Investing in cold chain infrastructure in or around UK ports is becoming an increasingly viable option for companies in the sector, but to establish an operation does come with plenty of considerations, writes Dan Parton.
Tesco caused a stir last July when it announced a multi-million-pound investment in a new distribution centre at DP World London Gateway, demonstrating the company’s commitment to future-proofing its distribution network.
The distribution centre, which is expected to open by 2029, includes cold store facilities. This is part of a growing trend for cold store operations situated in or near UK ports.
Phil Pluck, chief executive of the Cold Chain Federation (CCF), notes that this is because the UK relies on imports for its food supply, as well as exporting it too.
He says:
“A lot of that is facilitated through mainland Europe, with trucks going across the short straits on ferries or the Channel, but most global trade outside of Europe, and indeed some places in Europe, comes through quite a small number of major ports.”
“Our utilisation of space on our estates is the most critical bit of our businesses”
Historically in the UK there hasn’t been that much siting of cold storage within these ports. In Europe and other countries, there is a relatively high frequency of cold storage placed on ports so that as soon as temperature-controlled goods come off the container ship they can go straight into storage before going on to their final journey.
“What tends to happen in the UK now is a lot of our cold storage, particularly the bulk 3PL storage, is in the Midlands because that means that companies can distribute out to most of the UK,” says Pluck.
But there is a move towards ports offering more cold storage facilities, with port operators seeing that as an opportunity because they have so many products coming through their facilities.
“The flip side of it is that it tends to be a more expensive location to store your products than somewhere inland, so the service offering must be strong, but it does mean products can go straight off the ship into the cold store and that minimises disruptions,” says Pluck.
Having cold storage facilities within a port can also make the customs process more straightforward because goods can go into storage before they are cleared for customs, keeping them at the right temperature and maintaining it through the border control post. If a store is outside the confines of the port, it must be cleared through the customs process before it can go into a cold store, which takes time.
Competition for space and access to power
For operators, the decision of whether to base in or near to a port will depend on several factors – not just where their main depots and proximity to the logistics ‘golden triangle’ of the Midlands.
Adam Ramsey, commercial director for Hutchison Ports at the Port of Felixstowe – which handles 40% of the UK container market – says:
“It will come down to what the commodity is. Is it chilled? Is it frozen? Is it deep frozen? How fast-moving are the products? Do you want to put them into deep storage, like pigs in blankets that arrive in August ahead of the Christmas market, for example?”
Then the specifications of the warehouse will need to be considered.
“Does the warehouse need to be 45 metres high and fully automated, or does it require a lot of floor space?”
How big are the chillers?
There is competition for space for warehouses, and the location is important. But there is also competition for access to power as well. Some of these chilled warehouses are very power hungry.
Ramsey says:
“As a port, we’re on a huge net zero journey where we’re moving away from diesel and fossil fuels to electric. We physically need more power coming in. These warehouses need access to that power and in the future you’ll see ports get focus from the government in terms of access to power, and that will complement the warehouses that we’ve built around them, certainly for the cold chain.”
Geraint Evans, chief executive of UK Major Ports Group, notes that what port operators require is certainty.
“For a relatively short-term arrangement, which could be one or two years, it’s quite difficult for a port to justify significant capex investment on that. But if it’s a long-term arrangement, maybe 15 or 20 years, we can do it. That’s the bit where expectations need to be managed, because our utilisation of space on our estates is the most critical bit of our businesses. We need to make sure the port can remain competitive and commercial.”
Another consideration for cold chain companies is the transport network to and from the port.
“The overall connectivity picture is crucial because we haven’t really invested in road and rail infrastructure to support the movement of goods to and from our ports,” Evans says.
“For the cold chain company, the wider picture of how connected that port is important. Whether you’re on the port or slightly away from it, it doesn’t really matter if it’s 50 miles or five miles. It is about how quickly you can get products to and from there, especially for the supermarkets and those going into the golden triangle.”
Freeports and tax incentives
While the cost of setting up operations in ports can be expensive, there are numerous freeports around the UK, including Felixstowe, that offer tax incentives and relaxed regulations to encourage operators to set up operations there.
“It’s a case of engagement on a business plan that works for both parties in terms of the build, construction of a warehouse for use over the next 20–30 years or however long it’s needed for,” says Ramsey.
“It’s about the right model for the right operator. We’re engaging with some of the big cold chain distributors and movers of cargo to see where the right opportunity for them is in Felixstowe.”
Evans adds that he would encourage cold chain operators to get involved in freeports because those incentives won’t be around forever. He notes that ports are at different stages of development, which could influence a decision on whether to set up a base.
“But setting up in a freeport, if you can get the right arrangement, is worth investigating,” he says.
“There’s a real sense that logistics and ports should become more intertwined”
Saving carbon miles
Sustainability and the drive to reduce carbon emissions is also an increasing priority for ports and cold chain operators alike.
For instance, the Port of Felixstowe is aiming for net zero in scopes one and two by 2035.
“This is the fastest movement towards net zero of any major UK port,” says Ramsey.
“When we’re talking to shippers, they’re all very interested in what we are doing because they’re looking at any opportunity to show that their supply chain is being decarbonised. If you get the right warehouse configuration and your supply chain strategy correct, you’re saving food miles, which means you’re also saving carbon miles as well.”
Ports will change the cold chain market
Evans says that cold chain will be an important part of the mix at ports in the near- and long-term.
“Every time I go to a port, the range of activity we’re doing, including cold chain, is amazing,” he says.
“It’s becoming ever more varied in the activity we’re doing rather than what it was 15 years ago. Cold chain is central in the picture of what our future business planning is.”
“There’s a recognition that ports should be working much closer to logistics companies, to help move things quicker and understand each other better. There’s a real sense that logistics and ports should become more intertwined and that’s a good thing.”
Evans says that cold chain operations at ports are not going to replace the industry’s traditional heartland in the Midlands, but they will have an increasing influence.
“The golden triangle is always going to be the hub for cold chain,” he says.
“We’re not going to suddenly see all cold stores suddenly go out to the coast. But ports are going to introduce a different service offering to the market for product owners to be able to store that product in some of these sites, so it is going to change the market.”
Reefers on the rise
One consideration is the use of reefer containers to move fresh food. With supermarkets increasingly focusing on foods with sustainability benefits, reefers are growing in importance.
For instance, in November, London Container Terminal welcomed a new weekly reefer container service from Samskip that brings fresh produce directly from Morocco to the UK, to end up in supermarkets.
Samskip’s Moroccan Reefer Service is the only one on the market fast enough to carry fresh produce and saves 80% of carbon emissions compared to road transport.
This was followed in December by the launch of DP World’s first Atlas service, which also brings fresh produce from Morocco, this time to London Gateway.
As with Samskip, this new service increases the speed of delivery but also makes significant savings on carbon emissions — 70% according to DP World.
These services aim to meet rising demand for fresh produce from Morocco, as well as helping to strengthen supply chains.
If these are setting a trend, it could mean that ports and logistics companies seek to build more cold storage on or near to ports to accommodate the produce brought in these reefers.
