Lost miles: the cold storage challenge in North America’s grocery supply chain

Date:

Share post:

The existing infrastructure, particularly near rapidly growing urban centres, relies on outdated systems plagued by lost mileage and inefficiencies. Distribution centres with cooling and freezing capacity are few and far between, forcing trucks to cover unnecessary distances, often resulting in higher costs and delays.

The lack of adequate cold storage facilities near large urban centres often leads to redundant transportation, with products traveling back and forth between locations. For example, food might bypass nearby stores en route to a distant cold distribution centre before being redistributed back to those same stores, adding excessive mileage and causing delays.

While grocers like Walmart and Kroger are experimenting with promising new distribution models, the overall cold chain is challenged by high construction costs, sustainability concerns, and complex regulations that make it difficult to build and upgrade cold storage facilities to meet changing demographics and consumer demand.

How lost miles add up

Many of the existing cold storage facilities were built 20 to 30 years ago, following the ‘hub-and-spoke’ model, similar to the Sears distribution system in Industrial America. In this model, grocery retailers and their third-party logistics (3PL) partners rely on a few major distribution centres spread across the country, each serving as a central hub for all their stores.

This outdated grocery supply chain model has not kept pace with changing demands in the U.S., where online grocery sales are predicted to grow at a compound annual rate of 4.5 per cent over the next five years, more than three times the 1.3 per cent growth rate expected for in-store grocery sales, according to a Brick Meets Click’s forecast. As grocers expand into fast-growing U.S. markets like the Sun Belt, cold distribution inefficiencies are becoming more pronounced. The distance from stores to central cold storage hubs has grown, making older facilities less effective for modern supply chains.

Peter Kroner

“Many of the cold distribution centres for grocery retailers are significantly older and more outdated compared to what we’re seeing elsewhere in the supply chain,” said Peter Kroner, Director, Industrial / Supply Chain and Logistics Market Intelligence for Avison Young.

Canada faces similar challenges, especially in metro areas like Greater Toronto. Population growth over the past five to 10 years has outpaced the development of cold chain infrastructure, creating a lag in distribution.

Flash-frozen vegetables, for example, might be processed at a rural manufacturing facility, sent to a nearby 3PL, and then transported hundreds of miles to a major retail distribution centre—only to be sent back to another 3PL in the wrong direction before finally reaching the stores.

People generally prefer not to have food production facilities like hog farms near their homes. The separation between agricultural zones and populated areas further compounds ghost miles.

The fast expansion of e-commerce has led to more sophisticated and reliable supply chain models built on layered distribution systems—from hefty central hubs to smaller peripheral and last-mile fulfillment centres—although the cold supply chain for grocery items has been slow to adapt, increasing carbon emissions and fuel costs. Grocery retailers are now beginning to address these lost miles and inefficiencies as part of their ESG (Environmental, Social, and Governance) initiatives.

Warren D’Souza

“There will always be some ghost miles, but right now, we’re seeing a lot of redundancy, which happens because gaps in the network need to be filled. If the nearest distribution centre is 200 miles away, you have no choice but to go there. By building closer facilities, we’re creating new stopping points.” said Warren D’Souza, Senior Manager, Market Intelligence, National Industrial Lead for Avison Young.

Advancing the cold chain system and eliminating ghost miles

While progress is slow due to the high costs of developing cold storage facilities, some large grocers are beginning to lessen their reliance on faraway distribution centres by building multiple facilities that better serve growing urban areas. In Canada, major chains like Loblaw are adding cold storage on the periphery of cities, anticipating population growth in the next 20 years.

In the U.S., Walmart is opening five automated cold storage and freezer facilities, each costing over US$1 billion. The distribution centres are strategically located, with more storage capacity and cost-effective operations, to address sustainability issues and overhaul the old cold chain logistics models.

In addition, Walmart is using its existing store locations as fulfillment centres, with floor space dedicated to collecting orders, packing for delivery, and curbside pickup. Using stores for fulfillment can reduce lost miles, but grocers need to ensure it doesn’t deplete shelves for in-store shoppers.

Meghann Martindale

“The biggest challenge for retailers is balancing convenience with maintaining the in-store experience. When online orders are fulfilled directly from the store floor, it can deplete shelves and frustrate in-store shoppers. Grocers are faced with the difficult task of growing delivery and curbside pickup options without compromising the ease and experience of shopping in-store,” said Meghann Martindale, Principal, Director Market Intelligence, Retail for Avison Young.

Grocers are trying to find the right mix. Some, like Trader Joe’s, focus solely on the in-store experience, while others, like Kroger, are investing in fully automated fulfillment centres with freezing and cooling capacity and on-demand delivery. With its Ocala series in Groveland, Tampa, and Jacksonville, Fla., Kroger can service the entire Florida market without having any physical storefront locations.

Modern cold storage buildings are taller, with 70 to 80-foot clear heights that allow for higher racking systems, maximizing storage capacity. These fully automated ‘dark facilities’ require minimal human intervention. Features include insulated floors and advanced cooling technologies to prevent ground freezing and ensure consistent temperatures throughout the cold chain, enhancing food safety from the warehouse to the stores and consumers.

What’s next?

As these modern, strategically located cold storage facilities come online, they have the potential to eliminate inefficiencies and lost miles by reducing unnecessary transportation and helping grocers meet sustainability goals.

For grocers looking to stay competitive and meet evolving market demands, investing in a modern cold chain logistics system is crucial for securing future success.

(Content provided by Avison Young)

RELATED ARTICLES

Subscribe to the Newsletter

Subscribe

* indicates required

RECENT articles

Meghan Roach announces she’s stepping down as President/CEO of Roots

Roach will continue to support the company in an advisory capacity to ensure a smooth transition.

High Liner Foods to be acquired by Umios in $1.25-billion deal

Shareholders will receive $27 per share in cash under an acquisition agreement with Japanese seafood company Umios, with closing expected in early 2027.

Guac Mexi Grill plans 95 U.S. restaurants in 10-year expansion

Guac Mexi Grill has signed a 95-unit U.S. development agreement, targeting Georgia, South Carolina and Florida, with openings planned for 2027.

American Express Wants to Influence Where Consumers Shop, Not Just How They Pay

American Express is expanding its AI commerce strategy through OpenAI integrations, restaurant discovery and agentic payments. Its third-quarter earnings call reveals ambitions that could reshape how Canadian retailers attract customers, manage payment relationships and measure the value of emerging shopping channels.

UNIQLO to Open Flagship at Vancouver’s CF Pacific Centre

UNIQLO's planned CF Pacific Centre flagship will open in spring 2027, adding a roughly 37,000-square-foot downtown Vancouver store to its six existing Metro Vancouver locations. The store joins Aritzia and Simons in Cadillac Fairview's redevelopment of the former Nordstrom premises.

Lithia Warns Chinese Automakers Face Costly Canadian Dealership Expansion

Lithia & Driveway is considering a limited number of Chinese automotive franchises in Canada, but CEO Bryan DeBoer warns that exclusive dealership requirements, expensive real estate and a six-to-eight-year break-even estimate could complicate expansion.

Statistics Canada: Canada’s retail workforce is aging as AI adoption grows

Statistics Canada reports an aging retail workforce, rising AI adoption and uneven employment growth as Canadian retailers adapt to e-commerce and changing consumer spending.

Retail Insider “Q3 2026 Luxury Report”: Flagship Investment Changes the Store Economics

Luxury investment focused on selected Canadian properties, service and customer relationships in Q3. Retail Insider’s report examines the operating choices behind flagships, brand boutiques and more selective expansion.

adidas Canada partners with Montreal Canadiens, Cole Caufield

It gives adidas branding at the Bell Centre and feature the Canadiens winger in upcoming Canadian marketing campaigns.

Intimissimi and Calzedonia Open First Canadian Stores at CF Sherway Gardens

Italian fashion brands Intimissimi and Calzedonia have opened their first Canadian stores at CF Sherway Gardens in Toronto. ILT Group is planning a broader Canadian expansion, with another Intimissimi location scheduled for spring 2027.

The Shops at Buffalo Run Retail Centre Near Calgary Listed for Sale

The Shops at Buffalo Run near Calgary is for sale, offering 279,756 square feet of retail space, 93.7% occupancy and nearby Costco and Real Canadian Superstore anchors.

Sweat and Tonic to open third Toronto location in Yorkville

The 18,000-square-foot fitness and wellness facility will offer about 300 weekly classes, a group strength training studio and recovery amenities.

Ottawa introduces two-for-one rule to reduce regulatory burden on businesses

The federal government’s new directive will require regulators to assess competitiveness, remove outdated rules and review regulations regularly.

Behind Oakridge Park’s Ambitious Fashion Show: Luxury Retail, John Legend and a New Vancouver Tradition

Oakridge Park's inaugural Front Row fashion event brought together John Legend, Joe Zee, more than 40 boutiques and a 250-person production crew. QuadReal's Irene Quan explains the luxury retail strategy, customer engagement initiatives and plans to establish an annual Vancouver fashion event.

Daily Synopsis: October 23, 2026

Loblaw CEO says discount stores are key to winning, made-in-Canada embraced for Halloween, FIFA store remains open in Vancouver, numbers show resilience, and other news.

From The Desk: Social Media Growth, Store Modernization and AI’s Impact on Retail Marketing

Canadian retailers focus on digital-driven growth, store upgrades and authentic brand experiences amid rising AI-produced marketing content and property shifts.

Retail Insider’s Canadian Retail Monitor: October 2026 — Retail Spending Rebounds, but Growth Remains Uneven

Canadian retail sales rose 1.2% in August 2026 to $74.6 billion, with gains across all nine major subsectors. Retail Insider's October Canadian Retail Monitor examines category performance, regional differences, wholesale activity, e-commerce growth and persistent affordability pressures heading into the holiday season.

RETHINK Retail Expands Executive Communities Under Canadian Leadership

RETHINK Retail is expanding its executive communities under Canadian CEO Marie Chevrier Schwartz, with Chris Parsons appointed VP of Audience. The company is developing Canadian programming focused on AI, retail media and industry collaboration.

Retail sales climb to nearly $75 billion in August: Statistics Canada

Core retail sales, which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers, were up 1.1% in August.

Retail Insider “Q3 2026 Apparel & Fashion Report”: Stores Have to Earn Their Investment

Canadian fashion retailers are expanding, relocating and closing stores within the same market. The Q3 report examines why location productivity and network contribution matter more than headline store counts.