Woolies plans giant fresh food warehouse as online demand soars
Woolworths has unveiled plans to invest more than $110 million in a massive fresh food distribution warehouse in Sydney’s west as it looks to cater for surging demand across its supermarket network and from its booming online grocery business.
Preliminary plans lodged with the NSW government are for a multi-storey 60,000 square metre fresh food distribution centre to be built on an 8.6 hectare site it owns at 250 Victoria Street in Wetherill Park, west of Parramatta.
Once complete, the temperature-controlled facility would have the capacity to sort and deliver more than 3700 fresh produce and chilled items to more than 285 NSW supermarkets, including to its specialist “dark” stores that provide goods for online deliveries.
Last year, supermarkets struggled to keep up with the demand from online food sales, which doubled across Australia in 2020, and from spikes in demand across its supermarkets (where online orders are also filled) during the early weeks of the toilet paper and pasta panic buying spree.
“We’re supply constrained, not demand constrained,” Woolworths chief executive Brad Banducci said in November.
Last June, Woolworths unveiled plans to invest between $700 million and $780 million in two new Sydney distribution centres – one automated, the other semi-automated – as part of plan to transform and consolidate its NSW grocery supply chain network, resulting in significant job losses.
The proposed fresh produce warehouse will be operated manually, given fruit and vegetables require delicate handling, and will employ up to 700 staff.
Unlike other distribution centres with big storage capacity, this warehouse will “pick to zero” – which means all the fresh produce that comes in each day will leave the warehouse that same day for supermarkets.
Strategic location
“As our NSW business continues to grow, we need to think ahead and plan for our future infrastructure and property needs,” said Woolworths director of property Ralph Kemmler.
“Wetherill Park is strategically located in close proximity to a large number of our stores, suppliers and transport providers, and would be an ideal Sydney base for our fresh food distribution in the future.”
Woolworths, through its property development arm Fabcot, purchased the Wetherill Park site for $61 million in January last year.
As Woolworths will invest more than $50 million in the project, it will be assessed by the NSW Department of Planning as a state significant development.
If the site is approved, Woolworths will need to decide on the timing of the investment and the future of its existing temperature-controlled facility at its Minchinbury distribution centre.
Woolworths’ planned investment in a new fresh food distribution hub comes amid surging demand for specialist cold storage facilities from food retailers and pharmaceutical companies.
Based on Macquarie Research forecasts that online sales will rise from a record 12.7 per cent of total sales in 2020 to 20 per cent (or $77.3 billion) by 2025, JLL estimates that an additional 2.3 million square metres of industrial and logistic floor space will be needed by then to support the warehouse needs of the retail trade sector
Phil Pearce, CEO of logistics platform ESR Australia, told The Australian Financial Review more than 80 per cent of inquiries to develop warehousing on sites it owned were from organisations wanting temperature-controlled facilities for either pharmaceutical or perishable food products
“This is a trend we expect to continue, along with the demand generated by the e-commerce boom,” Mr Pearce said.
