Dive Brief:
- Union Pacific Railroad (UP) is enhancing its cold storage vertical integration with its purchase of Railex.
- Railex is already of prime importance in Union Pacific's food transport arm, making the purchase a sound investment, American Shipper reported Wednesday.
- UP purchased distribution assets from Railex's Delano, CA, Wallula, WA, and Rotterdam, NY locations, easing continued penetration of its already established markets.
Dive Insight:
Transport companies of all kinds are seeking vertical integration and expanded services.
The acquisition of Railex by UP demonstrates its intent to offer more than many other rail-based food suppliers. As rates within the industry struggle to revisit the highs of the early 80s, it may be that improved or increased services are a good means of survival.
But the type of acquisition could provide a hint as to the growth opportunities for transporters. Simply, the investment in Railex brings cold chain assets in-house and shows the company expects continued growth in shipments of refrigerated products, even as other types of shipments fall. The most recent earnings call reveals strong growth in the beer industry has more than tempered the fall in other food shipments.
Railex's purchased assets are each under 200 miles from the major Ports of Seattle-Tacoma, New York/New Jersey, and Long Beach/Los Angeles.
