Welcome to CrossDock,

In this issue, we deep dive into the journey of the American cold chain industry. We explore its origins, the key inventions and people behind its growth, and its rapid expansion during the COVID-19 pandemic. We also examine the industry’s current state, the challenges it faces, and what the future might hold.

Cold Play 🧊

Do you love fresh avocados from California, sweet peaches from Georgia, lip-smacking salmon from Alaska, and juicy oranges from Florida? You can thank the U.S. cold chain industry for making sure your favorite foods arrive fresh, delicious, and ready to eat, no matter where you live.

While the concept of preserving food by keeping it cold is centuries old, the modern cold chain story began about 200 years ago in New England.

Today, the U.S. cold chain industry is valued at over $100 billion, but its origins can be traced back to one man: Frederic Tudor. So what did he do? He harvested ice from the lakes in New England and sold it in tropical regions. Sounds simple, right? In reality, it was not! 

His first attempt at shipping ice was in 1806, when he sent a cargo of ice to the Caribbean, specifically to Martinique. This first venture didn’t go as planned. He faced massive losses as much of the ice melted before it could even reach its destination. Still, Tudor was not easily discouraged. He remained determined to refine his methods despite being mocked and facing a debt crisis. 

Tudor's breakthrough came in the 1820s. By this time, he had refined his process to the point where he could reliably ship large quantities of ice and preserve much of it during the journey. His shipping method involved cutting ice in the winter from frozen lakes, packing it tightly with sawdust, and storing it in insulated icehouses. He even designed double-layered hulls for ships to improve the ice’s longevity during transport.

As the business grew, Tudor expanded his network of icehouses and shipping routes, ultimately building a global trade in ice. Hence the moniker “Ice King.”  By the 1830s, the ice trade was thriving, and Tudor was out of debt, even amassing a considerable fortune. What began as an audacious idea to ship ice to tropical locations evolved into an industry that would revolutionize the storage and transportation of perishables. 

Tudor's success didn’t just impact the global ice sale — it laid the groundwork for modern cold chain logistics. His methods of insulating ice and transporting it over long distances pioneered the cold storage industry, which has grown into a critical part of today’s global supply chain, ensuring everything from food to pharmaceuticals remains fresh as it moves around the world.

New inventions 

Necessity is the mother of invention. This holds true for the cold chain industry. By the mid-19th century, the demand for better preservation methods led to significant technological advancements. In the 1870s, mechanical refrigeration was developed, replacing the need for natural ice.

This allowed cold storage facilities to maintain consistent temperatures year-round, regardless of the season. Ammonia-based refrigeration systems soon became the norm, transforming how industries like meatpacking, dairy, and fisheries stored and transported perishable goods.

One of the most significant developments came with Gustavus Swift's invention of refrigerated railcars (reefers) in the 1870s. These railcars enabled meat to be transported over long distances without getting spoiled. In 1900, the U.S. had over 50,000 refrigerated railcars in operation, allowing goods to be transported coast to coast and laying the groundwork for a national cold storage network.

Parallely, cold storage warehouses expanded rapidly during this period, especially in major urban centers like Chicago, New York City, and Boston – hubs for meatpacking, seafood, and agriculture.

During this period, much of the cold storage was owned by companies directly involved in these industries. For example, Swift & Company and Armour — leaders in meatpacking — owned and operated many cold storage facilities to support their supply chains. 

By the early 1900s, there were over 500 large-scale cold storage facilities in the U.S., with industries like agriculture, fisheries, and pharmaceuticals relying heavily on them. Cold storage allowed American goods such as meat, dairy, and grains to be exported globally. According to the U.S. Department of Agriculture, by 1925, over 10 million tons of perishable goods had been stored in cold storage annually.

Frozen foods

After World War II, the cold chain industry entered a period of unprecedented growth. Technological innovations in refrigeration and logistics, combined with the post-war economic boom, stimulated rapid expansion. Refrigerated trucks became common in the 1950s, allowing perishable goods to be transported efficiently over road networks. The introduction of containerization in the 1960s allowed refrigerated containers to be easily transferred between ships, trucks, and trains, further globalizing the cold chain. 

By the 1970s, cold storage had become an essential part of the global food supply chain. According to the Global Cold Chain Alliance, global cold storage capacity has grown to over 200 million cubic meters, with the U.S. leading the market.

The widespread adoption of frozen foods in supermarkets across the U.S. further solidified the importance of the cold chain. In fact, during this period, frozen foods became a staple of the American household.

According to the American Frozen Food Institute, in the 1980s, the frozen food industry was valued at over $20 billion. Companies like Birds Eye revolutionized the frozen food market, making frozen vegetables, meats, and ready-to-eat meals widely available. This also motivated more third-party players to invest hugely in cold storage space and transportation to cater to the growing demand. 

Reign change

The cold chain industry, which manufacturers and suppliers dominated, soon saw a significant shift in ownership patterns. In the 1990s and 2000s, third-party logistics providers (3PLs) began to dominate cold storage. Currently, in the U.S., approximately 70-80% of cold chain storage is managed by third-party logistics providers (3PLs), with major players like Americold and Lineage Logistics dominating the market.

In terms of storage capacity, Americold and Lineage Logistics manage around 2 to 2.5 billion cubic feet of cold storage in the U.S. out of the estimated 4 billion cubic feet of cold storage capacity. This underlines the supremacy of 3PLs in the cold storage space.

Americold Logistics, founded in 1903, grew to become one of the largest operators of cold storage warehouses. With over 1 billion cubic feet of storage space and 245 temperature-controlled warehouses, it is the second largest temperature-controlled warehousing and distribution services provider in the world.

Similarly, Lineage Logistics, founded in 2008, rapidly expanded through acquisitions, amassing over 2 billion cubic feet of storage capacity by 2020. Lineage, which operates over 450 facilities across 18 countries, recently made a significant mark on the U.S. economy with its Nasdaq listing. The initial public offering (IPO), priced at $78 per share, raised $4.4 billion, making it the largest IPO in the U.S. this year. This successful debut brought Lineage’s market valuation to over $18 billion, highlighting its crucial role in the cold chain industry.

The purple patch for the cold chain industry in the US arrived from the most important human invention: the internet. 

Role of E-commerce

E-commerce has significantly increased the demand for cold chain logistics in the US due to the rise in online grocery shopping, particularly for perishable goods such as fresh produce, dairy, and frozen food. 

According to reports, between 2019 and 2023, online grocery sales grew from approximately $60 billion to over $140 billion, driven by consumer preferences for home delivery. The COVID-19 pandemic accelerated this trend as more households turned to online platforms for essential goods. As a result, companies invested in cold storage facilities, with the United States Department of Agriculture reporting that cold storage capacity expanded by 15% during this period.

In addition to groceries, the growth of online pharmaceutical sales, especially for temperature-sensitive medications like vaccines, has also contributed to the expansion of cold chain infrastructure. The global e-pharmacy market is expected to grow to $244 billion by 2027, and the US market is a significant part of that. 

The need to maintain strict temperature controls during transportation has led companies to adopt advanced tracking technologies, like real-time temperature monitoring, to ensure product integrity from warehouse to doorstep. This has driven innovation in cold chain logistics and increased collaboration between e-commerce and logistics providers.

The surge in demand for cold chain logistics is further reflected in the investment patterns of major logistics companies. For example, Lineage Logistics has expanded its footprint by acquiring cold chain companies and increasing its US warehouse capacity by nearly 40% since 2020. Other companies like Americold and UPS have similarly invested in enhancing their cold storage and delivery capabilities to cater to the booming e-commerce sector. 

So, how does the cold chain industry in the US fare now? 

Current state 

The global cold chain market is now valued at over $300 billion, while the US cold chain is valued at about $100 billion. It is expected to grow to more than $800 billion by 2030. As of 2023, the U.S. cold storage capacity is approximately 4 billion cubic feet.

In recent years, cold storage capacity has grown significantly in cities like New York, Dallas-Fort Worth, Houston, and Atlanta. 

Let’s better illustrate this growth with numbers. 

As of 2022, the New York-Philadelphia region tops the U.S. cold storage market with about 19 million square feet of space. It saw a 5.7% increase in capacity from 2017 to 2022, while Dallas-Fort Worth, second in the list, has 16.8 million square feet of space. But between 2017 and 2022, it has seen a 49.3% growth. Dallas-Fort Worth added over 676,960 square feet of cold storage space as of 2022, positioning it as a key hub in the expanding Texas Triangle region. 

But why is DFW witnessing such tremendous growth, you might ask? There are multiple reasons for this.  

Firstly, its strategic location. It is positioned as a central distribution hub for the U.S., enabling efficient transportation of agricultural products across the Southern states. Next is the robust transportation infrastructure. This includes major highways, rail lines, and proximity to ports, making it an ideal logistics center. 

Additionally, the region’s significant population growth has fueled increased demand for grocery and perishable goods storage, especially as online grocery sales continue to rise. The shift toward e-commerce and grocery delivery has further driven the need for temperature-controlled facilities. 

Similarly, Houston has experienced rapid development, with 688,101 square feet of new cold storage projects, supported by its vital port operations and strong import and export activity. 

Other cities such as Phoenix and Miami have also seen substantial growth, each adding over 650,000 square feet and 312,000 square feet, respectively, to meet rising demand fueled by e-commerce grocery sales.

Also, Atlanta has emerged as a key market, with startups like Envision Cold Storage investing $500 million to expand cold storage infrastructure. These cities are responding to increased demand for refrigerated logistics, population growth, and the need for modern, efficient cold storage facilities. 

Do it yourself 

In recent years, a new trend has emerged in the supply chain industry: large companies are increasingly taking control of their own cold storage facilities. This shift highlights the growing need for precise management of temperature-sensitive goods, as industries from pharmaceuticals to food depend heavily on the reliability and efficiency of cold chain logistics to ensure product quality and safety.

No longer content with outsourcing to third-party logistics providers (3PLs), companies are now pouring big money into building and owning their own cold storage capabilities. This helps them take control of their fulfillment process and improve last-mile delivery. 

The company funneled resources into upgrading existing facilities while constructing state-of-the-art distribution centers with advanced cold storage capabilities. Walmart ventured into this to better manage perishable goods in-house, allowing them to improve both the speed and reliability of grocery deliveries. 

Similarly, Amazon has been aggressively expanding its cold storage footprint. Known for revolutionizing logistics with its cutting-edge technology, Amazon began integrating cold storage into its grocery chain, Amazon Fresh, and its Whole Foods Market operation.

Amazon expanded its Amazon Fresh and Whole Foods operations, building 15 new cold storage facilities across the U.S. in 2019 alone to support its grocery delivery services. By owning more of the cold chain, Amazon is positioning itself to cater to the rising demand for fast, fresh food delivery—a sector expected to grow exponentially.

Kroger, another major player in grocery retail, also took significant steps to enhance its cold storage infrastructure. In 2023, Kroger announced the launch of automated, temperature-controlled fulfillment centers. 

The company has opened nine cutting-edge, automated fulfillment centers across key markets. These facilities, sprawling between 300,000 and 700,000 square feet, are revolutionizing how Kroger manages its grocery orders, particularly for temperature-sensitive products. Kroger’s focus on in-house cold storage ensures better inventory management and faster delivery times, reducing reliance on third-party solutions that may not provide the level of control and service Kroger needs.

These examples paint a clear picture: big companies across industries are not interested in leaving cold storage and supply chains in the hands of third parties. The stakes are simply too high. As e-commerce, pharmaceuticals, and food delivery become more reliant on pristine cold chains, controlling these facilities directly allows companies to mitigate risks, reduce costs, and maintain higher standards of quality and speed. 

But it’s not all good news in America’s cold chain story. Let’s now look at what’s troubling the industry.

Old and expensive 

However, the U.S. cold storage industry is grappling with two major challenges: aging infrastructure and rising costs. As demand continues to outpace supply, the sector faces significant hurdles in meeting capacity needs. According to real estate firm Colliers, the U.S. cold storage market has only about 4 million square feet of vacant space, a stark contrast to the 100 million square feet of dry warehousing vacancies and the 681.2 million square feet currently under construction.

Currently, only about 2.3 million square feet of cold storage is under construction in the U.S., with rapidly growing markets like Charleston, Savannah, the Gulf Coast, and central Florida in urgent need of more facilities. As of July, the Southeast alone accounted for 43% of all cold storage development nationwide.

Now, let’s address the issue of aging assets. Over 70% of existing cold storage facilities are outdated, leading to inefficiencies and significantly higher operating costs. With an average age of 37 years, these older structures consume nearly 50% more energy than newer ones and cost twice as much to maintain. Additionally, the construction of new cold storage facilities is expensive, ranging from $200 to $300 per square foot — nearly three times the cost of building dry warehouses.

Despite the rising demand, speculative cold storage builds are considered risky due to the specific needs of different tenants and the high construction costs. Investors are hesitant to invest in aging facilities, opting instead to focus on new developments, even though the current supply falls short of market demand. 

One potential solution is to renovate older structures by creating modular temperature zones or "cold boxes" that can be adjusted to meet various tenant requirements. This strategy has proven more effective in established markets like Chicago, where demand from the food processing sector is particularly strong.

Conclusion 

The cold chain industry has seen remarkable growth, largely driven by the rise of e-commerce, which has exponentially increased the need for temperature-controlled storage. As a result, major corporations have invested heavily in expanding cold storage capacities, and there’s steady growth in the amount of available cold storage space in the US. Despite this expansion, the industry faces certain challenges, such as aging infrastructure and high construction costs, both of which need to be addressed to sustainably support future demand.

Thank you for reading. We’ll see you at the next edition!

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