Special Report: Top 20 Warehouses, 2009

Through mergers and acquisitions, leading 3PL and public refrigerated warehouse operators have found ways to maintain more space.

By Lorie King Rogers, Associate Editor -- Modern Materials Handling, 11/1/2009

The United States has about 1.25 billion square feet of storage capacity spread out over 8,000 commercial warehouses to store our stuff— everything from frozen food to hot new fashions, from aspirin to auto parts.

So, of the country's 900 public warehousers, who's the biggest in the land? To answer that question, Modern has once again turned to two industry experts: Dick Armstrong, chairman of Armstrong & Associates (608-873-8929, www3plogistics.com), for the top 20 third-party logistics (3PL) operators and Bill Hudson, president and CEO of the International Association of Refrigerated Warehouses (IARW, 703-373-4300, www.iarw.org), for stats on the top 20 public refrigerated warehouse operators.

Third-party logistics providers

On the 3PL side, when we compare the top 20 North American 3PL warehouse operators of 2008 to 2009, we see that their combined total square footage last year was about 504.8 million square feet, compared to about 528 million in 2009. That's a 4.9% increase.

The 2009 ranking of 3PL warehousers looks strikingly similar to 2008. "The top players are getting more sophisticated all the time," says Armstrong. "That's ever-increasing. They keep getting better at managing their supply chain and being an extension of customer operations."

Additionally, Armstrong says, all top 20 3PLs are heavily involved in value-added warehousing. "They don't just store product. There's a whole host of things that value-added warehousers can do to product while they have it—kitting, repacking, relabeling, and in many cases, returns work."

All of last year's top 10 ranked 3PLs are back at the forefront, although in a slightly different order. And of the top 20, all but one returned.

None of the companies came close to comparing with DHL Exel Supply Chain. It held on tightly to the No. 1 position, growing from 86 million square feet of space last year to 99 million square feet in 2009. That growth puts DHL Exel Supply Chain ahead of No. 2 GENCO Supply Chain Solutions by about 62 million square feet. Still, GENCO's total of 37 million square feet was right on track with last year's ranking and nearly 1 million square feet more than Jacobson Companies, which moved up to two positions to No. 3.

The other players shuffled positions a little bit, but they all had places in the top 20—all except one: NAL Worldwide. "NAL was very aggressive in 3PL, trying to do a lot," explains Armstrong, "but the company was sold."

That sale left a spot for Saddle Creek Corporation, headquartered in Lakeland, Fla., which joins this year's list in the No. 20 position.

The lack of movement in the rankings is an indication that the 3PL warehousing market has been quiet this year. "There weren't too many people going into this business this year," says Armstrong, "but not much in the way of bankruptcies, either. There also were no significant mergers or acquisitions to report."

Refrigerated warehouse operators

Like the 3PLs, the North American public refrigerated warehouses (PRW) operators top 20 list is nearly a repeat performance of 2008. All 20 are back on top. However, there were two acquisitions to report. Yacaipa, which owns No. 1 Americold, made a strategic move to buy 49% of No. 2 VersaCold. The two entities are still operating as separate organizations, but we'll watch to see what the future holds as they come together as one company.

That acquisition was somewhat behind the scenes. More visible was the move by Castle & Cooke to purchase Inland Cold Storage, which ranked No. 9 last year. As a united company operating as Castle & Cooke Cold Storage, the newly combined companies rank No. 6 this year.

In last year's Top 20 article, IARW's Hudson predicted that the industry would see more integration with traditional public refrigerated warehousing companies collaborating to provide transportation services. Did that happen?

"Yes, it's happening," Hudson says. "Public refrigerated warehousing is progressing and driving much of the growth in the industry, whereas transportation is more challenged. With more companies leaving the transportation industry, the PRWs are stepping in a couple ways—buying or leasing assets or creating partnerships with transportation companies, and those partnerships can be valuable. That's a platform that the International Refrigerated Transportation Association is servicing, creating those partnerships in B2B."

Modern also reported that the IARW had established offices in Latin America, India, China and Russia. So what's happening in those developing markets? Did the global economic downturn stall growth?

No, says Hudson, adding that a number of PRWs are positioning themselves globally to take advantage of export and trade in the growing middle class in developing markets around the world, going beyond North American borders to increase their bottom line. "There is continued strong growth in China," says Hudson. "Public refrigerated warehousing is progressing and driving much of the industry growth. Companies such as Preferred and AmeriCold are currently building in China, and other companies have China within their target."

Hudson also says there is strong investment in India and Vietnam by North American companies. "Developing markets are still seen as an opportunity for the future. Things may have slowed a bit, but [expansion into developing nations] still has very strong momentum."

Getting back on track

Momentum has not been as robust stateside. "This has been a tough year for property managers," says Armstrong. "There's excess capacity in every market; buildings are empty and space is available. You can find warehousing space just about anywhere in the country at better prices than in 2007 or 2008."

Armstrong also tells Modern that existing customers are still there, but business has dropped. Some warehousers took a big hit this year proportionate with the economy. For example, according to report recently released by Armstrong & Associates, automotive logistics was off about 18.5% through August. On the brighter side, overall, value-added warehousing and distribution is only off about 5%.

"Consumers may be tightening their belts and buying cheaper brands, but it's not having a tremendous impact on warehousing," says Armstrong. "Consumers are trying to save money on prices, but product still needs to be moved and stored."

Food and beverage sectors are steady. "People haven't given up eating," Hudson concurs, "but they are making changes like eating in rather than going out." These consumer choices result in changes for restaurants, for example, but not for warehousers. "We're still moving product, just taking it to different locations.

In terms of economic growth, Hudson says, "Flat is usually as bad as it gets, and many of our members have seen growth."

"For the remainder of 2009, I anticipate slowly building volumes," says Armstrong. "We expect for the year, value-added warehousing will be down about 3%, but next year it will slowly build back up, and by the end of 2010 we'll be back in good shape."

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