“Supermarkets are Changing, but the Cold Chain Isn’t Going Anywhere”
Ever since the announcement that Amazon is acquiring Whole Foods, we’ve been getting some version of the same question from partners, customers, and investors: “What does this mean for Axiom?”
The short answer is… not much.
The bigger question, of course, is “What is Amazon going to do with Whole Foods?” There’s a multitude of speculation floating around, from theories about turning Whole Foods Market stores into distribution hubs for Amazon Pantry deliveries, or using stores as testing grounds for new products and processes to keeping stores operating as they are now, but with more diversified offerings.
The answer will likely be some combination of all three. But regardless of the way Amazon chooses to use its newly acquired playground, it’s a safe bet that the facilities are still going to be tasked with keeping food cold, 24/7/365. Whether that inventory is sold to customers on site or shipped out to door steps across the country, theses stores will still be consuming power for refrigeration around the clock. In other words, there will always be a cold chain.
The cold chain is termed as an unbroken supply chain made up of storage and distribution facilities with temperature-controlled environments to ensure the shelf life of products is maintained. By 2022, Markets and Markets predicts this industry could reach $271.30 Billion. Of this, $118 billion is expected to come from the cold chain equipment segment.
In today’s market, more customers are demanding fresher food, and more of those foods are being transported internationally. Of those, dairy and frozen foods, from desserts to prepared meals are witnessing high demand due to rapid urbanization and sophisticated marketing channels. To accommodate these global dietary changes refrigeration systems also have to evolve. However, simply adding more refrigeration cases, without also updating how those systems are kept cool would be a critical misstep for the industry.
For a general supermarket refrigeration broadly accounts for up to 60 percent of a supermarket’s energy bill. It’s an expense compounded by variable electricity prices that skyrocket by up to 400% during on-peak hours. To make matters worse, a supermarket cannot simply turn off their systems during these peak times to avoid the high prices. As the retail electricity markets and rate structures have shifted to peak pricing and demand charges, refrigeration systems have remained unable to flex in ways that allow them to take advantage of lower night time prices.
This is where Axiom Exergy steps in. Axiom’s technology does something no other technology can: intelligently manage refrigeration load. The Refrigeration Battery is designed to turn a static, energy-intensive piece of commercial equipment (the central refrigeration) and transform it into a dynamic and responsive asset that can be optimized for savings.
Will the new Amazon stores continue to need refrigeration? Yes. Perishable inventory will undoubtedly continue to be a part of Whole Foods offerings.
Will Amazon want to save on their utility bills for the stores? Of course. Amazon built an empire by keeping their prices low to attract customers in droves and keeping their margins low in order to fuel their investment in growth. Amazon is focused on cost leadership and market development - both of which require keeping operating costs extremely low. The same will likely apply to their management of supermarket facilities. Lower monthly expenses means they can offer products at Whole Foods stores for less than competitors, grow market share, and funnel profits into aggressive expansion.
Axiom has developed a strong partnership with Whole Foods Market over the past few years. The Whole Foods store in Los Altos, CA is home to Axiom’s first in-field pilot testing unit, which has already begun saving the store money on its PG&E bill. Amazon will be walking into a relationship that is already providing value to their acquisition. This gives Axiom a huge head start against the coming barrage of technology providers that will soon be courting Amazon, now that it’s in the grocery game. Axiom looks forward to working with Amazon by providing insights, savings, and resiliency to Whole Foods stores and cold storage facilities, regardless of how they’re operated.
If you’re interested in learning how to optimize your own fleet grocery stores or refrigerated warehouses, contact us today.
John is the VP of Sales and Marketing at Axiom Exergy.