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American ShipperWarehouse

German retailers select Virginia for new distribution centers

Barge service between the Port of Virginia and Richmond helped the state nail down investments from German grocery chains ALDI and Lidl.

Source: Port of Virginia

   Foreign investments in new distribution centers near Richmond are expected to pump transshipment cargo into the Port of Virginia and potentially contribute toward a third consecutive year of profitable operations.
   Two large German grocery chains this summer agreed to set up offices and large warehouses in the Richmond area, where they will be able to take advantage of a barge service that hauls containers three times a week between ocean terminals in Norfolk harbor and the city 95 miles up the James River.
   In mid-August, Virginia Gov. Terry McAuliffe announced that German discount supermarket ALDI will invest $57 million to establish a regional headquarters and a 500,000 square-foot distribution center in Dinwiddie County, south of Richmond. The ALDI facility will create 145 jobs. ALDI operates more than 1,500 stores in 34 states and its expansion plan calls for almost 2,000 stores by the end of 2018. Officials say they hope to open up to 60 additional locations in Virginia within the next five years.
   “Virginia is located within a 10-hour drive of over 50 percent of the U.S. population, which makes the Commonwealth a strategic location for companies’ distribution centers,” Secretary of Commerce and Trade Maurice Jones said in a statement. “I thank ALDI for trusting in Virginia’s prime location, best-in-class infrastructure and talented workforce.”
   The state agreed to provide $1.3 million in subsidies to help develop the property.
   Lidl, a fast-growing European retailer with headquarters in Neckarsulm, Germany, will invest $125 million in a regional headquarters and distribution center in Spotsylvania County, marking its first foothold in the U.S. market. The company is also setting up its U.S. headquarters in Arlington, Va., near Washington, D.C.
   Lidl operates almost 10,000 stores in 26 countries throughout Europe. It is part of the Schwarz Group, one of the largest retailers in the world.
   The state of Virginia agreed to pay $7 million in development costs to attract Lidl.
   Both companies are familiar with using barges to move goods because there is an extensive barge network across Europe.
   Port of Virginia officials say the James River Express barge service operated by the port authority was a contributing factor in their site selection decision.
   The Virginia Port Authority (VPA) is operating and reinvesting in Richmond’s river port under a 40-year lease extension signed with the city in February. The James River Express, operated by a private tug company, moves about 200 containers in and out of the Richmond Marine Terminal per week. The VPA recently switched to a barge capable of carrying 120 containers, increasing capacity by 50 percent. Other investments made in partnership with the Richmond metropolitan planning organization include $4.2 million for a new mobile harbor crane, and another $3 million to repave the wharf, fix railroad crossings and add dockside bumpers for vessel safety.
   Officials in the near future also plan to upgrade rundown warehouses, offer refrigerated container service and establish a system for matching empty containers in Richmond with outbound export loads from area shippers.
   “One of the unique aspects of these companies is they understand the river barge system” because it is common in Europe, Russ Held, the Port of Virginia’s vice president of economic development, said in a phone interview. “We expect them to use it [the James River Barge service] and we think it caught their attention” when deciding where to locate their operations.
  Meanwhile, the port authority announced that in fiscal year 2016, ended June 30, it posted an annual operating income of $4.76 million, the second year in a row that the port completed its fiscal year with a profit. In fiscal year 2015, the port had an operating profit of $13.6 million, a period when global trade was much stronger.
   In fiscal year 2014, the port’s operating arm lost $16.5 million – the sixth consecutive year in the red. The poor financial results were before the state implemented a major reorganization of the port authority and new leadership under John Reinhart took over.
   “The Port of Virginia’s performance is meeting and exceeding the expectations of my administration,” said Gov. McAuliffe said in a statement. “This financial turnaround is proof that the port’s wise investments in capital projects and people, which are being made in support of a plan for sustainable growth, are yielding very positive results, in terms of reputation abroad, delivery of service, performance at the piers and an increasingly stable financial picture.  “The work of this administration, the support of the General Assembly and effort port leaders have put into returning The Port of Virginia to sustainability is a true source of pride. I look forward to the continued role our port will play in the new Virginia economy.”
   The port authority had budgeted operating income of $2.7 million for fiscal year 2016.