It could be shades of déjà vu for the produce transportation industry if some intermodal carriers have their way.
Before the 1950s, most produce was transported by rail, said Tom Finkbiner, chief executive officer for Tiger Cool Express LLC, Overland Park, Kan.
Boxes were loaded onto flatcars, and stations were set up every 250 miles or so where containers would be topped off with ice. But that all changed when the Interstate Highway System was built and refrigerated trailers were refined.
“(Produce) was all on the railroads until that time,” he said. “Then all of it left the railroads.”
But some believe that for a number of reasons, including skyrocketing costs, environmental concerns, driver shortages and tight fuel supplies, the time is right for a return to rail — intermodal rail service, in particular.
“There’s a confluence of events here that appears to make it practical,” Finkbiner said.
“The old model is broken,” he said. “Another model needs to take its place. We’re hoping this is the model.”
Produce is a multibillion-dollar transportation market, he said, that in many cases can be best served through intermodal systems that use trucks to deliver specially designed containers to trains that transport them to a destination. Then trucks pick up the containers and deliver them to their final stop.
“Intermodal is most competitive in the long haul,” Finkbiner said. “It saves the most money and is the most fuel-efficient.”
The intermodal process still uses trucks to haul produce, but via short hauls rather than long hauls.
Serving the industry efficiently as the growing season shifts from California to Texas to Florida and back again can be a challenge for the mostly small, independent carriers that haul produce, he said.
“A driver from Southern California doesn’t want to go to Pharr, Texas, to haul vegetables to and from Chicago,” he said.
“In the intermodal business, we don’t depend on drivers, we depend on equipment — containers.”
It’s easy to move a container from the California-to-Chicago lane to the McAllen, Texas, area, he said.
Tiger Cool Express serves the Midwest and Northeast.
“We’re trying to follow the seasons,” Finkbiner said.
From May to October, the company concentrates on Southern California; from October to December the focus is on Mexico; and in January to April, the firm emphasizes the south Florida area.
“We’re trying to follow the peak season and provide supermarket buyers with something they haven’t had before — the same party that can move tomatoes from Southern California can also move tomatoes from south Texas and south Florida,” he said.
Finkbiner cites U.S. Department of Agriculture statistics that say that 2% of produce now is shipped by rail. He predicts that within the next 10 years, intermodal should pick up at least 30% of the current reefer truck capacity over 1,000 miles.
“We’re really bullish on the business,” he said.
Rail Logistics LLC, with its Cold Train Express Intermodal Service is another operator that is bullish on the business.
Farmington Hills, Mich.-based Federated Railways Inc., an affiliate of Federated Capital Corp., announced in March that it has entered into an agreement to acquire the assets of Rail Logistics. The new subsidiary will be called Federated Cold Train LLC.
Patrick Boss, director of public affairs for Rail Logistics, sees only good things from the acquisition.
“The company will do what it’s always done, just owned by a new entity that is going to put more capital into the company so it can buy more containers, etc.,” he said.
Rail Logistics now has 450 containers and will add 150 in the near future and 1,000 over the next five years,
The company, which now primarily serves the Pacific Northwest, plans to start servicing intermodal ramps at two locations in California — the Stockton area in the north and San Bernardino in the south — by late May or early June.
Federated Cold Train will haul to the same places from California as it does from Oregon and Washington — about 20 states in the Midwest and on the East Coast.
“Expedited trains leave Washington and Oregon six days a week,” Boss said. The same will be true out of California.
All the trains go through Chicago, where cargo is trucked to adjacent states or switched to other trains for shipments to states farther away.
All four major U.S. railroads have an interest in serving the produce market “because it’s a market they understand they’ve lost,” said Finkbiner of Tiger Cool Express.
But railroads typically don’t have the money to spend on intermodal systems. They have to spend their capital dollars on their rail infrastructure, he said.
“The railroads, historically, are looking for someone else to make the investment,” Finkbiner said. “People like us.”
In most cases, Tiger Cool Express can meet truck transit times plus one day.
“For the vast majority of produce commodities that’s OK,” he said.
And the containers can be double stacked.
“You can put one on top of another, and that provides the railroads a chance to price in a manner that’s much more efficient than putting a single trailer on a flat car,” he said.
The containers have a 6% or 7% weight disadvantage compared to reefers, he said. But even still, there’s cost savings.
Supermarkets operate on notoriously low margins, he said.
“If you can buy your transportation at 5% to 7% per hundredweight below what you’re buying it for now, you’ve just tripled your money.”
Rail Logistics shipped produce in boxcars for many years before launching a domestic intermodal program four years ago, Boss said.
The company felt that long term, domestic intermodal would be more efficient, he said.
There may be times when truck transportation may be more efficient, he said, but intermodal gives shippers more choices.
“It really opens up a whole new ballgame for produce shippers because now they can use expedited intermodal trains to ship their produce cross-country, or they can still use long-haul trucks,” he said.
“Domestic intermodal is a much-needed way to add capacity for the produce industry to move their products,” Boss said.
Motivated by savings
Tom Kovacevich, general manager of TM Kovacevich-Philadelphia Inc., said cost savings was the prime motivator for the company’s decision to give intermodal transportation a try for some of its citrus and vegetable shipments.
“We work on very, very thin margins in our business,” he said, “so anywhere we can save even a percent or two off the total is very important motivation.”
Kovacevich estimates that he saves 10% to 20% on freight costs compared with using trucks alone.
The company only has been using the service for a couple of months, and ships about 5% of its citrus and vegetables with intermodal. Kovacevich believes that figure will increase in the months to come.
“There’s no question in my mind that it’s going to become much more prolific and a much larger percentage of the industry will be using it,” he said.
“The service is excellent, delivery is relatively fast, and the equipment is unbelievably great,” he said. “I think it has a bright future.”
Waiting it out
But Providence, R.I.-based United Natural Foods Inc., parent company of Albert’s Organics, isn’t ready to hop aboard the intermodal bandwagon just yet — at least not for most fresh fruits and vegetables, said Kristin Lacoste, director of inbound logistics.
The company uses intermodal for about 1,100 loads a month but not for fresh produce, she said.
But the company is waiting for the railroads to lay more track and develop better transit times before committing fresh produce to rail, she said.
Rail shipments take about a day longer than trucks, she said, and that can make a difference for fragile items like lettuce or fruit.
Lacoste said she “would definitely entertain” the possibility of using intermodal for items like potatoes or onions. Bananas currently are the only fresh produce item the company ships by rail.
Nonetheless, Finkbiner anticipates good things for the intermodal industry.
“If we didn’t see a great future, we wouldn’t be here,” he said.