Cerberus Capital Management, the big private investor that this year largely cashed out of its long investment in Albertsons Cos., is getting right back into the food economy as part of a joint venture with Provender Partners, an investor in refrigerated food warehouses.
The investors said they would focus on building a multibillion-dollar portfolio of cold storage processing facilities in the United States, while bringing new supply chain solutions to a market absorbing disruption, including COVID-related supply-chain stress and real-estate pressures forcing growers processors and retailers to rethink the fresh supply chain.
“The cold storage industrial segment plays an integral role in the U.S. food supply chain and we see strong opportunities to build on the market dynamics,” said Tom Wagner, head of North American real estate for Cerberus, in a release. “Together with Provender Partners, we will be able to acquire and enhance cold storage facilities across the United States to build a national portfolio of high-quality assets and meet the critical needs of food-related tenants.”
Since its founding in 2014, Provender has acquired nearly $500 million of refrigerated real estate totaling 5 million square feet. Its retailer warehouse tenants include HelloFresh, Dollar General and Sprouts Farmers Markets. As recently reported in WGB, Provender leased an acquired food distribution center near Washington to an affiliate of the grocery wholesaler SpartanNash, which is expected to become a facility from which it would distribute to newly won supply customer Amazon.
“We’re excited to partner with Cerberus and leverage their expertise and financial horsepower to further drive our market-leading position,” said Neil Johnson, founder and CEO of Provender Partners. “Beyond expanding our portfolio, the partnership will broaden our ability to help farmers and distributors as global conditions continue to impact the food supply chain. As processors and warehousers seek efficiency and geographic diversity, we look forward to delivering innovative, quality food supply chain solutions.”
The investment also enables Provender to bring proprietary solutions to market, the companies said. Its Strategic Break Bulk Freezer Facilities program, for example, creates an expansive network of refrigerated buildings designed to respond to market conditions, helping to offset disruptions to the supply chain that plagued the industry when the pandemic arrived. The companies described the program as a “first-of-its-kind” solution enabling farmers and food processors to pivot between bulk and individual packaging, eliminating waste and providing alternative solutions for product during times of uncertainty.
In a recent interview with WGB, Johnson detailed several additional factors contributing to change in cold storage, including food processors priced out of traditional urban real estate, regulations such as the Food Safety and Modernization Act creating a need for renovated and modern facilities, and the emergence of direct-to-consumer businesses like meal kit companies and food tech. “There has been a lot of change in this space that has created a lot of inefficiencies,” he said.
Johnson said he believes the coronavirus crisis, in the meantime, exposed drawbacks of “just-in-time” inventory systems adopted by large retailers and contributed to the plague of out-of-stocks that accompanied it. He predicts retailers will move to “take back control” of their inventories, adding perishable space to their distribution centers.
Dollar General, for example, said last month it was in the process of expanding traditional dry distribution centers in Ardmore, Okla., and Zanesville, Ohio, to also provide fresh food distribution capabilities under its DG Fresh initiative—and would build an $85 million combination distribution center in Blair, Neb.
Sprouts, which is building new fresh distribution centers in Colorado and Florida, and Ahold Delhaize USA, building new frozen facilities in Pennsylvania and Connecticut, have also separately announced initiatives to bolster their cold distribution capabilities.