Small food retailers not prepared for refrigeration regulations, Emerson warns

• UN commitments and European regulation require the phase-down of environmentally harmful HFC refrigerants
• HFC supply is due to drop 40% this year, which is driving up prices and causing a refrigeration shortage for food retailers
• Refrigeration is one of the highest investments stores make, according to the Association of Convenience Stores

Less than half of SME food retailers in France, Germany and the UK have started the transition from harmful HFC-based refrigerants to cleaner refrigeration alternatives required by EU regulations, according to survey data released today by global technology company Emerson.

Commitments set by the UN, along with EU regulation, means that food retailers need to shift away from refrigeration systems that run on hydrofluorocarbons (HFCs) – an environmentally damaging refrigerant – and replace them with more environmentally friendly options. The phase-down is a progressive reduction of the refrigerant which started in 2015 and runs through 2030.

The biggest cut to the HFC supply happens this year, with a reduction to almost 40% from 2015 levels, which is already driving up prices and causing a refrigeration shortage for retailers. Yet, a ComRes* survey commissioned by Emerson reveals that food retailers – small food retailers with fewer than 200 employees in particular – are still learning how to navigate the change.

The data, which has been shared to coincide with UN Micro-, Small and Medium-sized Enterprises Day [#MSMEDAY18] – set up in part to celebrate the vital contribution these businesses make to achieving the Sustainable Development Goals – found that just under half (49%) of SME retailers across the European countries have started the transition, compared to two-thirds (66%) of large retailers with over 200 employees. Only two in five (40%) of SME retailers reported they were aware of the regulatory changes, compared to an awareness level of three in five (60%) by large retailers.

When asked about the biggest challenges in navigating the regulatory change, cost was unsurprisingly a significant factor. Forty-four percent of SME food retailers cited operational expenditure as one of their biggest concerns when thinking about refrigeration, followed by safety (39%).

Where SME retailers have started to phase-down HFCs, they are opting for different natural refrigerants as compared to their larger counterparts. The majority of SME retailers (58%) have transitioned to low GWP HFCs or Hydrofluro-Olefins (HFOs), compared to only 37% of larger retailers – HFOs are a compound similar to HFCs but with a lower global warming potential (GWP). Larger retailers are most likely to have transitioned to more sustainable natural refrigerants, such as CO2 (47%). A minority of SMEs and larger retailers have opted for hydrocarbons such as propane (15-16%, across SMEs and larger businesses respectively).

Despite being the most popular choice amongst SME retailers so far, HFOs are expensive and may be vulnerable to further tightening of regulations in the future.

This has significant implications as there are 5.5 million small and medium-sized enterprises in Europe’s retail and wholesale sector.

“While the HFC phase-down is a positive change for the environment, there is a risk the regulatory pressure is causing retailers to rush into stop-gap solutions that may not be best for the environment or for business,” said Eric Winandy, Director of Integrated Solutions, Emerson Commercial & Residential Solutions. “The research showed very few SME retailers have explored natural refrigerants like propane, which can reduce emissions and operational cost. There needs to be more education and support to help retailers select a clean and cost-effective refrigeration system that will serve the business best in the long-term.”

According to reports from the Association of Convenience Stores, refrigeration is consistently one of the highest investments that stores make, especially as chilled foods remain a fast-growing category in the convenience sector.

A spokesperson for the ACS commented: “The convenience sector continues to outgrow the rest of the grocery market as changing shopping habits drive more customers toward little and often purchases and top up shopping instead of a big weekly or fortnightly shop at a supermarket. Convenience stores have invested heavily in refrigeration over the last few years as food to go and chilled goods become more popular in small format retail. It’s important that retailers ensure that future investments are made with upcoming regulations in mind so that any new equipment is compliant.”

A research paper from Toby Peters, Professor of Cold Economy at the University of Birmingham, similarly recommended that the EU and national governments need to match regulation around refrigeration with support, as it does for other sectors. It called for:

• Incentives for retailers to accelerate transition to low-impact refrigeration solutions;
• Support for R&D into deeper integration of store refrigeration into electricity grids and district thermal networks;
• Mandated certification and training in natural refrigerants, and the provision of enough funding to develop the skilled workforce required to support an accelerated transition; and
• Increased investment into low-impact and sustainable cooling technologies and applications.

“Small businesses are the backbone of most European economies and have a significant role to play in combatting climate change, yet limited resources means they often bear the greatest burden when it comes to addressing regulatory changes. The industry and government needs to work with small retailers on the HFC phase-down, by providing incentives and education about the refrigeration options available,” added Emerson’s Winandy.

Notes to editors:

*The ComRes survey findings are based on an online poll of 140 professionals with decision-making responsibility for purchasing in the food/beverages retail sector. This included 41 participants in France, 50 in Germany, and 50 in the UK. Eighty-two participants were from SMEs with less than 200 employees, and 58 participants were from businesses with 200 employees, or more. Fieldwork was conducted by ComRes between the 11th and 23rd of August, 2017. A full set of data tables can be access on comresglobal.com.

More information on natural refrigerants, including system options, articles and webinars can also be found at www.emersonclimate.eu.