Commercial Refrigeration Equipment Industry

Industry Overview

According to the latest report from the Freedonia Group, the global Display Cases market stood at US$23.1 billion in 2009 and should grow 7.9% p.a. from 2009 through 2014.

The commercial refrigeration industry comprises a large variety of products, including: (i) cold displays or plug-in commercial refrigerators, which include refrigerators and upright and horizontal freezers for commercial use, (ii) refrigerating chambers, cold counters and reach-in refrigerated displays, (iii) refrigerated automatic sales machines, (iv) ice machines, and (v) refrigerator parts and other products, such as cryogenic equipment and liquid refrigerators. Metalfrio’s business is primarily comprised of (a) cold displays, (b) refrigerating chambers, cold counters and reach-in refrigerated displays and (c) refrigerator parts and other products. However, Metalfrio do not manufacture all of the products included in each of these categories. In 2009, these three segments represented approximately 75.5% of the global market for commercial refrigeration, or US$17.4 billion.

The United States, Japan and Western Europe represent the largest portion of the global market for commercial refrigeration equipment in terms of sales volume. However, its principal markets, notably Latin America and Eastern Europe, have exhibited high growth rates over the last several years. Asian markets have also been growing significantly, particularly China and India. Total sales in its sector, along with five-year and ten-year CAGR levels, are set forth below by region.

Country Commercial Refrigeration (US$ million) CAGRe
1999 2004 2009 09-14
North America 900.0 880.0 990.0 8.4%
United States 700.0 625.0 57,255.2 7.9%
Canada 65.0 75.0 80.0 3.7%
Mexico 15,937.2 22,195.9 23,063.3 0.2%
Western Europe 935.0 1,080.0 1,150.0 5.3%
Eastern Europe 160.0 195.0 250.0 9.4%
Russia 60.0 80.0 105.0 10.2%
Other Eastern European countries 29,920.5 29,497.3 27,463.9 (1.6)%
Asia/Pacific 940.0 1,040.0 1,265.0 10.8%
Japan 545.0 460.0 420.0 1.7%
China 45.0 150.0 280.0 27.5%
India 40.0 60.0 90.0 16.7%
Other Asian countries 350.0 430.0 565.0 11.2%
Latin America 180.0 202.0 270.0 11.0%
Brazil 90.0 100.0 140.0 11.8%
Africa/ Middle East 140.0 155.0 205.0 12.6%
Turkey 25.0 30.0 40.0 12.9%

Source: Freedonia Group- Demand by Region

Global demand for its products, particularly plug-in commercial refrigerators, is directly affected by the economic strength of the chilled and frozen food and beverage industry. Among the main factors affecting this demand are

(i) global consumption of chilled and frozen food and beverages;

(ii) the opening of new restaurants and bars, convenience stores and other retail outlets;

(iii) modernization and replacement of installed commercial plug-in type refrigerators;

(iv) the use of plug-in commercial refrigerators as a marketing tool; and

(v) consolidation of the global chilled and frozen food and beverage industry


Global Consumption Of Chilled And Frozen Food And Beverage

Increases in disposable income improve quality of life generally and fuel the demand for chilled and frozen food and beverages. Such demand is also affected by changes in consumer habits.

Improvements in the standard of living allow more people to eat out. This trend is reinforced by the increase in restaurant chains and the rapid expansion of fast-food networks around the world, particularly in Latin America, Eastern Europe, Asia and the Middle East. These trends positively affect demand for commercial refrigeration equipment used for the conservation of food and beverage. Over and above the demand generated by the opening of new sales outlets, commercial refrigerators are used as displays, or Ice Cold Merchandisers (ICMs) that offer a platform for visual communication and merchandising, thereby promoting impulse buying and facilitating brand recall.

The concentration of the world’s population in major urban centers and the increased participation of women in the labor market contributes to changes in eating habits. One such change is the higher consumption of frozen foods and refrigerated drinks. The key categories of food and beverage include: (i) carbonated non-alcoholic beverages, such as soft drinks, and non-carbonated drinks, such as juices and water; (ii) beer; (iii) ice cream; and (iv) chilled and frozen food.

According to Euromonitor, the global market for ice cream, beer and soft drinks reached a total of US$1,048.3 billion in 2008, with the Americas representing the largest consumer market, as the tables show.

Global Market for Ice cream, Soft Drinks and Beer (in billions of US$)

Global Market for Ice cream, Soft Drinks and Beer (in billions of US$)
2007 2008 2009 2010 2011 CAGR
Ice Cream 56.3 60.7 59.7 63.5 68.9 4.12%
Soft Drinks 648.0 703.6 693.5 739.1 810.4 4.57%
Beer 528.7 569.2 549.5 576.4 615.8 3.10%


Commercial Refrigeration Industry Growth

The following variables may also have a material effect on its industry’s growth

Modernization and replacement of already installed commercial plug-in refrigerators.

The plug-in commercial refrigerator industry has adapted quickly to introduce product innovation.

These innovations are frequently stimulated by customers’ desire to boost impulse sales of their products at check-out counters. Certain examples of these innovations include: (i) an increase in the use of plastics in commercial refrigerators, which enables designers to use rounded shapes and make more aesthetically-pleasing products; (ii) an expansion of the advertising display area and improvements in access to merchandise stored in plug-in commercial refrigerators; (iii) the use of enhanced lighting for customized marketing; and (iv) an increase in mobility and a reduction in the size of plug-in commercial refrigerators. Natural wear and tear of plug-in commercial refrigerators, the evolution and modernization of product design and the increase in sales of its customers’ chilled and frozen merchandise are the chief reasons why its customers replace their existing equipment and/or choose to increase their installed capacity with additional equipment. In general, its customers in emerging markets have a lower installed capacity than customers in other markets, and they therefore make proportionately more purchases of additional equipment.

Technological development of the refrigeration industry and its products

Most manufacturers of plug-in commercial refrigerators constantly seek to develop new products with differentiated technology. Technological innovation projects have focused on two categories of refrigerator: (i) those that reduce the environmental impact of commercial refrigerators, such as a reduction in electricity consumption and the use of cooling gases, like CO2; and (ii) those that help in the management of the installed equipment, such as remote monitoring systems, electronic temperature controllers and the introduction of removable refrigeration units that make maintenance simpler.

Importance of products as a marketing tool

The importance of plug-in commercial refrigerators for the customers’ marketing strategies of different brands of drink, food and ice cream has a significant impact on demand for its equipment. The designing and production of refrigerators that display the logos and products of its customers helps with visual communication and recall, while the introduction of merchandising solutions, like LCD displays and vapor production machines attached to the refrigerator stimulate impulse buying.

Effective marketing via the development of joint communication strategies with its customers (brands of drink, food and ice cream) is one of the main success factors of commercial plug-in refrigerators.


Consolidation of the Plug-In Commercial Refrigeration Industry

The increasingly international profile of companies in the chilled and frozen food and beverages industry—and the growing standardization of their brands—greatly affect the market of plug-in commercial refrigerator suppliers. Multinational companies in this sector typically use a standardized marketing approach in the different regions in which they operate, and plug-in commercial refrigerators are an important part of such an approach.

These companies increasingly prefer to concentrate purchases of key equipment, such as commercial refrigerators, in a limited number of global suppliers. In order to fulfill the needs of their customers, some suppliers of plug-in commercial refrigerators have increased their global reach by creating international sales teams, offering maintenance services worldwide and expanding their production capacity internationally.

Consolidation in the chilled and frozen food and beverages industry and the formation of conglomerates with increased global operations should strengthen the trend toward greater internationalization of its sector and may contribute to increased consolidation in the plug-in commercial refrigerator suppliers’ market.