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Refrigeration

The current state of the European refrigeration industryPresented by Greg CortyThis webinar will start at 9:00 BST

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Making buildings better

Serving industry since 1955

European Refrigeration

The current state of the refrigeration industry

Greg Corty30th June 2020

Webinar

How will the industry meet the challenges?

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BSRIA WMI has:

➢ 50 + years of research and consultancy experience in the building industry

➢ 35+ years experience of publishing market studies in Air Conditioning, Heat Pumps, and Refrigeration. BSRIA is a member of the International Institute of Refrigeration

➢ Published several multiclient studies on refrigeration markets worldwide

BSRIA’s services are fully independent which enables us to provide outputs that offer truly objective analysis and opinion

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BSRIA capabilities

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➢1 The current crisis

➢2 The product market in key refrigeration sectors

➢3 Market drivers and challenges

➢4 What next for refrigerants?

➢5 Focus: What next for food retail?

Agenda

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The current situation:

A lasting crisis upon Europe

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The state of the economy

Sharp contraction expected in global output this year: the years 2020 and 2021

will be lost for growth

Deflation fears as eurozone price growth falls to four-year low

German industry records historic 18% tumble in output

Unemployment rises in Europe as coronavirus ends labour market recovery

The economy on life support

ECB boosts bond-buying stimulus package by €600bn

Germany’s €130bn stimulus will boost recovery, says Bundesbank

Covid crisis likely to mask economic fallout of no-deal Brexit

6

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Changes in consumer patterns encouraged by COVID-19

“For the next at least 12 months the internet will be a really important part of anyone’s

business and you’d be crazy not to embrace it”

Coronavirus: Southern Europe discovers digital shopping

Online grocery shopping becoming the new norm

Estimated % share before COVID-19

Source: SimilarWeb

UK

Germany

France

Frozen food experiencing a surge (France)Over 9 year(2011-2020)

Over 1 year(2019-2020)

Over last 2 months (mid-Feb to mid-Apr)

CANNED FOOD DELICATESSEN SALTED FROZEN FOOD

Change in supermarket shopping during COVID-19

7

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The refrigeration industry is segmented between a few key sectors of application.

How will it impact the refrigeration industry?

Super/HypermarketsConvenience storesRestaurants/leisure sector

Consumer50%

Cold storageCold rooms

Distribution

9%

Food processingBreweries, dairies, wineMarinePetrochemicalEngineering/electronicsPharmaceutical

Production41%

Applications for European refrigeration market, 2019, % value Total: EUR 9.9 bn

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The product market in key refrigeration sectors:

Production areaDistribution area

Consumer area

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Air-cooled condensers / dry coolers

Different types:

- air cooled

- dry cooler

- gas coolers

- adiabatic

- evaporative

- borehole/ground sink

From small capacities (<5kW) to large condensers (up to 2 MW)

Evaporator units:

- Unit coolers

- Variable retention time tunnel freezers (VRT)

- Commercial refrigerators

- Spiral & plate freezers

- Ice makers

- Milk tanks

Source: BSRIA

Refrigeration

Refrigeration in production area (EU 28)

Total: EUR 4.0 bn

Refrigeration market in production area, value, EUR million, 2019

Industrial refrigeration is characterised by several types of evaporator applications

Condensing units

Remote condensers

Compressor racks

Industrial packages

Evaporator units

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Source: BSRIA

Refrigeration in distribution area (EU 28)

Refrigeration market in distribution area, value, EUR million, 2019

Total: EUR 0.9 bn

Evaporators / Unit coolers:

From small capacities (0.2 kW) to large HEX for process, cold stores, expedition platforms (>100 kW)

Compressor racks

Distributor made

Manufacturer made (Commercial refrigeration power up to about 450 kW)

Installer made<40 kW to >350 kW

Heat exchangers

Condensers

Evaporators

Fluid/fluid HX

Products

A large proportion of the distribution area is made of unit coolers

Condensing units

Remote condensers

Compressor racks

Industrial packages

Evaporator units

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Source: BSRIA

Refrigeration in consumer area (EU 28)

Refrigeration market in consumer area, value, EUR million, 2019

Total: EUR 5.0 bn

Condensing units:

Uncased units

Cased units – including split units

Silenced cased units

Monoblocks

<2 kW to >20 kW

Evaporator units:

- Commercial refrigerators / freezers

- Beer / wine coolers

- Remote display cases

- Integral display cases:

- Air cooled

- Water-cooled (water loop self contained)

Products

Evaporator units such as display cases account for a large share

Condensing units Remote condensers

Compressor racks

Evaporator units

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Market drivers and challenges

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The European refrigeration market

European refrigeration market, EUR million 2015-2019

Technology /

energy

efficiency

Social /

proximity

Political /

legislation

Environment /

COVID-19

Environment /

climate

change

Social /

shopping

patterns

Drivers

Restraints

• Europe EUR 9.9 billion in 2019• CAGR of 2%

8,600

8,800

9,000

9,200

9,400

9,600

9,800

10,000

10,200

2015 2016 2017 2018 2019

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What next for refrigerants?

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2009 2012 2016 2018 2021 2024 2027

Baseline period

F-Gas Regulation (EU) No 517/2014: phase-down of HFC in CO2 equivalent tonnes

The EU F-gas Regulation implements the Kigali Amendment, with a stricter agenda:

- More stringent phase-down schedule than the Montreal protocolEU F-gas quotas (tonnes CO2eq): -69% 2024, - 79% by 2030 (Kigali Amendment: -45% by 2024 only)

- Different 100% HFC base years : EU F-gas ref years 2009-2012 // Kigali ref years 2011-2013

- Bans on HFC in new equipment

- Measures to prevent leakage of F-gases

A reminder: the EU F-gas Regulation

2030

16

21%24%

45%

63%

93%

100%

31%

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The EU F-gas Regulation focuses on refrigeration where higher GWP apply

Sector Products Ban HFCwith:

Year

Domestic refrigeration Domestic refrigerators and freezers GWP ≥150 2015

Commercial refrigeration Refrigerators and freezers (hermetically sealed)

GWP ≥2500 2020

GWP ≥150 2022

Commercial and industrial refrigeration Stationary refrigeration equipment GWP ≥2500 2020

Multipack centralised refrigeration systems (≥40 kW) except in the primary refrigerant circuit of cascade systems where F-gases <1,500 GWP

GWP ≥150 2022

Stationary air conditioning Moveable room AC GWP ≥150 2020

Single split AC GWP ≥750 2025

The EU F-gas regulation – Bans on HFC in new equipment

17

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Refrigerants in refrigeration

Refrigerants

Potential for main refrigerants in Refrigeration

Condensing units

Compressor racks

Display cases (integral)

HFC HFO CO2 R290 Others

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- HFOs are popular alternatives to both R404A and R134a

- New HFC/HFO blends are also on the increase, but they are expected eventually to recede in favour of pure HFOs

- Natural refrigerants such as CO2 and propane have already made a breakthrough

- After widespread use in compressor racks, CO2

should now progress in condensing units of 15 kW or more

- HFC Refrigerants are declining

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No noticeable initiative

Cascade R448A/CO2 in one supermarket

Initiative must come from store owners

55% energy used is from renewable sources

Some uptake of transcritical CO2 HC in all stores

All display cases have doors

Increased the number of HFC-free systems

Display cases with doors in 355 stores

Starting to implement CO2 condensing units in convenience stores

Uptake of HFC-free refrigerants

R404AR134a

R448A/R449AR452AR513A

CO2

R290

High GWP Low GWP

Choice of refrigerants by key retailers

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Centralised decision-making is key to drive low-GWP refrigerants

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Focus: What next for food retail?

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8,000

9,000

10,000

11,000

2017 2018 2019 2020 2021

Nov 2019 projections

Singe hit scenario

Double hit scenario

Source: BSRIANote: million € at constant prices 2017

Refrigeration forecasts up to 2021

Refrigeration is an industry correlated to GDP, and in particular to private consumption.

New forecasts take into account:

Forecast

Refrigeration market forecast –before and after the crisis

Refrigeration market real growth, EU (28), in volume mln €

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- Scenario 1 = the virus continues to recede, - Scenario 2 = a second wave of rapid

contagion erupts later in 2020.

No return by 2022 to the level of income that would have been expected in normal circumstances.

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The difference between countries:

- An estimate -15% is expected for refrigeration in Europe

- France, Italy, United Kingdom = strong and lasting decline

- Germany, and Nordic countries = business as usual?

How will it differ between countries?

22

Italy20%

Spain20%

Poland9%

Netherlands8%

France8%

Germany6%

Rest29%

Vegetable production, EU (28), volume

Italy6% Netherlands

6%Poland

8%

UK6%

France20%

Germany24%

Rest30%

Livestock processed, EU (28), volume

Source: FAO

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A brief survey was carried out with key stakeholders:

- Contractor associations

- Manufacturer associations

- European suppliers of refrigeration products and components

- Some key specifiers

Source: BSRIA

Survey results

Market Feedback

Business

environment

There is a difference between refrigeration sectors. The worst hit has been food servicesWe can expect several bankruptcies in the HoReCa sector, with a lot of second-hand appliances reaching the marketThe retail sector has postponed investment, but they will still take place later in the year

The situation differs among EU countries:- Germany, the Netherlands, Scandinavia: these

countries are still going strongly- France, Italy, Spain, the UK: these have been worst

hit by the lockdown and its aftermath

EU countries

There is no obvious scenario for 2021: while the virus may come back, activities in food services and the leisure / travel sector are likely to remain subduedWe are facing a W-shape recovery, with a further depression expected by the end of 2020By the end of the year, we will reach -10% to -20% activity level

The future?

23

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Will they continue to

exist?

Retail parks

➢The traditional model of large stores, often in retail parks, might be threatened

Will they unsettle the traditional

supermarket model?

Convenience stores

➢Convenience stores expected to continue to grow at the expense of large super / hypermarkets

The traditional hypermarket is threatened – will alternative shopping models continue to grow?

The future of food retail

Food retail

24

“Click & drives”

81% 19%

Will they continue to

thrive, driven by online shopping?➢Internet shopping continues to

progress, driving deliveries or pick up stores requiring more cold stores

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Conclusions

25

Drivers such as energy efficiency and new refrigerants will mean product innovations will continue

The Pandemic likely to result in a further push in changing the way we shop

The current crisis will mean a recession over 2020, particularly for food services, but likely recovery from 2021

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New projects

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New Projects - Refrigeration

27

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Contact details

Greg CortyHVAC&R Senior Researcher

Old Bracknell Lane West, Bracknell, Berskshire RG12 7AH UKT: +44 (0)1344 465600 M: +33 (0)6 65 21 46 62E: Greg.Corty@bsria.com W: www.bsria.co.uk