Why a cold-storage company just delivered the year’s hottest IPO

The world’s biggest cold-storage operator by capacity, Lineage, is so deeply embedded in the U.S. economy that when it listed its stock on the Nasdaq exchange this past week, it was the largest initial public offering in the U.S. so far this year. At $78 a share, the IPO raised $4.4 billion and valued Lineage at more than $18 billion.

Cold storage is a centuries-old industry, but Lineage’s own lineage is young. It was founded in 2008 by two former Morgan Stanley investment bankers, Adam Forste and Kevin Marchetti. Since then, the duo has amassed an empire that today operates nearly a third of the temperature-controlled warehouse space in the U.S.

The Novi, Mich.-based company, which counts Kraft Heinz, Darden Restaurants and Walmart among its clients, operates more than 480 temperature-controlled warehouses around the world. The business handles logistics operations such as storing, picking and packing items and offers e-commerce fulfillment, transportation and customs-brokerage services.

The success of Lineage is a function not just of fortuitous timing, but also a savvy recognition that the businesses storing and transporting the perishable items Americans have come to rely on could be rolled up and streamlined.

The bet has paid off, Forste said: “The importance of the supply chain, especially post-Covid, is even more pronounced."

‘A safe place’

Forste and Marchetti, both 46 years old, started plotting their future as co-business owners shortly after meeting at Morgan Stanley analyst training in New York City in 2000.

In 2007 they started to hunt for companies to buy, with the goal of building a business that would last for decades. Then the financial system began unraveling.

“The world was falling apart," said Forste. “Cold storage seemed like a safe place to be."

Cold storage wasn’t completely foreign to them. Marchetti worked at the investment firm Yucaipa when it made an investment in cold-storage giant Americold Realty Trust. Lineage overtook Americold to become the biggest cold-storage operator in 2019.

The duo, friends who sometimes spent holidays together, remember racing through a rare Seattle snowstorm, fittingly, in December 2008 to close on their first cold-storage warehouse purchase. At the time, the country reeled from a widening financial crisis.

The following year, the two courted another Seattle-based cold-storage warehouse owner, Jack Rosling, whose daughters didn’t want to take over the business. Rosling said he was at first wary of Forste and Marchetti’s youth, but over multiple meetings, including a lunch at the Rainier Club in Seattle with his wife and daughters, they won him over.

Forste and Marchetti closed the deal for their second warehouse, CityIce Cold Storage, in December 2009. Rosling remains an informal adviser to the Lineage founders.

“When you look at this industry, it’s pretty old-school, meat and potatoes," said Marchetti. The owners of the facilities Lineage courts “know every employee’s name."

Forste and Marchetti wanted to keep that part of the culture, but recognized that running temperature-controlled warehouses was “not the most sophisticated industry," said Forste. By 2013, they decided they needed to integrate more technology into the business. They made their first outside hire: a chief information officer.

Forste and Marchetti funded their acquisition spree by raising money from investors, borrowing money from banks and tapping their personal savings for early warehouse purchases. Forste and Marchetti quickly saw how data and technology could make the logistics of moving perishable items around the world more efficient. Many trucks were transporting half-filled trailers, for example, so Lineage started coordinating shipments from different customers to cut costs and increase efficiency.

“We saw a lot of waste," said Forste.

In some warehouses, Lineage uses automation such as autonomous forklifts to reduce reliance on manual labor, something that not only helps speed up the process and reduces human error but also provides predictability, given the high turnover rate of such a physically demanding job.

An acquisition spree

Over the past 16 years, Lineage has grown to become a giant in a sector where many warehouses are still run by family-owned companies. The largest cold-storage operator in the world by space managed, it has made 116 acquisitions since 2008.

Lineage operates nearly 2.1 billion cubic feet of temperature-controlled space in the U.S. and Canada and about 860 million cubic feet elsewhere.

Americold, its next-biggest rival, said it runs about 1.3 billion cubic feet in North America and about 204 million cubic feet elsewhere. Americold was founded in 1903.

The cold-storage industry benefited from a surge in demand in the early days of the Covid-19 pandemic but has faced challenges over the past four years. Warehouses have struggled to retain workers and have had to adjust operations amid sharp swings in inventory levels and shifts in consumer demand driven by high inflation.

“The biggest issue the industry faces right now is a weak consumer and demand being down," said Americold Chief Executive George Chappelle. “We’re really hopeful that demand comes back soon."

The cold-storage giants also compete with smaller, privately owned businesses and even face competition from some of their own customers.

Walmart said earlier this month that it is building five new high-tech perishable distribution centers, expanding four existing sites and upgrading another facility to ensure the things customers want and need “are on shelves faster than ever before."

Walmart mostly uses its own facilities, supplemented by third-party logistics providers like Lineage, according to a person close to the company.

A brief history of cold

The cold-storage industry dates back to the 1800s, when a booming business selling blocks of ice enabled developers to build warehouses that could preserve food and extend its shelf life.

Technological breakthroughs in the early 1900s led to mechanical cooling systems that eliminated the need for big ice blocks and created more reliable, long-lasting cold storage. The invention of refrigerated shipping containers, trucks and railcars lengthened the food supply chain, enabling goods to travel around the world under safe conditions.

Consumers gained access to a wider variety of food than they had been able to get from local farms.

Frozen, concentrated orange juice hit U.S. grocery shelves after World War II and pushed more Americans to buy home refrigerators and freezers. “What comes swiftly after it is the fish stick and the TV dinner," said Nicola Twilley, author of “Frostbite: How Refrigeration Changed Our Food, Our Planet, and Ourselves." “And because now everyone has a freezer, the [food] companies start making stuff to put in it."

Sprawling cold-storage warehouses were built farther outside cities as Americans moved to the suburbs and began shopping at supermarkets weekly, rather than picking up fresh food daily.

“The way our modern food system works is based on refrigeration," said Shane Brennan, spokesman for the Global Cold Chain Alliance, an industry group. Cold storage, he said, is “the reason you can have tomatoes in the winter."

The specialty warehouses also enabled the growth of the pharmaceutical industry in the U.S., which largely operates separate facilities storing drugs and vaccines that must be kept cold. The importance of cold storage was highlighted during the effort to distribute Covid-19 vaccines as drugmakers rushed to get shots that required storage at ultracold temperatures into the world.

The pandemic also changed the way Americans eat. Consumers over the past four years have switched to eating more meals at home as they work remotely more often and cope with rising food costs. Shoppers are buying more groceries online for pickup and delivery, ordering ready-made meal kits and eating more frozen food.

Frozen-food sales rose to $74 billion in 2023, up 7.9% from a year earlier and roughly 33% above 2019, according to data from the American Frozen Food Institute.

At the same time, companies have outsourced more of their cold-chain processes to big operators such as Lineage and Americold, which run sprawling facilities that can handle dozens of customers under one roof.

More developers have entered the industry amid growing demand. Real-estate investor Related Fund Management in 2022 launched a $1 billion cold-storage business called RealCold.

More than 18 million square feet of new temperature-controlled space has been built across the U.S. since 2019, according to commercial real-estate services firm JLL.

‘Timing is everything’

Dale Sims, 76 years old, has been in the seafood business for 40 years and is intimately familiar with how food shipping and storage can go wrong.

Sims is the president of Buena Vista Seafood, a San Francisco-based company that sells seafood from fishers and fish farmers to wholesale seafood and meat distributors, among others. Much of the fish from its suppliers spends time in temperature-controlled warehouses run by Lineage and others.

How fast a shipment of grouper or halibut can get from the ocean to a restaurant depends on how efficiently the warehouses and trucking companies operate.

“The fish is not getting any fresher sitting on the back of a truck or in a cooler," said Sims.

He said it’s not uncommon to hear complaints about how long it can take for a truck to be loaded or unloaded at a warehouse. He doesn’t hear those complaints from Lineage customers.

A key part of Lineage’s business model is to update technology in its warehouses. The company uses data to speed up things like pallet-receiving and retrieval systems. Customers can see online when products arrive, access safety checks and see the time and where the pallet was placed, helping cut down on food waste and spoilage.

Sims said some of Lineage’s biggest improvements in turnaround time—the time between when the order arrives at a warehouse to when it leaves the warehouse—are possible because the company offers both cold storage and trucking and delivery.