NORTHWEST ARKANSAS — A business that produces cold air once considered itself recession-proof, but is learning there is no such thing.
Cold storage warehouses store products from manufacturers in freezers until they are sold and shipped.
Local freezer warehouses felt the brunt of the recession in 2009 when poultry companies reduced inventory levels and downsized production because of slumping global demand.
The ripple effect from poultry pullbacks forced the fi rst industrylayoffs in 55 years, according to Mark Rumsey, owner and CEO of Zero Mountain.
Zero Mountain operates warehouses in Johnson, Lowell, Fort Smith and Russellville with more than 30 million cubic feet of storage. The business started in 1955 in a limestone mine in Johnson called “The Cave” with 25,000 square feet of refrigerated and freezer space, that has since expanded ten-fold.
“We always felt we were in a very recession-proof business dealing with food,” Rumsey said. “This recession has impacted every aspect of business.”
Zero Mountain reduced its workforce about 70 workers, or 30 percent throughout 2009. About 165 workers remain at the company’s four warehouses.
Frez-N-Stor in Springdale is also operating with a smaller staff thana year ago, said Eric Doege, general manager.
The personnel decrease came through attrition, not layoffs, he said. Frez-N-Stor has 110 local employees.
Cold Chicken
“We perform a service. We just store products; we never own them,” Doege said.
The local freezer storage facilities rely heavily on their manufacturing customers, which in Northwest Arkansas is poultry processing, Rumsey said.
Doege said at least 95 percent of Frez-N-Stor’s business is poultry.
On March 31 frozen poultry supplies in the U.S. were up 3 percent from the previous month, but down 13 percent from a year ago, according to the U.S. Department of Agriculture.
Total pounds of turkey in freezers were up 11 percent from last month, but down 26 percent from a year ago.
And although poultry production is slowly increasing, local poultry executives have said they will no longer confuse the freezer with a customer.
Tyson Foods, the nation’s largest processor, has shrunk its frozen chicken inventory by almost 50 percent from a high of 600 million pounds in January 2009, according to industry analysts.
“We have made a concerted effort in recent years to limit our product inventories,” said Gary Mickelson, Tyson spokesman. “We expect to continue this practice as part of an ongoing eff ort to eff ectively match product supply with customer demand.”
Tyson Foods has its own cold storage warehouses, but also contracts with other businesses, Mickelson said. Most Northwest Arkansas warehouses have Tyson products in them at one time or another.
Simmons Foods, George’s, Cargill and Butterball also produce a lot of goods for area cold storage units.
Recession Expansions
Don Coenen, president of Don’s Cold Storage and Transportation in Rogers stores his share of poultry, but in the last year has worked to diversify his clientele. Coenen also runs a small trucking business.
“Having our own trucking service has added another element to our business, he said. “We can switch from chicken to dog food for example.”
Coenen said business was lean during the recession, but starting his company when the economy was bad allowed for slower growth, which is more sustainable over the long haul.
He recently completed a 286,000-square-foot addition - 220,000 square feet of cold space and 56,000 square feet of dry storage - costing $7 million. “We are now in the process of fi lling that,” he said. “Every month is a little bit better than the month before. I wish it was an elevator ride, but it’s like taking the stairs,” he said.
Frez-N-Stor also added space, but Doege said in retrospect it was probably not the best time for the expansion.
The company was financially committed to go forward with the expansion project before the recession hit, he said, although business has picked up in the past three months.
“We still have some extra space, but we are taking advantage of it. This gives us more fl exibility,” he said.
The company added 1.8 million cubic feet of freezer space, bringing the total to 6.8 million cubic feet. The addition also added four blast cells for quick freezing and 14 dock doors. The warehouse now has 49 loading bays.
Industry Adjustments
Tori Miller, director of marketing and communications for the International Association of Refrigerated Warehouses, said the industry found a way to manage through the recession without business casualties.
The association has 230 members operating 762 facilities in the United States and Canada and more than 1,000 warehouse facilities in 67 countries.
Miller said none of the members were forced outof business from the recent recession.
The industry is pretty optimistic it will post higher revenues as the year continues, according to Miller. She said cold storage contracts are often signed a year in advance, so it takes longer for a recession to catch up.
Coenen credits his company’s diversification into trucking with helping the cold storage business survive the last year or so.
He said the company has gone from running three trailers to a transportation fl eet of 30. “We are custom-tailored to meet our customers’ needs,” he said. The company has 16 regular customers.
He said if business is slow, the company will do its own construction work instead of hiring contractors.
“I cannot complain during this recession. We’ve doubled our size, income and number of employees,” he said.
Co enen added about 20 workers a year ago and said he just hired a couple more bringing the total to about 55 employees.
KIM SOUZA CONTRIBUTED TO THIS REPORT.
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AT A GLANCE
COLD STORAGE
Cold storage warehouses
have blast cells that freeze
goods quickly. Blasting takes
between 36 and 48 hours
and temperatures dip to
-30 degrees.
Northwest Arkansas has
18.08 million cubic feet of
cold storage space operated
by Zero Mountain, Frez-N
Stor, Americold Logistics and
Don’s Cold Storage. That’s
equal to the storage capacity
of 2,293 refrigerated boxcars
lined up for 32.14 miles.
SOURCE: STAFF REPORT
Business, Pages 21 on 05/23/2010