: Was it worth it to “fight that trend?” In 2023, for example, Lineage acquired about 100 cold-storage companies to broaden its network.
“We are looking at the next one; we feel really confident that timing is everything. and we are positioned well,” Nichols said. “What we found was there is an opportunity to provide, at least regionally in Arkansas, an option. We’re smaller, a little more flexible and can do some value-added services really well.”
Cold Storage 101
Cold storage is aptly named since the warehouses are storage sites for frozen or chilled food products, but the industry is about much more than storage.
In Arkansas, much of cold storage is focused on poultry generated by state companies such as Tyson Foods Inc. and George’s Inc., both of Springdale. Most facilities have blast-freezing operations, so, for example, a truckload of chicken that has been processed in a Tyson Foods plant is brought to a cold storage plant, frozen to subzero temperatures within 24 hours and then stored for later distribution.
Cypress Cold Storage’s Springdale plant can blast-freeze 400,000 pounds of chicken — or another product — a day. That corresponds to about 10 truckloads.
“We are very heavily in the protein-poultry industry, and our core business is blast-freezing, which is basically production support for every poultry company in Arkansas that produces fresh poultry,” Nichols said. “It is a significant investment into blast-freezing, and we went out and invested really heavily in the most up-to-date modern technology to get those turn times down.”
Federal regulations require food products such as chicken to be frozen within 72 hours of its processing. Industry experts will tell you that 72 hours may be the legal limit, but the quality of the meat will begin to degrade much earlier than that.
“In the food processing and poultry industry, it is not nearly as simple as it is if you’re manufacturing nuts and bolts,” Nichols said. “Long story short, the sooner you can get that product frozen and in a shippable state, the more opportunities you have to get turns through your warehouse.
“It’s called cold storage, but storage is not really what we want. We want turns; we want to turn product. The sooner we can blast it and have it ready, the sooner we can turn that product.”
Room for Growth
Doug Bowen and business partner Darren Winstead invested $24 million in a cold storage facility in Mulberry in 2019, just before the COVID-19 pandemic hit. The pandemic caused a sharp increase in online orders of refrigerated or frozen foods, a trend that continues to this day.
Bowen didn’t know the pandemic would boost cold storage and blast-freezing needs, so his Compass Cold Storage was relatively modest when it opened. Compass can blast-freeze 250,000 pounds a day and has storage capacity of nearly 19,000 pallets of roughly 1,500 pounds of product each.
Compass Cold Storage’s blast-freezing business is booked solid.
“Our blasting portion, if anything, is like a quarterback on a play on Monday morning,” Bowen said of wishing he had planned more capacity initially. “We are tapped out. The blasting could have been increased, but hindsight is always 20-20.”
Americold, the Georgia juggernaut, recently spent $84 million to expand its plant in Russellville by 42,000 pallets and 131,000 SF. A local company, Central Cold Solutions, announced plans in May to build a 125,000-SF, 29,520-pallet warehouse in Conway.
According to the Research & Markets firm, cold storage was a nearly $41 billion U.S. industry in 2022, and it is expected to hit $148.6 billion by 2030. A report by Skyquest earlier this year said that online orders and home delivery requests from consumers have fueled cold storage industry growth.
“This trend is expected to continue, driving the growth of the U.S. cold storage market in the coming years,” the report said.
Bowen said there are a lot of new and expanded facilities in the pipeline as businesses try to take advantage of the boom. Success will still come to those who provide quality service.
“It is a hot industry,” Bowen said. “It is continuing to grow, not only in Arkansas but elsewhere. Our mindset is let this thing do what it is supposed to do. One thing I’ve learned is anybody can essentially get these things built; it is now operating them. That is where Compass’ focus is, making sure we service our customers to the fullest of our ability.”
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