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The Perishables Ecosystem –Food, Wine, Cannabis & More

Conventional Reefers Stage a Comeback, But Will It Stick?

Lara L. Sowinski · April 2020 ·

Recently, Howard Posner, president and managing director of NAGA Logistics, posted on LinkedIn about the comeback of the conventional reefer market—one that had been losing considerable market share to containerized carriers in recent years. 

The post included a link to IrishShipbrokers.ie, which reported a surge in reefer rates due to “the chaos that has developed in the container market as a result of the Coronavirus outbreak.”

While the major containerized carriers were struggling with disruptions in China—reefer containers stuck at Chinese ports, blank sailings, and the downstream impact of perishables exporters waiting for reefer boxes—conventional reefer carriers were available to fill the void.

Posner is a staunch advocate for those that operate in the conventional reefer market, especially Seatrade, which he describes as a “specialized” carrier that offers multiple modal options. For example, Seatrade’s fleet includes reefer and container vessels, multi-purpose carriers, freezers and juice carriers. Its “fast, direct and dedicated” service proposition also sets it apart from the containerized carriers, according to Posner.

Some contend that both conventional reefer carriers and containerized carriers can flourish by doing what each does best, and that there is plenty of business to go around considering the ongoing growth in the global perishables market. 

Despite the present opportunities, the disadvantage for conventional reefer carriers is that much capacity has been lost in recent years as older vessels have been scrapped or decommissioned, while newbuilds have slowed. It’s not easy—or cheap—to scale when you’re in the shipping business…ask any carrier that’s lucky enough to have survived consolidation in recent years.

Global supply chains are being put to the test right now. Those that are dynamic, nimble and predictive will persevere, resulting in new and different models for others to emulate. That means all stakeholders, including the transportation and logistics sectors, will emerge with a changed perspective.

Let’s hope this temporary boost for the conventional reefer carriers results in something more permanent. 

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I VOTED (for cannabis)

No matter their political stripe, many Americans are in agreement with efforts to legalize recreational and medical cannabis.

On November 3, voters legalized marijuana for adult use in Arizona, Montana, New Jersey and South Dakota. Initiatives to legalize medical cannabis passed in Mississippi and South Dakota. The rapid expansion of legalized cannabis throughout the U.S. has a direct impact on the supply chain.

Let’s start by considering the food supply chain–a valuable case study with COVID-19 as the backdrop. Early on, Americans experienced food shortages at the retail level. Manufacturers and distributors scrambled to realign networks to supply grocery stores where demand was spiking, while shifting away from restaurants and the hospitality sector where demand was tanking. In a matter of months, online shopping and food delivery to consumers’ homes grew dramatically. As a result, the food supply chain is in the midst of reinventing itself.

The cannabis supply chain faces some similar challenges. Most importantly, there’s an opportunity now to learn and adopt best practices from the food and pharmaceutical supply chains with which it shares key commonalities.

What are the risks to the cannabis supply chain? California’s unprecedented fires this year threatened growers throughout the state. How quickly can infrastructure scale-up to meet demand, and at what cost? Commercial and industrial real estate is currently at a premium with the proliferation of e-commerce. What about transportation, distribution and logistics capabilities, including reverse logistics in the case of product recalls? Facilities, equipment, and skilled workers are in high demand, and as competition for these various assets tightens, what does that mean for the entire perishables sector (food, cannabis, wine, beverages, pharma, etc.) that need them? Collaboration and creativity can provide critical solutions across the board.

On a related note, a small handful of American and European companies are in talks with Rwanda now about exporting cannabis to the country to meet rising pharmaceutical demand. Supply Chain Sparrow has previously identified cannabis exports as a massive opportunity for the U.S., which of course, would require legislative changes at the federal level.

Vote. And keep on voting.

Be Brave. Fly Right. And keep in touch at info@scsparrow.com.

Lara L. Sowinski, Executive Editor

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