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Wall Street's Great Ice Cream Buyout

Investors love refrigerated warehouses, and that could hurt some small food companies.

Prashant Gopal

While his friends played in the Florida sunshine, Elliot Greenbaum, then 11, was often bundled up in coat and hat, sweeping the floors in his dad’s refrigerated warehouse. As a teenager, he operated the forklift and loaded Danish canned hams into station wagons bound for Cuban sandwich shops.

Now 73, Greenbaum is closing the business he inherited from his Polish immigrant father, unable to compete in a $6 billion refrigerated storage industry dominated by institutional investors scaling up to serve food giants such as Unilever NV and Nestlé SA. As a result, some of his smaller customers—which recently included a specialty frozen-dog-food maker and a kombucha startup—are at risk of getting shut out of the cold. “We’re losing the exotic things that make America great,” says Greenbaum, who just sold his last warehouse. “Now other people far away are deciding how your ice cream should taste.”

Cold storage is the kind of niche business that Wall Street long ignored—it amounts to just 3% of public warehouses—but now it has become its latest darling. Roughly two dozen private equity firms have latched on to this corner of industrial real estate. They’re seeking to capitalize on the growing preference for home grocery delivery, which requires warehouse space, and looking for a hedge in the next recession. (Eating isn’t cyclical.) And two companies, Americold Realty Trust and Lineage Logistics, have grabbed 60% of the sector in the U.S. and Canada, expanding through a rapid-fire series of acquisitions.

Eleven-year-old Lineage Logistics, named by its private equity owners in a nod to the many family owned companies it absorbed, is now the biggest operator in the U.S. Billionaire Ron Burkle took the 116-year-old Americold public early last year, making it the industry’s first and only publicly-traded company. Its shares have since doubled in value, to about $34. Americold is trying to institutionalize a business where contracts were little more than handshakes and customers of all sizes were welcome. Now manufacturers with truckloads of food get priority, and smaller ones can squeeze in, if there’s room, for a higher fee.

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July 22, 2019

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