Coldstores Getting Ready to Reach Capacity
Lockdowns and shipping restrictions are still active worldwide affecting numerous business and their internal processes to reach their level of productivity. Nowadays the biggest concern for cold chain businesses is the expectation that a significant number of customer businesses will fail, with bad debt repercussions. While right now many businesses are fighting to stay alive (and looking to the cold chain for support through, for example, extended credit terms), the expectation is that the strongest risk of customer business failures will come when lockdown ends and businesses try to get back up and running.
There is generally a low take up of Government loans at the moment across the cold chain sector – businesses are trying to avoid new borrowing, keeping this option as a last resort because there is uncertainty whether market conditions will allow them to pay the loan back later in the year.
The cold chain is already seeing a tightening in availability of cold storage across the sector for both frozen and chilled food, especially frozen. It is very hard to get new space now, and we predict in two weeks’ time getting new space will be pretty much impossible.This is because while new products have been coming into the cold stores, the rate of products flowing out has slowed markedly as a result of large swathes of the food sector going into hibernation during lockdown. This will have a big impact on cold chain businesses’ profitability. There is also a reduction in demand for cold chain businesses’ value added services, such as blast freezing.
“With frozen and chilled food products still coming into store at a high rate but demand all but gone for many usual customers such as food service, schools and airlines, cold stores are now starting to fill up,” Shane Brennan, chief executive, Cold Chain Federation says. “Cold chain businesses are doing their best to plan ahead, at the same time as battling to meet wildly changing requirements from week to week, but forward planning is very tough when total uncertainty means that feasibly life could pretty much return to normal by September, but equally restrictions could stay in place at some level until Spring or even Summer 2021.“We predict that they will be full across the UK, with no new space available, in about two weeks’ time,” Brennan says.
What will be happening after the lockdown?
Some EU countries are starting to take steps towards de-restrictions. The life as normal could be with us by September 2020, or more likely not before at Spring / Summer 2021. Like all sectors, this makes planning ahead very tough for cold chain businesses.
Business support measures
Cold chain businesses are generally trying to avoid taking on new borrowing, therefore we are currently seeing low take up of the Government’s intervention loans.
For more information please access the Cold Chain Federation website: https://www.coldchainfederation.org.uk
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