Cold storage real estate investment trust (REIT) Lineage Logistics LLC has built its company around a business-to-business distribution model in which perishable foodstuffs move from factory to warehouse to retailer. Now Lineage has turned its attention to the embryonic but fast-growing business of direct-to-consumer deliveries.
Through two acquisitions made in 2021, Novi, Michigan-based Lineage has pushed into a segment that experienced a sudden burst of pandemic-related demand as more consumers began ordering perishable foodstuffs online directly from manufacturers. In May of last year, Lineage acquired Crystal Creek Logistics, which provides final-mile D2C order fulfillment for temperature-controlled products. Six months later, it acquired Perishable Shipping Solutions (PSS), an e-commerce fulfillment service for similar types of companies.
The Crystal Creek transaction gave Lineage a D2C footprint, albeit a relatively limited one. The PSS deal, which was made public earlier this month, enabled Lineage to gain nationwide exposure.
Leveraging PSS’ eight U.S. warehouses, Lineage plans to offer deliveries within two to three days of receipt of a consumer’s purchase order, according to Mark Nelson, PSS’ founder and the new head of Lineage’s D2C business. Manufacturers will manage inbound inventory flows into the warehouses. Once an order is placed either on a manufacturer’s website or on an e-commerce platform, the goods will be picked, packed in dry ice and shipped using parcel-delivery carriers.
The service will support orders of frozen and refrigerated products, as well as items like chocolate that can be kept at room temperature but are prone to melting at rest and in-transit. Lineage is exploring ways to integrate the eight PSS warehouses with the 290 Lineage warehouses in the U.S. and to become more involved in the inbound inventory moves currently handled by vendors, Nelson said in a phone interview last week. Lineage operates more than 400 warehouses worldwide, covering more than 2 billion cubic feet.
For now, Lineage is steering clear of working with fresh meal kit manufacturers like Hello Fresh and Blue Apron, though it supports orders of frozen meal kits, Nelson said.
Growth data for the D2C perishables market is difficult to come by. Frozen food sales rose 21% in 2020, according to a September 2021 report from consultancy Deloitte cited in a June Modern Retail article. That doubled the rise in fresh food sales, according to the Deloitte report.
Lineage was formed in 2012 by private equity firm Bay Grove Capital, which at the time combined all of its previously acquired cold storage distribution assets under the new brand. Since then, Lineage has acquired more than 50 companies in the U.S. and abroad.
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