Meeting the Challenge of Same-Day Delivery
To some observers, e-commerce startup Jet.com was taking a gamble when it made the decision to double the size of its headquarters in Hoboken and commit to a distribution facility in South Jersey the size of more than 12 football fields.
But most experts agree that betting on the growth of online grocers is a sure thing. Walmart certainly did. The brick and mortar retail giant agreed to acquire Jet.com in August (2016) for more than $3 billion in cash.
The acquisition is not altogether surprising. Online grocery sales are expected to increase 9.5% annually to become a $9.4 billion industry by 2017, according to IBISWorld, a research organization specializing in long range industry forecasting. Business Insider research provides an even more optimistic view. It predicts between 2013 and 2018, online grocery sales will grow at a compounded annual rate of 21.1%.
At the same time, fresh meal kit sales also are surging, as consumers embrace the convenience of home delivery. Research conducted by Deloitte and its food industry research partner, Technomic, predicts the meal kit delivery business will grow into a multi-billion industry within the next five years.
The growth of fresh meal kit sales aligns perfectly with growing consumer preference for fresher, healthier foods. Over the past decade, consumption of fresh foods grew by 20 percent to more than 100 billion “eatings” per year and growing.
But opportunities in any industry also can present challenges. For online grocers and fresh food companies, the hurdle is often distribution. How do you satisfy consumer expectations of same-day delivery without the expense associated with long-distance shipping?
A growing number of companies are discovering that a New Jersey location not only gives them the ability to clear the hurdle, but offers them a competitive advantage.
22 MILLION CONSUMERS WITHIN A TWO-HOUR DRIVE
When it comes to same-day delivery capabilities, it’s all about location and market access. New Jersey offers food companies both.
Perfectly located in the heart of the U.S. Northeast corridor, New Jersey gives food companies easy access to one of the most concentrated and affluent consumer markets in the world. In fact, a distribution center in central New Jersey can serve more than 22 million consumers who collectively have nearly $800 billion in disposable income, within a 2-hour drive.
That’s a big reason Jet.com chose to double down on its New Jersey investment. The company wanted to position itself for overnight deliveries in the Mid-Atlantic and Northeastern U.S. and there’s no better place than New Jersey. It not only gives them access to consumers in the most densely populated state in the nation. They can reach more than 130 million consumers – more than 40% of the U.S. population – within a day’s drive.
THE CHALLENGE OF FRESH FOOD DELIVERY
While location is a critical factor for companies that rely on fresh food delivery, access to a reliable transportation network is equally important. With more than 2,800 miles of interstates and highways and unrivalled cargo rail network, companies can easily move product and connect with suppliers and retailers anywhere in North America from a New Jersey location.
That’s important to companies like Ready Pac Foods, which requires speedy delivery to a network of retailers across the U.S. The company packages and markets an extensive line of fresh cut fruits and vegetables and has capitalized on consumer demand for healthier, fresher food, growing by more than 10% in 2014.
Easy access to the New Jersey Turnpike (Interstate 95) certainly was a factor when Ready Pac chose to expand its facility in Burlington County in 2015, one of its two New Jersey locations. The primary interstate along the U.S. East Coast has undergone a major expansion, making it possible for companies like Ready Pac to grow in a location where space is typically more affordable without sacrificing their ability to reach consumers and retailers quickly.
The $2.3 billion New Jersey Turnpike widening project, the largest ongoing roadway project in the Western Hemisphere, was completed in the fall of 2014. It consists of approximately 35 miles of road improvements from Middlesex through Burlington counties to improve the logistics capabilities of companies that rely on the ability to get product to retailers and consumers quickly.
For food companies, like Ready Pac, that require access to the lucrative Northeast market, but require more space, improvements to road networks means a broader menu of real estate options.
ACCESS TO THE LUCRATIVE NEW YORK CITY MARKET AND THE #1 PORT IN THE NORTHEAST
HelloFresh, a German-headquartered food delivery service, opened a 44,000-square-foot warehouse in Linden in February 2015. A little over a year later, it announced it would open a new 352,000-square-foot distribution facility near Port Newark to accommodate the growth of its fresh meal kit sales.
HelloFresh is not alone. In recent years, there has been a flurry of activity in and around New Jersey’s Ports. In fact, industrial development and leasing activity has been surging.
In 2015, more than 3 million square feet of new space was delivered to the New Jersey market with another 6 million square feet scheduled to come on line in 2016. New Jersey has become the second fastest-growing logistics market in the world, based on CBRE research. The consumer goods sector, including food and beverage manufacturers and distributors, accounted for the majority of the leasing activity.
Why? A location near New Jersey’s Ports gives food companies like HelloFresh two distinct advantages: Strategic access to consumers in the highly-concentrated, affluent New York Metropolitan area market, as well as access to the #1 seaport in the Northeast – the Port of New York and New Jersey.
A location that provides easy access to and from the Ports will become increasingly important as super-cargo ships from Asia begin traversing the widened and deepened Panama Canal, which celebrated its long-awaited opening on June 26, 2016. The U.S. Department of Commerce predicts as much as a 10 percent shift in container movement from West Coast to East Coast ports in the neo-Panamax era.
The Port Authority of New York and New Jersey, along with its shipping terminals, container ship companies and railroad, have been gearing up for the arrival of post-Panamax vessels in Ports Newark, Elizabeth and Bayonne for several years. This preparation has resulted in a series of infrastructure improvement at the Ports and beyond that give all New Jersey food companies a competitive advantage, whether or not they plan to take advantage of the import/export opportunities presented by the Panama Canal widening.
In addition to the much publicized $1.3 billion project to raise the clearance of the Bayonne Bridge, which is on-track to be completed by mid-2019, the Port Authority has been building out ExpressRail in Port Newark to double the Ports intermodal capacity to facilitate sea/land connections that get products to market faster.
Forward-thinking companies also are expanding cold store warehousing capacities near the Ports in anticipation of increased volume. And more than $250 million also is being spent to expand roadway capacity into and around the Ports, making access to consumers via road, rail, air or sea significantly more expedient.
There’s no doubt that online grocery and fresh meals kit sales will continue to grow and that fresher, healthier foods will become increasingly popular in years ahead. There’s also no doubt that food companies in New Jersey will have a strategic advantage: a perfect location for same-day deliveries.