In 2022, frozen food sales
in the U.S. reached over $72 billion. Demand has been rapidly
growing. Throughout Covid, we had
among the highest sales in all of the food space. Behind this seemingly
simple idea, there's a sophisticated supply
chain keeping perishables frozen. Each step is very
critical. The products have to
maintain proper temperature throughout a
complex network of refrigerated trucks and
cold storage facilities. Should the temperature
vary, it can become unsafe. But it's not just about
keeping ice cream from melting. The percentages are
remarkable in terms of what's tossed and frozen
items because of inadequate cold storage
temperature. And the refrigeration tech
is often outdated. We're still relying on
centuries old technology. The weak link in cold
chain logistics, planes, trains, automobiles is
how to deliver any perishable good at the
appropriate temperature. Major players in the
global frozen food market include privately-held
Cargill, Conagra, Nestlé, General Mills and
Unilever. So the consumers are
buying more frozen product, it's going to
require more storage capability and a more
efficient supply chain. The perishables are poised
to profit, and so are those investing in really
cold properties. Supply chain issues and
labor challenges haven't really gone away in the
food industry. Where's the stuff? Without resilient supply
chain infrastructure, the growth and safety of the
massive $265 billion global frozen food market
is at risk. Can cold storage supply
chains keep up with frozen food demand? Virtually
all American households purchase frozen food at
least once a year. Since 2019, sales have
grown by 23%, according to the American Frozen Food
Institute. When Covid happened, when
supply chain, everything got shut down, you saw a
huge spike in frozen food, sometimes 30%, 40%, 50%
year over year basis. Frozen foods demand was
supercharged during the pandemic in the U.S.,
bringing in over $65 billion in 2020. The pandemic taught
consumers to invest in bulk buying. Frozen foods
were some of the best selling items during the
pandemic, since they can be really stored for long
periods of time. We're seeing that growth
continue. We saw about a 20% growth
during Covid, which was really very rapid and
fast. Most frozen food products
reported double digit increases. We did a recent survey and
found that over 80% of consumers looked to
frozen to reduce in-home food waste and also save
money. The main driver is cost. What can consumers
afford? A great study by Cornell
that looked into how much waste the average
consumer has between both fresh and frozen. And
what they found was with frozen food, you're five
times more likely not to encounter food waste. Every year, roughly $1,300
is spent by the average American on food that
ends up as waste. You know, Cargill produces
enough protein to feed 170 million people around the
world. So that's enough to feed
the entire country of Bangladesh every single
day. The frozen category,
really seeing things like variety meats more likely
to be purchased frozen. At the end of the day.
It's about that 4 p.m. dinner tonight decision,
right? A great variety of dinners
is promised. The dinner is packed and
ready for subzero storage. The industry has come a
long way since the 1930s, when Clarence Birdseye
pioneered a flash freezing technique that better
preserved foods. Before then, the market
was known for a tasteless and textureless products. Quick freezing is one of
the newer ways of keeping foods, meat, fruit,
vegetables. He won consumers over. I'm sorry, but I already
have a frozen food man. In the 1950s and '60s
became the golden age of food freezing. Birdseye Hawaiian style
international vegetables. That flash freezing
technique is still how a lot of frozen products
are made today, particularly with
mechanical freezing. Think frozen plates and
conveyor belts for contact freezing or the air blast
method, which is one of the oldest and commonly
used. That's when cold air
fills a room of food to freeze it. Freezing technology really
hasn't gained leaps and bounds. Flash freezing. And what that means is,
let's say strawberries are coming out of a field in
California, we'll take those warm strawberries
out of the field as soon as they're cleaned, and
then we'll blast them down to -20 degrees and then
store them so then later they can be consumed. The air blasting technique
also utilizes individual quick freezing, aka IKF. IKF, what it does is it
freeze individual pieces of food, and that does
two things. One, the speed of the
freezing helps reduce the size of the ice crystal. So it helps preserve the
integrity of the food when it's thawed or cooked. You want to freeze at
that peak of freshness. And that's really an
aspect that whether you look at meat or
vegetables, a lot of industries have really
focused on communicating that message as well. The other way food can be
frozen is cryogenic freezing. It uses liquid
nitrogen or carbon dioxide to get to
extremely low temperatures quickly, but it can be
more expensive for companies to invest and
switch to the cryogenic techniques, plus the cost
of nitrogen added to that. However, cryogenic
freezing is much faster since that liquid
nitrogen is so cold. One estimate puts
mechanical freezing at nearly an hour to freeze
fruits and veggies, while cryogenic freezing could
take 11 minutes. It's all about speed. The faster food can
freeze, the smaller ice crystals that form, which
ultimately creates a higher quality product. Our data scientists heard
that we were not blasting strawberries fast enough
in California. The algorithm, based on
computational fluid dynamics that were able
to reduce the freeze cycle from three days down to
one to two days. So not only are you
reducing the lead time of freezing the berries, but
we're using less energy to do that. How to freeze food is just
the first half of the equation. Frozen foods
need a robust and sustainable cold storage
supply chain to reach consumers. Even Birdseye
recognized this in the late 1920s when
convincing Americans to try Frosted Foods, He
created his own refrigerated boxcars for
trains and leased freezers out to retailers. The U.S. still transports
a lot of food by truck. In the U.S., we're very
fortunate, but in other developing countries
we're seeing an investment in the cold chain to try
and keep the agricultural products preserved for
year-round consumption. It's really a way of
preventing food waste globally. Approximately 13% of all
food produced globally is lost due to poor cold
storage every year. That wasted food could
have fed an estimated 950 million people. Tenth annual Disruptor 50
list, our fastest growing private companies
challenging public incumbents. Number three, Lineage
Logistics, improving the food supply chain to
prevent waste with a proprietary freezing
process. Lineage serves big name
customers, including Walmart and McDonald's. Lineage Logistics focuses
on the frozen food market, and part of its mission
is decreasing global food waste. And so we provide frozen
and chilled warehousing, 450 warehouses across 20
countries. Let's use salmon as an
example. Salmon will be harvested
up in the Pacific Northwest. Salmon will
immediately be packaged, put into one of our
freezers that packaged salmon across the
country, may go to a retail store and then
finally to the consumers at home. It may end up
moving to a restaurant where the final consumer
then purchases. But we're helping to move
that food through the entire cold chain and
ensuring that it keeps a safe temperature the
entire way. The supply chain
weaknesses garnered international attention
when the coronavirus pandemic struck. Covid really showed how
fragile the supply chain system is. That really
exposed huge gaps in being able to transport in
frozen food and even refrigerated food in the
U.S.. At the same time, it's
expensive to generate power to keep the entire
supply chain frozen. Being able to minimize
costs in different ways, whether you're using
different software, AI, robotics, freezing
technology, driverless technology to transport
the product from point A to point B, like that is
the biggest pinpoint. Our data scientists have
looked at the space that's used in our freezers
because they consume a lot of energy and we want to
make sure that we're using every square inch of that
facility with frozen food. They've created
algorithms to be able to see where are we not
using some of that cubic space and how can we
optimize that usage? We have been able to
create over 300,000 additional pallet
positions of frozen food that is equivalent to a
3,000,000 square foot freezer. Food waste also
contributes to unnecessary emissions, and that's a
ticking time bomb that Phononic aims to defuze. Number 17 on the list is
Photonics, a semiconductor company that is
reinventing the refrigerator. Through the power of
semiconductor innovation, we are sustainably
transforming global cooling, so core to our
platform is a semiconductor chip that
when powered, generates coldness. Phononic embraces solid
state cooling with semiconductor devices
that cool and freeze products in the cold
chain fulfillment process. So Phononic really
developed the ecosystem, and now we're delivering
solutions poised to disrupt an almost $50
billion global market. Cold is super hot if
you're in the cold storage warehouse business. Why? It's because of your
Amazon Fresh, your Peapod by Giant. The new food
delivery service is driving it literally from
the warehouse to your home. Online grocery sales
soared over the pandemic. Feeling frozen food sales
with a 75% increase in 2020. It's expensive right now
to ship by e-commerce frozen products because
it needs to stay cold. How do we get product
either from retail to the consumer using e-commerce
and or from other distribution points
straight to the consumer? While that may be
convenient for a consumer, it makes warehouse
management a nightmare. So much so that now in
almost every case, retailers lose almost $13
in an online grocery delivery. Phononic
developed an end-to-end cold chain solution, not
just hardware that includes actively
refrigerated and frozen totes, but also the IoT
connectivity that allows the consumer to know
exactly where their order is from the minute it was
placed to the time that they pick it up. Phononic is releasing
these reusable totes to grocery stores and
retailers. And that gives the grocer
the warehouse and the last mile delivery solutions
provider tremendous flexibility, saving
labor, saving on energy costs, but more
importantly, increasing order throughput to meet
those online demands. We're seeing the
e-commerce side of the cold chain growing and
we've acquired two companies to really be
able to give us some infrastructure there
because it does require a different layout of the
facility and different technology. And while the number of
households buying online leveled out in 2022, what
continued to grow was the frequency of orders and
the money spent per order. The pandemic surge in
frozen food consumption has shown staying power
from purchases in stores to online orders. I don't see that changing
at all. To be able to not only
feed yourself, but feed your family something
that it doesn't take two hours to cook. That is a huge factor as
well. That's driving frozen
food sales. I like to call it the
convenience continuum. So when you think from a
consumer standpoint, it's the "let me do it, do it
with me or do it for me." And frozen foods can
really play in all three of those spaces. Between the demand growth,
retailer engagement and industry innovations, the
frozen food market is looking strong, according
to the American Frozen Food Institute. They want cold and frozen
items in particular, almost instantaneously. So we view ourselves as
not just a facilitator of coldness, but a
facilitator of e-commerce itself. Once consumers get used to
the convenience, it's really tough to go back.
