Category: Shipping

Crowley has spent the past 53 years providing U.S.-flag vessel assets and logistics support to the offshore oil and gas industry and now is gearing up to provide that same transportation skill set to the burgeoning offshore wind farm industry in America.

It is forecast that as many as 2,000 gigantic, multi-megawatt wind turbines will be generating 29 gigawatts of electricity off the U.S. coast for hundreds of thousands of American households by 2040. However, the industry is only at the starting line in terms of construction. Available portside infrastructure and U.S.-flag vessel assets are also largely in their infancy.

So far, five turbines with a collective output of 30 megawatts of electricity are operating off the coast of Block Island, Massachusetts, and two trial machines (generating 12 megawatts) were recently erected off the coast of Hampton Roads, Virginia. Now many coastal states and offshore wind farm developers are eager to begin full-scale installation work within the next several years.

“We view this as a once-in-a-generation opportunity,” Bruce Harland, vice president of business development for Crowley offshore services’ wind farm program, told American Shipper in a telephone interview.

Experience from offshore oil and gas

Once Crowley’s vessel assets and crews are deployed to offshore wind farm work, Harland envisions that they will remain engaged in a 25-year, “cradle-to-grave” activity — in other words, from the construction of the turbines to their eventual decommissioning.

To start, Crowley plans to redirect U.S.-flag tugs and heavy-deck barges from the offshore oil patch to transport wind turbine components — tower sections, blades and nacelles — from U.S. ports to mobile offshore platforms, which will perform the actual construction of the wind turbines.

Harland said Crowley’s initial vessel equipment deployed to offshore wind turbine transport will require only minor modifications to secure components to the barge decks and provide safe and efficient transfers to the installation vessels. “We’re currently conducting computer simulations of this work,” he said.

Crowley is also in regular contact with offshore wind farm specialists in Europe to learn from their 30 years of experience with this type of component transport and offshore construction. Europe currently operates just over 5,000 offshore wind turbines generating about 22 gigawatts of electricity across 12 countries, according to the Brussels-based trade association WindEurope.

Crowley is also looking ahead at what future U.S.-flag vessel assets it may build and deploy for offshore wind farm work. The company’s in-house marine engineering group has several designs on the table, said Jeff Andreini, general manager for Crowley offshore services.

Jones Act compliance

Section 27 of the 1920 Merchant Marine Act, better known as the Jones Act, generally requires that vessels transporting cargo from one U.S. point to another in coastal waters be U.S.-built, U.S.-flagged and U.S. citizen crewed.

This strict regulatory requirement has many offshore wind farm developers nervous about the general availability of U.S.-flag vessel assets and the expertise of their operators to get the work underway. The biggest concern is the lack of U.S.-flag turbine installation vessels.

Installation vessels have legs that jack up on the ocean floor providing a stable work platform. They also include heavy onboard cranes to lift wind turbines components into place, as well as crew quarters.

Dominion Energy (NYSE: D), which recently installed the first two offshore wind turbines for the planned Coastal Virginia Offshore Wind farm, has decided to construct its own Jones Act-compliant turbine installation vessel. Industry estimates put the price tag of the vessel to be around $500 million.

The company said it plans to make the installation vessel, which is expected to enter service at the end of 2023, available to other offshore wind farm developments after it completes its own off the coast of Virginia.

Crowley currently has no plans to build Jones Act-qualifying wind turbine installation vessels, not only due to their cost but also the risk associated with the increasing size of offshore wind turbines that could outstrip a ship’s handling capabilities within several years instead of the expected 20-year service lifecycle, Harland said.

2nd Wind Marine, a Louisiana-based company, in June announced plans to build two Jones Act-compliant jack-up vessels for use in offshore wind turbine installation. The company said each vessel will be able to transport a single set of wind turbine components from port to the offshore installation site.

There will also be a need for a fleet of smaller Jones Act-compliant vessels to transport crews to and from the installation ships, as well as to provide ongoing turbine maintenance once the offshore wind farms are in operation.

Harland is not worried about the ability of U.S. shipyards to quickly respond to this need for offshore wind farm-oriented vessels. “America is pretty good at ramping up to meet the challenge with the commitment,” he said.

Crowley executives also feel strongly that once the construction of offshore wind farms gets underway that it will generate a host of new American manufacturing and service jobs. “Many wind farm developers sold the states on the idea that these activities will stimulate their economies through job creation,” Andreini said.

Click for more FreightWaves/American Shipper articles by Chris Gillis.

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Ingrid Uppelschoten Snelderwaard will begin her new role as the Svitzer A/S global chief operating officer on Dec. 1.

She currently is the global head of equipment and a VP at Maersk. She will replace Leonardo Sonzio, who will be moving on to become Maersk’s head of fleet operations, Svitzer said.

She will report to CEO Kasper Friis Nilaus, who said, “Today, innovative thinking and a digital mindset is crucial to succeed as a global towage operator and this is precisely what Ingrid stands for.”

Nilaus continued, “Beyond running operations with a strong eye on safety and efficiency, Ingrid applies a digital, innovative mindset and approach to her work and leadership. We aim to leverage technologies and find new ways of doing business to support our customers’ needs now and in the future, and Ingrid is a great match for this mission.”

Since 1833, Svitzer has provided safety and support at sea first as a stand-alone towage operator and now as part of A.P. Møller – Maersk.

Alvys

Leo Gorodinski, the former VP of engineering and first hire at Jet.com, has joined Alvys as co-founder and chief technology officer.

He joins Denver-based Alvys co-founder and CEO Nick Darmanchev in the race to automate and digitize the supply chain.  

Darmanchev previously built Archerhub, a digital asset-based brokerage, and has spun off Alvys as a separate transportation management system to empower small and midsize brokers to compete with the likes of Uber Freight and Convoy.

“I see a tremendous opportunity in the transportation space. Nick’s hands-on experience, vision and the team he’s put together so far is an ideal foundation for realizing this opportunity,” Gorodinski said. 

Blue Ridge

Blue Ridge, a provider of supply chain planning and pricing solutions, announced that Ed Rusch has joined the organization as chief marketing officer, reporting to CEO Jim Byrnes.

“Ed is a dynamic leader uniquely qualified to develop our marketing strategy and help drive our growth, product and customer experience ambitions forward,” Byrnes said. “He will be an integral part of developing and communicating our vision, exploring the science of demand planning and price optimization that together create a more foreseeable future for our customers.”

Rusch most recently was the vice president of global marketing for Command Alkon, a supply chain technology platform for heavy construction. Prior to that, he was the vice president of corporate marketing for Elemica, a digital supply chain and logistics network in manufacturing.

Duluth Seaway Port Authority

The Duluth City Council appointed Tyrone Walker to the board of commissioners for the Duluth Seaway Port Authority in Minnesota. 

Walker, an ironworker with Lakehead Constructors and Ironworkers Local 512, succeeds Norm Voorhees, whose final term on the board concluded in early October. Walker’s term will run through Oct. 10, 2026.

“We have a great board — the commissioners are very engaged and represent a broad spectrum of business concerns,” said Deb DeLuca, executive director of the Duluth Seaway Port Authority. “Commissioner Walker brings an important union and labor perspective to the board.”

The Duluth Seaway Port Authority is an independent public agency created by the Minnesota Legislature in 1955 to foster regional maritime and economic development and advocate for port interests. The port authority is governed by a seven-member board of commissioners — two appointed by the governor of Minnesota, two by the St. Louis County Board and three by the Duluth City Council.

Bureau Veritas

Bureau Veritas has named Gijsbert de Jong as marine chief executive for the Nordics.

He succeeds Bengt Sangberg, who will serve as a special adviser to the classification society through the remainder of 2020. 

De Jong will have responsibility for operations and business development in Denmark, Iceland, Norway and Sweden. 

He joined Bureau Veritas in 2001 and has served in the marine and offshore sectors in Rotterdam, the Netherlands, as well as Paris and Shanghai. He most recently led the marine marketing and sales team from Bureau Veritas’ headquarters in Paris.

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German freight forwarder Hillebrand this week announced that it has acquired bulk liquid logistics services provider Braid in the U.K.

Financial terms of the deal were not disclosed.

Hillebrand expects the acquisition of Braid to expand its business in handling nonhazardous bulk liquids, such as wine, olive oil, juices and edible oils.

Braid currently manages a fleet of about 2,500 food-grade ISO (International Standards Organization)-standard tanks. These tanks can be transported internationally by container ship and delivered to customers intermodally.

In addition, Braid manufactures its own flexitanks, or flexible plastic container liners, for nonhazardous liquid bulk transport at its facilities in the U.K. and China. The company claims all components of its flexitanks are “traceable to source, including the polymers.”

Hillebrand is one of the largest specialists in transporting alcoholic beverages and other food-grade liquids throughout the world. The company has 2,300 employees located in 90 countries.

“With its global reach, wide range of customized logistics solutions in bulk liquids transportation, as well as its manufacturing and technology know-how, the acquisition of Braid supports Hillebrand’s strategy to not only lead the market in logistics for alcoholic beverages but also for nonhazardous bulk liquids,” said Hillebrand Chairman and CEO Cees van Gent in a statement.

In the interim, the companies’ bulk liquid services will operate separately, but they will be integrated within the next 12 months, Hillebrand said.

The 175-year-old Hillebrand said it will continue to grow its operations organically and through acquisitions. So far this year, the company has acquired 3W-Logistik of Germany and Royal Logistics in the U.S.

Click for more FreightWaves/American Shipper articles by Chris Gillis.

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The U.S. Federal Maritime Commission (FMC) voted on Tuesday to grant the temporary relief from certain service contract and tariff filing requirements requested by French ocean container carrier CMA CGM.

The carrier sought relief from commission regulations earlier this month as part of its efforts to respond to a crippling cyberattack on its computer system in late September.

The commissioners granted the request for exemption from relevant service contract filing requirements and relevant tariff publishing requirements.

Both exemptions are subject to certain conditions, the FMC said. The exemption from tariff publishing requirements applies only to cargo received on or after the date of the order.

“Because the commission’s exemption authority is limited to prospective relief, the commission denies the request for exemption from the relevant tariff publishing requirements for cargo received prior to the date of this order. Instead, the CMA Group may use other procedures provided by the Shipping Act that allow them to refund or waive collection of freight charges for these shipments due to failure to publish a tariff,” the FMC said in its temporary relief order for the carrier.

CMA CGM asked the FMC to use its authority under the Shipping Act to institute the exemption for a period of 60 days, starting on Sept. 27, when it was struck by the ransomware attack.

The carrier said the cyberattack had impacted its ability to publish tariff rates and rules, as well as file service contracts and amendments, which are required under the Shipping Act, in a timely manner.

“Granting this petition will allow the CMA Group to apply service contract rates agreed upon with customers and tariff terms offered to customers for shipments received before filing or publication can be accomplished, rather than requiring customers to pay higher rates due to the CMA Group’s inability to conduct timely service contract filings or tariff publications,” the carrier said in its four-page petition.

CMA CGM cited that subsidiary APL had been unable to publish new rates and prevented from amending existing rules. APL, for example, could not revise its general rate increase effective data from Oct. 1 to Nov. 1 due to its lack of access to its tariff system.

CMA CGM and ANL use a third-party tariff publisher that was not subject to the cyberattack. However, the two operations were unable to access quotes that have been submitted to customers to convert them into tariff line items for current bookings.

“In the absence of relief, customers who book against their quotes will be invoiced at higher NOS rates because the quotes will not be converted to tariff line items prior to cargo receipt,” the carrier said in its petition.

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The World Shipping Council (WSC) has filed an agreement with the U.S. Federal Maritime Commission (FMC) to ensure that its continued container shipping advocacy work complies with the 1984 Shipping Act.

WSC submitted the six-page agreement to the agency on Oct. 1. Without objection from the commission, it will become effective Nov. 15.

Since its formation in 2000, the Washington-based WSC has interfaced with governments and advocated positions in regard to laws, policies, rules and regulations of governments and international organizations affecting ocean container carriers.

“Our work in the past has focused on our interactions with governments and international organizations on policy and regulatory initiatives, and that will remain the case in the future,” he added. “There may be situations in which governments are unable to drive solutions, however, and in those cases, we may want to look at how the industry can work together to tackle these challenges.” 

WSC has also been instrumental in increasing government and public awareness on the importance of container shipping to the global economy.

“As we look to the future, the nature of the challenges that the industry faces will continue to grow and change,” WSC President and CEO John Butler told American Shipper.

The agreement would authorize WSC members to exchange information, discuss and reach “voluntary, nonbinding agreement (including best practices and/or guidelines for voluntary implementation of best practices)” with regards to environmental and climate change matters relating to vessels; legal and regulatory matters involving competition and antitrust laws; positions to be taken in respect of international agreements, treaties and conventions; positions related to requirements of or under consideration by state, national, regional and international governments; safety and security involving packing, labeling, storage and handling of dangerous cargoes; and positions related to matters of information technology, data submission, customs, cybersecurity, and electronic bills of lading.

These types of activities may fall into the category of “cooperative working agreement” under the Shipping Act, thereby potentially triggering a filing requirement, Butler explained.

“We are filing the agreement at this point to make sure that we have access to the appropriate tools to meet the industry’s challenges and out of an abundance of caution to make sure that we are in full compliance with the U.S. Shipping Act. With or without an FMC agreement, the council has and will operate within the boundaries of legal requirements everywhere we are active,” he said.

While not common, the WSC agreement filing with the FMC is not unique. The Cruise Lines International Association, for example, has had a similar agreement on file with the FMC for years.

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U.S. agriculture and forest product exporters are counting the ways and dollars it costs them when ocean carriers without warning change the dates for container arrivals at marine terminals.

The Washington-based Agriculture Transportation Coalition (AgTC) and supply chain technology firm TradeLanes recently reached out to hundreds of American shippers to survey the operational and financial impacts of earliest return date (ERD) fluctuations on their businesses.

The AgTC and TradeLanes have analyzed and processed data collected from 283 survey respondents, which they said quantifies the problem with erratic ERDs from the ocean container carriers.

“Costs and disruption imposed by inaccurate and changing earliest return dates for containers are eroding margins,” said AgTC Executive Director Peter Friedmann in a statement. “Restoring ERD integrity is a top priority for our industry.”

 Some of the highlights from the 25-question survey include:

• More than 75% of respondents said their carrier bookings frequently lack a listed ERD.
• Most respondents reported that a quarter of their containerized shipments experienced ERD changes, with 35% of respondents reporting ERD changes for more than half their shipments.
• Seventy-eight percent of respondents noted that at least 5% of shipments impacted by ERD changes incurred additional costs that reduced their profitability, with 8% noting 50% or more of their containerized cargoes experienced additional ERD-related costs.
• Seven percent reported ERD-related disruption costs of $1,000 or more per shipment.

AgTC has been monitoring this problem among its shipper members in recent years and wants carriers to correct the problem.

Friedmann said the inability of ocean carriers to keep shippers immediately informed about changes to sailing schedules and ERDs for containers leads to demurrage charges, additional truck and storage costs, rolled cargo and missed sailings.

Since ocean carriers have contractual relationships with the shippers, either through service contracts or bills of lading at the individual shipment level, the AgTC said they are obligated to communicate directly and immediately with those customers and not depend on marine terminals and other parties to let the exporters know of ERD changes.

In many cases, once a container enters the intermodal stream, shippers have little to no recourse to stop a container en route to a marine terminal when they discover changes to the ERD. Shippers and their truckers are left struggling to find storage and parking until the containers are allowed into the marine terminals for loading on the ships.

While both AgTC and TradeLanes believe that a technological solution can be developed for ocean carriers to immediately and uniformly communicate ERD changes to shippers, it will require an industrywide push to make that happen.

All parties in the supply chain will need to work together to develop a “fair and effective standard of practice,” Reese Giangola, TradeLanes’ chief of staff, told American Shipper.

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The Washington-based Institute of International Container Lessors (IICL) has appointed Dennis Lombardi to president, effective Jan. 1.

Lombardi will take over from Steven Blust, who will be retiring as president but will stay on at the IICL as a senior adviser.

Prior to this appointment, Lombardi operated his own consulting firm, Lusoco Consulting, and worked with Global Logistics Development Partners as an associate advising on maritime logistics.

He had spent 40 years previously working for the Port Authority of New York and New Jersey, including serving as deputy director of port commerce and running the day-to-day operations for the department and preparing capital investments.

After his retirement from the port authority, Lombardi spent five years as an executive with third-party logistics services firm Romark Logistics.

This extensive experience is what attracted the IICL to hire Lombardi, said IICL Chairman Robert Sappio in a statement Monday. “We are confident he will serve as a strong leader who will guide the organization as the industry continues to evolve,” he added.

Blust has served as IICL president since 2006, after serving a four-year appointment to chairman of the U.S. Federal Maritime Commission. Before that, he served nearly four decades in the ocean container shipping industry.

The IICL said it benefited from Blust’s extensive industry and regulatory experience during his tenure as president. He guided the container leasing industry through complicated issues, such as combating counterfeit refrigerant usage and global financial market disruptions.

“Mr. Blust’s cooperative approach to developing an agile organization supported the membership in minimizing risk and adopting best practices to mitigate operational challenges,” the institute said.

Blust, 72, told American Shipper that he is most pleased with this work on technical matters that involved improving the economics and environmental integrity of the ocean container. This included designing a new floor system to reduce use of hardwoods and applying safer anti-corrosion coatings to the steel exteriors of the boxes.

Blust also pointed to the IICL’s work on container safety issues, such as container stacking and strengthening. In addition, the IICL has incorporated more operational and regulatory matters surrounding container chassis.

The IICL was founded as a trade association representing maritime container and intermodal chassis lessors in 1971. Its member companies include Beacon Intermodal, CAI, Direct ChassisLink, Flexi-Van, SeaCube Container, Textainer, TOUAX, TRAC Intermodal and Triton International.

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Ed Greenberg plans to retire as general counsel for the National Customs Brokers and Forwarders Association of America (NCBFAA) at the end of December after 35 years of representing the ocean freight transportation intermediary industry in Washington.

Greenberg, 78, made the decision four weeks ago after spending the past six months working from his home office and enjoying the presence of his 2-year-old grandson.

“It had never occurred to me. I had no interest in retirement,” Greenberg told American Shipper in an interview. “But I have decided that it’s my time and I want to spend it with my grandson.”

Grounded in transportation law

Greenberg has spent his entire career in transportation law, first with the former Interstate Commerce Commission (ICC) heading up the agency’s Bureau of Enforcement concerning the regulations of truckers and freight forwarders. 

After that, he led the government’s investigation of the cost overruns and rate regulation of the Trans Alaska Pipeline and successfully persuaded the ICC that it had the power and should suspend the excessively high rates of the pipeline. That decision was affirmed in a landmark case by the U.S. Supreme Court.

In 1978, Greenberg joined the firm now known as GKG Law of Washington, where he first worked on railroad rate cases.

In the mid-1980s, he was approached by a dozen non-vessel-operating common carriers (NVOCCs) to represent them in seeking refunds of the costs imposed by the steamship lines as a result of the so-called 50-mile rule. The rule, in essence, precluded NVOCCs from loading and unloading containers within 50 miles of an International Longshoremen’s Association-controlled port to preserve those jobs for longshore labor.

The battle was hard fought at the Federal Maritime Commission (FMC) and in the federal courts, but by the late 1980s the 50-mile rule was finally declared to be unlawful, and Greenberg was able to obtain millions of dollars in reparations for his NVOCC clients. It was also the start of a three-decade relationship with the NVOCC industry.

“I realized then that I was on the ground floor of an industry that was undergoing tremendous change,” he said.

It was also during this time that the NCBFAA’s then-general counsel Gerry Ullman notified Greenberg of his retirement and his interest in having him apply for the role. The association liked Greenberg’s credentials and brought him on board.

Greenberg said at that time the NCBFAA did not have a strong NVOCC presence. Most of its prowess was aimed at customs broker and freight forwarder issues. But the industry was changing dramatically as the intermediaries began taking on a much larger role facilitating the movement of cargo in large part because of the nature of containerization and the need for significantly more logistics services than the carriers could provide.

“I think I was useful in getting various government agencies to appreciate the role of NVOs and the NCBFAA in the international supply chain,” he said.

NVOCCs earn respect

In the early 1990s, there was an underlying hostility toward NVOCCs within several federal agencies in charge of freight transportation regulations. “I think they believed that NVOs were a bunch of guys operating in dark rooms figuring out how to cheat shippers and carriers and not offering any value,” Greenberg said.

Greenberg used his role as the NCBFAA’s general counsel to alter the federal government’s perception of NVOCCs, and through his representation on legislative and regulatory issues on behalf of the association successfully changed agency views of this burgeoning industry.

Greenberg has always preferred to take a measured tone with the FMC’s commissioners and staff, despite seeming indifference at times to how the regulations and policies tended to stifle the growth and efficiencies of intermediaries.

“My relationship with the FMC as a whole was never needlessly adversarial even when we didn’t see eye to eye on all issues, but I did feel that there were offices within the agency that at times could be inappropriately hostile to the NVOs and forwarders,” he said.

Over the past 20 years, Greenberg said he has noticed a substantive change within the FMC to be both more cognizant of the value of intermediaries and more receptive to the NVOCC industry’s concerns.

Since the enactment of the 1998 Ocean Shipping Reform Act, the FMC has considered the role of NVOCCs far more favorably in its regulatory actions. For example, in the early 2000s, the NCBFAA worked with the FMC successfully to press the Chinese government to allow non-Chinese NVOCCs to operate more freely in that market and issue their own bills of lading.

There have also been a number of other deregulatory actions taken by the FMC that have tended to ease unnecessary regulatory burdens on this inherently competitive side of the transportation industry, he said.

Greenberg cited, as a prime example, his work with the FMC to develop the exemptions that allowed the industry to enter into NVOCC rate arrangements (NRAs) and NVOCC service arrangements in a manner more reflective of today’s service contracts between shippers and ocean carriers. And, with additional deregulatory changes, the NRA process now effectively eliminates the need for rate tariffs, a goal that Greenberg had long sought.

In addition to interfacing with the FMC, and again working through the NCBFAA, Greenberg was instrumental during the 1990s and early 2000s in working with the Census Bureau’s Foreign Trade Division and Customs and Border Protection to develop regulations and procedures that permit NVOCCs to become responsible for electronically filing their own shipment data with the agencies without having to share proprietary information with or rely on the various underlying carriers.

He takes pride in the NCBFAA’s recent role in working with both the Coast Guard and FMC to ensure that NVOCCs are exempt from the “verified gross mass” requirement for containerized shipments, which he called “a terribly inefficient, costly and unnecessary requirement for NVOCCs in the U.S.”

Ongoing issues

During the past two years, Greenberg helped the NCBFAA members voice their concerns to the FMC over unfair demurrage and detention charges imposed on them by the ocean carriers.

Demurrage pertains to the time an import container sits in a container terminal, with carriers and terminals assessing significant charges when containers are not moved in or out within the applicable free time. Detention relates to shippers or NVOCCs holding containers outside the marine terminals beyond the established free-time period.

For years, shippers and NVOCCs have complained to the FMC about being forced to pay unfair and costly demurrage and detention fees whenever container equipment cannot be returned or picked up by their truckers during the free period for reasons beyond their control. 

The FMC’s recently issued interpretative rule on these issues will, Greenberg hopes, work to make the process fairer and not penalize NVOCCs or shippers when the delays are not their fault.

Greenberg continues to worry, however, about the competition and supply chain impacts to NVOCCs and shippers if the ocean carrier industry should further contract. “I would hate to see what happened to the rail industry after 1980 happen to the ocean carrier industry,” he said. 

He opined that it was essential for the FMC to use its authority to ensure that the trend toward consolidation through ocean carrier alliances does not stifle competition or that the agency consider seeking legislative authority to control carrier behavior in the absence of real competition in the ocean carrier industry.

While Greenberg will miss his relationship with the NCBFAA and clients, he has no regrets stepping down at this time.

“The staff and members of the association continue to work for the common good and make the industry ever more professional,” he said. “It has been an honor to have been a part of this remarkable organization for so many years. Similarly, I have treasured the opportunity to work closely with other clients and government officials over this time and build wonderful relationships that I will not forget.”

NCBFAA’s changing of the guard

The NCBFAA in recent years has undergone a changing of the guard in terms of management, as younger members increase their roles and responsibilities in the association.

NCBFAA’s Washington lobbyist Jon Kent, 74, retired last September after 35 years of representing the association on Capitol Hill. Before year’s end, the association selected Washington-based government relations and consulting firm Whitmer & Worrall to be its representative on legislative matters.

Greenberg said GKG Law colleagues David Monroe and Katie Meyers will continue to represent the NCBFAA as transportation counsel and general counsel, respectively.

NCBFAA staff and members expressed both appreciation for Greenberg’s decades of work to improve the industry’s position in the supply chain and regret for his soon-to-be departure.

“His retirement is bittersweet,” said NCBFAA President Jan Fields. “While I am thrilled that he will be retiring to spend more time with his grandchild, we will surely miss his strong leadership and expertise as an icon in our industry.”

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E-commerce shipping logistics company ShipStation released a national consumer study detailing consumer buying tendencies and the impact of delivery fulfillment on brand perception. The COVID-19 pandemic has largely been a positive for e-commerce companies, as people turned to buying online when cities shut down to tackle the virus spread. 

The report specifies that North American consumers increased shopping by 33% over the course of this year, with nearly two-thirds mentioning that most of their shopping is done online due to the pandemic. Increasing consumer expectations on shipping experiences continue to put pressure on e-retailers. While consumers expect expedited shipping for their products, they also ask for free or negligible shipping costs. 

ShipStation’s survey respondents make this clear, with 97% saying shipping costs are a primary factor and 92% saying shipping speed also is a primary factor while making an online purchase decision.

Still, expectations on expedited shipping have relented a bit over this year, courtesy of the pandemic. While consumers expected to receive their online purchases within five days in 2019, they were content with receiving them within eight days this year. But this has taken a toll on the shipping costs parameter, with two out of three respondents expecting free shipping due to slower-than-normal shipping speeds. 

“Free shipping is a consumer expectation born before COVID — which is why that particular data set skews so highly; it’s an industry standard at this point,” observed Krish Iyer, the director of strategic partnerships at ShipStation. “When it comes to investing in fast versus free shipping, businesses have typically put their dollars toward offering free shipments with average delivery timelines to keep up with the likes of Amazon and other e-commerce companies that made free shipping a customer expectation versus a nice-to-have.”

But since the pandemic, expectations over on-time deliveries have decreased exponentially. Iyer explained that ShipStation saw a new trend in which consumers were more willing to pay a premium on enhanced delivery experience — anticipating the supply chain bottlenecks over pandemic-induced restrictions. Consumers staying indoors are ordering more online and, with certain items, are willing to pay a premium for on-time arrival. 

“Our advice to retailers this holiday season would be to continue offering free shipping to uphold an industry standard. But with premium delivery, be warned that customer expectations will be high. If you offer premium options, make sure you can deliver on your fulfillment promise or risk losing customers for good,” said Iyer. 

Another interesting observation from the consumer survey was that people had begun their holiday shopping well in advance — as early as August or September in some cases. About 62% of shoppers said they would start their shopping by October, slightly up from the 58% last year. This year’s rise might be attributed to delivery delays around COVID-19, aside from inventory and product availability concerns. 

The impact of such nontraditional holiday shopping schedules can go beyond just the retailer’s sales and hit the entire inventory lifecycle. Consumers are stockpiling goods early on, which would likely increase returns during the prime holiday season rather than in January. Iyer contended that this could lead to retailers running out of inventory before the actual holiday climb, while inventory gets back to stores via returns during prime time. 

“Depending on when certain retailers measure their quarterly sales cycles, early shopping will absolutely impact their bottom-line revenue. However, I think inventory management and how consumer behavior will impact returns cycles is the metric that they should be paying attention to as we inch toward the holidays,” said Iyer. 

***

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Cold storage warehouse owner and operator Americold Realty Trust (NYSE: COLD) announced on Tuesday that it has entered into an agreement to acquire the world’s fourth-largest temperature-controlled operator, Agro Merchants Group, for $1.74 billion.

The announcement follows several others over the last two years as the Atlanta-based real estate investment trust continues to expand its network through acquisition. Americold added facilities in Florida and Texas in August and was chosen by the East Coast’s largest retail grocery group for a $325 million two-facility project in May. In 2019, Americold acquired Canadian-based Nova Cold Logistics in a $250 million deal and purchased Cloverleaf Cold Storage from a private equity group for $1.24 billion.

In addition to being the globe’s No. 4 cold storage provider, Agro is the third largest in Europe and the fourth largest in the United States.

Founded in 2013, Agro has amassed a portfolio of 46 refrigerated facilities through acquisitions aided by the help of investor Oaktree Capital Management. The company’s warehouses include 236 million cubic feet across 10 countries in Europe, North America, South America and Australia. Agro’s global operations are headquartered in the Netherlands, while its U.S. operations are based out of Alpharetta, Georgia.

“We are very excited to welcome the Agro team to the Americold family as we expand the scale and enhance the geographic reach of the Americold network. The acquisition of Agro represents a unique opportunity to acquire an institutional-quality global portfolio that facilitates our strategic entry into Europe and adds complementary locations in the U.S., South America and Australia, where Americold is already established,” said Americold President and CEO Fred Boehler.

The $1.74 billion deal will consist of $554.3 million in Americold stock, $519 million in cash, the repayment of $560 million of Agro debt and the assumption of $110 million of Agro’s capital leases and sale leaseback agreements. Management from Oaktree and Agro will hold 14.2 million shares of Americold stock. The lockup period for those shares ends May 17, 2021.

In a separate announcement, Americold announced a public offering for 29 million common shares with a 15% overallotment for another 4.35 million shares. The total offering represents roughly 16% of the company’s outstanding shares as of the end of the second quarter. Proceeds from the offering will facilitate the 14.2 million private placement of shares with the sellers.

Americold will use the proceeds from the offering for general business purposes and debt repayment and to fund expansion opportunities and acquisitions if the transaction doesn’t close.

Citigroup Global Markets Inc. (NYSE: C), BofA Securities (NYSE: BAC) and Goldman Sachs & Co. LLC (NYSE: GS) are the joint book runners on the offering.

Americold expects the portfolio to provide a 6.3% net operating income (NOI) yield initially, with NOI yield increasing to a stabilized range of 7.3% to 8.3% five years after closing. The deal implies an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 22.3x and is expected to be modestly accretive to earnings in 2021.

The acquisition is expected to close late this year or early in the first quarter of 2021.

“I am extremely proud of the work we have done to build Agro into a true industry leader in temperature-controlled logistics with a global portfolio,” said Agro CEO Carlos Rodriguez. “We are confident that by joining Americold we will accelerate our growth and by combining our complementary networks, we will be able to provide a more comprehensive range of solutions to customers around the world.”

Americold expects the transaction to allow it to “serve multinational customers on a global scale” by expanding its footprint into Europe, adding port facilities in Europe and the U.S. and building out its existing presence in Australia and South America.

After the close, Americold’s portfolio will consist of 229 owned and managed facilities and 1.35 billion refrigerated cubic feet.

“We have always admired Americold as leaders in the cold storage sector and we believe that the combination of Agro’s portfolio with Americold’s operating system and global platform creates an extremely compelling growth story,” Oaktree managing director Zach Serebrenik said. “For this reason, we will retain a meaningful equity position and look forward to participating in what we expect to be significant shareholder value creation over the long term.”

Citigroup is Americold’s exclusive financial adviser on the transaction with Moelis & Company LLC acting in the same capacity for Agro.

Shares of COLD are down 2% in early trading.

FreightWaves Cold Chain Summit will be held on Oct. 23.

Click for more FreightWaves articles by Todd Maiden.