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The changing face of retail

RAC’s 6th Retail Question Time saw our end-user panel facing up to a new era of smaller stores, smaller budgets and a smaller skills base. And, on top of that, there’s F-Gas to grapple with

Colin Coe Morrisons

Ron Parry Iceland

Paul Alway Marks and Spencer

John Skelton Sainsbury’s

Danny Ryan John Lewis/Waitrose

Richard Raper RDM

Ray Gluckman Ray Gluckman Consulting

Colin Coe  Six years ago when we first did Retail Question Time, the supermarkets were really buzzing and we didn’t really have to think too much about budgets. But now, after the recession and the rise of the Aldis and the Lidls of this world, we can no longer just refer to them as discounters. Those companies are here to stay – they are a genuine shopping force.

Our profit margins are therefore under scrutiny and so are our budgets. Where we would like to look at evolution and integration and pushing the boundaries, we are literally constrained by our budgets and they are being stretched year by year. We have an ageing estate and a bigger estate and we still have to deliver on that trade.

It is the changing dynamics of retail – we now have the discerning shopper to deal with. No longer will they just come to Morrisons to do a weekly shop, but they will shop around – and that has an impact on us. We also have the rise of convenience and of online. Each one of those changes how we operate – more delivering will mean more distribution, for instance –
and that has an effect on budgets.

It is no longer one size fits all, but it is: “what are the demographics of that store? Will it have the same bits of kit in as all the others?”

Because of all that, we are reinventing ourselves – this year has been interesting as we have done a lot of evaluating of our green solutions.

So we can say that most of our new development will be CO2, apart from those sites which we have already agreed will be HFC and can’t change for various reasons. By 2016, all new stores will have a green solution – that may be transcritical CO2, it may be hydrocarbon, it may be glycol. We have got a number of options and we are constantly looking to stretch the boundaries.

We are very new to the convenience market; we have only been in the market really 18 months. As a result, we are still really finding our feet and finding out the baseline for these stores and what we have put in is a very basic format in terms of refrigeration. What we have found out is that doors are an absolute essential now. So we will be looking to retrofit doors on every single convenience site except for some very high-trading stores.

Refits are a big thing at the moment, and consequently where we can achieve CO2 integration with the current systems we will do that – that probably will apply to about 50 per cent of the sites.

Integration is something we are looking at – in my view, we have a system that is generating heat but we are not using it to its best advantage. We are not using the refrigeration system to its optimum – in future we need to be looking at major integration with mechanical services to deliver heat. All our trials have shown some sort of success, but it has been a massive learning curve.

It is going to be one of the key elements in the future – we should no longer be looking at the refrigeration system on its own. 

The big shift is that money will need to be spent on maintenance, not new store-building, and that will need someone to look after it all. Once we have refrigeration integrated with mechanical, it will need people with the skills who can look at both, and who can look at the energy side, too.

Ron Parry As head of operational services, my job is to have responsibility for energy management and energy procurement, the development and equipment of the various systems and, more importantly, the maintenance of them. It gives me a pretty unique opportunity to look at what does and doesn’t work; the efficiencies and how reliable it is.

We are very fortunate that we are a privately-owned company and that there is a desire and recognition to save energy – primarily because it helps the bottom line. You can say what you want about the green elements of it – and we have a responsibility – but the biggest driver is going to be the bottom line.

We trade out of 850 stores nationwide and the average sales floor is 40 or 50 sq m. We have been in and out of the convenience market. In the 1990s, we started introducing c-stores and equipment that was mostly remote. It didn’t work for us for a host of different reasons. I am pleased to say we went back into private hands in 2005 and we took all the remote refrigeration out and put integral cabinets in.
The business started to become profitable again – not solely
because of integrals, but it helped.
So convenience doesn’t necessarily fit our core business.

People may be surprised that our choice is integral equipment. We have about 60,000 integral units. It has benefits – contingency, so if one fails, we can keep trading; we can move them around fairly easily; we can change formats very easily. With the equipment we are using, we can save about 15 per cent on our core store electricity consumption, which is considerable, given that we are spending about £50m per annum on electricity.

The heat gain as a result of using the integrals and the density of heat generated on the sales floor is quite challenging – we are generating about 1 kW per 5 sq m, so we have quite a high dependency on heat recovery. To manage that, we have a centrally ducted air handling system, which we would call a process cooling system. If you can’t get rid of the heat, you’ve got big problems.

We have developed an integrated controls system for the AHU and the system itself that optimises the use of free cooling and uses minimal fan power wherever possible. We have a wide daytime temperature variation band between 18 and 23 deg C and because the store is unoccupied at night, by using the free cooling, we can drop the temperature down to 16 deg C, with all the benefit that brings. We have minimal heating requirements because of the recirculation and the 24 kW heating within the AHU is only engaged for about 2 per cent of the year.

Paul Alway We call our convenience stores Urban Format and the bulk of them are franchises – so we don’t own those stores. What has been good of late is that on the convenience side, we have started to see natural refrigeration developing – and building integration.

I can’t take any credit away from Carter Synergy, who recently delivered a BP Simply Food on a Green & Cool CO2 system, with the heating, cooling and refrigeration system fully integrated. It has got some great features, such as cold stores with doors on the front of it so you can backload your products and use less cabinets in store. I think we are talking now about a 40 per cent energy reduction, so it’s a great piece of work. Obviously it costs more to deliver but it works on a strategy and payback basis. And Colin is right – doors on the chillers is the only way to make a convenience store stack up in energy terms.

In terms of plans for in-house convenience stores, I guess we can say that it is on the cards. The bulk of new stores over the next three years are going to be of the Simply Food type – the 100,000 sq ft stores are not going to be what we are doing at the moment. For the next year, they are going to be R134a primary, CO2 secondary, with the exception of our first two transcritical Simply Food Stores. They should have launched in October, but now they are planned for April and June 2015 – I can only go as fast as the developers put the shelves in.

Genuinely transcritical is where we are looking to go now.

We are working closely with RDM on things like pack control, and temperature control. What I am doing in some respects is to catch up on what other supermarket systems have done in terms of optimisation – so this year I have rolled out suction optimisation. But we are not just optimising suction, we are reporting on it. That means I know exactly what case with what year of manufacture is stopping me from getting the optimisation I want. So, when money is tight, I can put it where it makes a difference – it is a one-year payback for us on a £200,000 investment. It also means we can sort out the obstacles, so we are getting a 7 per cent improvement, not a 5 per cent one.

The final piece we are working on is the live monitoring of the estate so that our engineers can walk in in the morning and say “where are we going to use the labour today?” and hopefully that intervening is before anything breaks down, not after it breaks down.

Heat recovery is a standard installation for us for on any new store. It is quite rudimentary: we have a desuperheater on the discharge line on the pack. It isn’t an intelligent system in that the sales floor doesn’t call for the heating, so there is a step change we need to look to when we start putting the transcritical system in in volume.

The big challenge at the moment is around energy. Three months ago, our £7m energy reduction budget jumped up to £17m and I was given three months to spend £10m on something that would pay back by April.

The whole doors on fridges debate is ongoing – the challenge in the UK is “if it isn’t a door, what is it?” We are working on the lines of a CFD model of a cabinet, which is now at the stage of being tested with a Formula One company. It is about looking at attachments that we can drop onto a shelf to give us 20 to 25 per cent energy saving.

In a new store, doors stack up, because you can downsize the plant and the energy numbers are there; but for an existing Simply Food store, using £55,000 to £60,000 of energy a year, for me to put doors on our bespoke cases with all the adjustments that means, that will be about £60,000 to install.

But it will be another £15,000 to sort the suction lines out; plus another £25,000 for the pack, which is short cycling as the compressors are also now oversized. Add in the downtime and temporary cases needed, you can add another £6,000 and the total is a payback of 15 to 21 years on an existing store, without the additional maintenance and cleaning of the doors, the heating adjustments and the like. That’s why I am being driven to the smaller changes I can do for the existing estate.

Now, we have been talking a lot about F-Gas, but the one I am worried about now is Ecodesign, because by 2017 we will have energy ratings on commercial cases. I have been told that this is no longer up for debate, so I am appealing for help to cabinet suppliers. This could be the law that makes it mandatory to put doors on all fridges.

John Skelton Firstly, to get back to Ecodesign – hopefully we can get a few more end users to the end-user group of the BRA to discuss this, as this has been a big topic of debate at that group. Unfortunately it is another piece of European legislation that hasn’t been aligned with F-Gas and I think it is going to have a big impact, so it is something that we as an industry need to understand.

At Sainsbury’s, I try to get best value. It is all about trying to spend the money wisely: what do you do with the cash you have? It is just like any of you would do at home.

If we can come up with something that stacks up in refrigeration, we will invest in it. You have got to help us by understanding how the business works and how it has changed and the financial constraints we have or you won’t be able to present us with a business case that will be attractive.

Retail has changed completely recently – we have had a recession; we have had deflation in food; we have had the rise of the discounters, who are doing a fantastic job of giving the customer what they want; we have got the internet, where people compare online.

We know that our customers now don’t always want to go out and shop in large supermarkets and we as a business are going to slow down on large supermarkets.

Our focus has been on convenience for the last few years and we are going to continue to deliver a hundred of those stores each year. Convenience is a real challenge for us. These are the stores that are making the money, but also the most challenging to deliver –
they normally are the most compromised sites in compromised locations and they have a short window to be fitted out.

We haven’t got a viable cost-effective natural solution for convenience yet, although we are just about to launch our second CO2 solution. If a case fails in a 60-case supermarket you can usually move the product into other cases, but if you have only four or five cabinets and you get a problem, it is going to seriously affect trading in that store. We need to look at things differently and we are looking for people to come up with smart solutions for us. And, of course, they are energy-intensive.

I have 196 stores running on CO2  – and I have the scars to prove it. It is still painful. We were the first retailer to have an estate with CO2 that is a year old and we will be the first to have an estate which is two years old. We are learning all the time. We need your help – we are a food retailer, so most of our profit comes from chilled and frozen food. The more money we make, the more we can spend on refrigeration.

I am a big advocate of system integration. I wasn’t, but I am now.

We are now in a place with energy where we are looking to dovetail the heating and refrigeration systems back together again.

We are running trials into reclaiming the heat from refrigeration and they are going well, but we need to think about both system integration and building integration.

I think it is a fantastic opportunity for the refrigeration industry to step up and have more influence.

We use 1 per cent of the UK’s energy and 40 to 50 per cent of that is refrigeration. To my mind, our industry has got to be in the lead, and at the moment we are trailing behind our M&E colleagues.

What that will mean is more training but also, that it is about maintaining the systems as well as designing and installing them, and using the data proactively.

The utopia is to have a multi-skilled engineer that can fix the boiler and the lights as well as the cooling. I think we are a few years away from that, but what we can do is to look at the way the engineer is sent on site so that the right engineers fix it.

I was interested to hear that we are putting the cabinets in the wrong place because we put the cabinets in to sell food, so we are putting it where the customers will go.

In fact I want to have smaller stores – we have opportunities with smaller properties than our standard 2,000 to 2,500 square feet, which we can’t fit our equipment into.

So I want to know: what is happening with the narrower cases; what is being done about designing for smaller footprints? Where is the test that shows what a cabinet will do in the real-world environment?

We have got to get a lot smarter – there are going to be a lot more convenience stores out there and a lot more challenges with draughts and doors.

Danny Ryan I am the refrigeration engineering manager for John Lewis and Waitrose.

I have only been an end-user for a year now, but before that I was a contractor for 23 years.

I thought I knew what the retailer wanted, but it isn’t until you work for one that you realise the pressure they are under to deliver and the budgetary constraints.

My challenge has been getting the information back on our ageing estate as to where that money should be focused. We do need the supply chain’s support on where to spend that money to best effect.

Waitrose has been very focused on refrigerant containment and I have inherited the F-Gas containment group.

We have a large ageing estate on R404A and the group has been historically focused on keeping the refrigerant in, and on replacing key parts of the systems, but now we have a new challenge as to what the replacement strategy is.

In the year I have been here, I have had little contact from refrigerant suppliers as to what we should do. We looked at R407A drop-in, but as John mentioned, it is not as easy as you’d think.

Very little can be dropped in without a large capital expenditure on condensers and the like – and with 200 branches, I don’t yet have the ideal solution.

From 2009, we have been installing our hydrocarbon water-cooled systems.

This has integralised units on the sales floor, where every cabinet has its own compressor, and a water-cooled system with a condensing loop, which allows free cooling – this saves energy, of course.

Since 2013, we have been running the second phase in three stores, which is a pure secondary system with a hydrocarbon chiller and a pumped glycol secondary.
We have taken the data from those three branches and have used it in one of our biggest branches – Salisbury, which is 55,000 sq feet.
So that model is going to be the spec going forward.

A larger convenience offering is certainly where our MD sees the future, so that brings challenges around new technology.

I think training is essential – it has been a struggle for some of our refrigeration engineers to handle the new solution and I think to have multi-skilled engineers who can handle the refrigeration and the M&E has got to be the future.

Q A couple of comments. Firstly, as the amount of convenience retail space continues to increase, it seems to me that is going to put more pressure on the service and maintenance sector.

How is the sector developing to meet the challenge?

There is so much data around, but I  don’t think we retailers take the knowledge out of the data we have because we don’t have the resources to devote to the analysis. There seems to be a gap in the market here.

Q What direction is Iceland going in regarding natural refrigerants and HFOs for integrals?

RP I think hydrocarbons are the obvious choice, and there is a degree of inevitability that it will become standard spec in the next few months. With regard to HFOs, we actively tried to engage the refrigerant manufacturers on alternatives but there is a limit to how much chasing you can do.

We couldn’t get component manufacturers and refrigerant manufacturers to do the same thing.

PA I have met with the manufacturers lately about HFOs –
and my personal feeling is that while CO2 is the answer for me and I am going to use it where I can, that HFOs is a good solution in the medium term. I need to get the HFCs out of my cascade systems, if I am to meet my targets of reducing emissions by 80 per cent by 2020 – I am at 69 per cent at the moment – and the easiest and cheapest way is to drop something in.

Q What are the opportunities for using heat outside of the store, with neighbouring buildings, for instance?

JS It is a good idea in practice, and we have a couple of projects on the go at the moment, but it is surprising how reluctant some people are. If we had all the processes in store, it would be an easier decision.

We have been looking at things like Organic Rankine Cycles and phase-change materials, but we are looking for ideas.

Q Just to let people know that R448 and R449 are commercially available. They may not be in use in large quantities, but until the new F-Gas came along there was no need for them. My question is – what does the panel see as its biggest challenge in the next three years regarding F-Gas and how can we help?

PA One thing we are not good at is sharing on a technical level and I think we should be willing to share our experiences at retrofitting estates and using retrofill refrigerants.

Our change to R407A was not without pain, but we have learnt and I would be happy to share what I am able to – and it is considerably easier than changing over to CO2.

JS From my point of view, I don’t really understand the landscape of refrigerant reduction. If I spend a load of money putting R407 in, will I need to go back to the board in a few years and say “I need to change again”? So at the moment I am nervous about taking the plunge. Like the others, drop-ins have not been without problems. But 85 per cent of my estate is R404A and the legislation is coming into place quickly. And I am not decommissioning kit in a way that will start my bank off.

PA The cost of R407A is going to go up, and there are scare stories that it will triple by 2018 or whatever, but then we also don’t know what a kilo of HFO blend is going to cost, but it will clearly be expensive and more than the R407A.

All we know is that by 2020 we won’t be able to service the R404A.

CC We will all be looking to sweat the assets as budgets are tight. For us we are now predominantly R407F, so the challenge for us is do we keep going with that or do we make the leap to HFOs?

For our business, I am not specifically criticising the refrigerant firms, but it will be hard to go back to the board and say we are going to a refrigerant which is five times more expensive.

RG A key point is that reclaimed refrigerant will be additional to the quota, so people can use that over and above the quota system. We will over time have more recovered gas from the systems that are being converted.

Q I work for a door manufacturer and I just wanted to add that I have not had anybody come back to me to say that putting doors on has affected sales, in fact generally they have been positive, in terms of other factors, like the store feeling warmer.

RG The Co-operative has also reported that there has been a fall in theft because of the addition of doors in their stores.

CC I could probably paper the room with the papers proving the energy savings of doors on fridges, but if retail has a perception that it will affect sales, it won’t happen.

I hope next year we will be in a position to prove that putting doors on doesn’t have a detrimental effect on sales, which we can put with all the energy numbers. For me, it’s a no-brainer.

JS I think we are all doing trials to see the effect of doors. I don’t think it is as easy to do the retrofits as some people have made out.

On some of our retrofit trials we have had to do alterations to the plant and the heating.

There are other things to consider, such as the cost and the carbon footprint, and the fact that they do break.

We have all said from an engineering perspective, there is a definite place for doors in retail.

Energy management, integration and Big Data – Richard Raper

Energy costs are increasing and the bar is being continually raised, with the service costs rising.

At the same time, the skill base for servicing is diminishing and so it is more essential than ever to have real-time access to installations.

By having IP-based solutions, which are truly open, they are future-proof, with more data availability, more predictive analytics, condition-based monitoring and pre-emptive maintenance.

We can have energy, maintenance and downtime all in one place, so it keeps a lot of people happy.

The fact that more engineers have access to smart devices means they can have real time access to the system they are working on, as well as the schematics.

Energy efficiency in the systems can have a real impact on the bottom line. It has been shown that a 20 per cent cut in energy costs can have the same bottom line benefit as a 5 per cent increase in sales.

How do we make these changes? Twenty per cent can be saved with little investment.

Fifty per cent of the available savings can be achieved with more efficient equipment; while 25 per cent can be achieved with good housekeeping and control and 25 per cent through good maintenance – so the latter two are the ones with the lower capital outlay.

You may have designed the most efficient system in the world, but the customer may then abuse it through overstocking it, putting a big draught into it or siting it in the wrong place.

This may give a 20 per cent additional energy burn, with poor maintenance giving another 10 per cent.

The way to fix all this is to constantly monitor the performance of the equipment and to detect any efficiency drop-offs long before you see any temperature-related alarms.

One example of energy saving is suction pressure optimisation; other easy wins are anti-sweat trim heater control, with payback in terms of weeks; lighting on and off times; making sure things are switched off; and upgrading the system for efficiency.

But sometimes the payback timescales allowed by the financial departments are too short and unrealistic. It is always easier to design these things at the beginning, rather than retrofitting the energy-saving initiative.

You can’t control what you don’t measure – how do you know your system is still working as it was intended?

If you are monitoring your refrigeration temperatures, as you are often mandated to do, you can pull in all the other information from your controls and utilities in the building and from that you can set alarms and pre-warnings and thresholds, so you don’t have to keep pestering the staff.

You can now have a top-level visualisation of your systems to see things like asset availability and temperature monitoring, so you can target the actual need for maintenance rather than maintaining alphabetically. You can then home in on individual stores.

That data can be further analysed depending on the viewer’s criteria – our temperature performance indicator, for instance, is a maintenance tool showing case energy performance, but it is also a precursor to case preventive maintenance.

In a large supermarket, there are around 70,000 data points, of which 8,000 are changing constantly and we store them every 15 seconds. It allows us to feed a maintenance regime.

The fridge IP network is probably bigger now than the IP network for the checkouts as there are more display cases than checkouts and each has
its own microprocessor– so
this network is growing to become the de facto store engineering controller, taking in the HVAC and the lighting controls too.

Retail and F-Gas – Ray Gluckman

I have tried not to talk too much about the basics as I think you already know it. We are now in the phase where we have to think about the practical implementation. Everything kicks off in January and things like thresholds and who is responsible will come into play.

I am slightly worried that the first three years will see a lack of urgency as there will be gas available next year and there is a lot of stocking going on.

But the fuss really kicks in from 2017, when the pre-charged amount is included, adding about a 10 per cent demand – 2018 will thus effectively see a 47 per cent drop on today’s volumes and I expect that will sharpen a few pencils.

The change of the thresholds for leak checking etc to CO2 equivalent will see some challenges – the automatic leak detection threshold was 300 kg, but for R404A systems that will now be 127 kg.

That will capture a lot of smaller supermarket pack systems.

There are some important changes to the rules on purchasing.

There is now a legal responsibility on wholesalers to screen their customers to ensure they are certificated for F-Gas. Contractors need to have a company certificate from Refcom or Quidos or Bureau Veritas and they will need to prove they have it to get their refrigerant from a wholesaler.

It gets more complicated if you aren’t a contractor. Supermarkets, for instance, won’t have that F-Gas certificate.

As I have said before, the 2020 service ban will not allow servicing of existing equipment with virgin high-GWP refrigerant above 2500, which will mainly apply to R404A on larger systems, equivalent to above 10 kg charge.

But because the EC didn’t match it to the 2018 quota drop, there will not be much virgin high-GWP refrigerant around between 2018 and 2020.

You would be mad in 2019 to buy R404A equipment when the service ban applies a year later.

To my mind the high-GWP ban applies now.

The other key message is don’t take the eye off the ball on the simple stuff – leak prevention will become even more important as the price of refrigerant inevitably becomes higher.

I have tried not to talk too much about the basics as I think you already know it. We are now in the phase where we have to think about the practical implementation.

Everything kicks off in January and things like thresholds and who is responsible will come into play.

I am slightly worried that the first three years will see a lack of urgency as there will be gas available next year and there is a lot of stocking going on. But the fuss really kicks in from 2017, when the pre-charged amount is included, adding about a 10 per cent demand – 2018 will thus effectively see a 47 per cent drop on today’s volumes and I expect that will sharpen a few pencils.

The change of the thresholds for leak checking etc to CO2 equivalent will see some challenges – the automatic leak detection threshold was 300 kg, but for R404A systems that will now be 127 kg. That will capture a lot of smaller supermarket pack systems.

There are some important changes to the rules on purchasing.

There is now a legal responsibility on wholesalers to screen their customers to ensure they are certificated for F-Gas.

Contractors need to have a company certificate from Refcom or Quidos or Bureau Veritas and they will need to prove they have it to get their refrigerant from a wholesaler.

It gets more complicated if you aren’t a contractor. Supermarkets, for instance, won’t have that F-Gas certificate.

As I have said before, the 2020 service ban will not allow servicing of existing equipment with virgin high-GWP refrigerant above 2500, which will mainly apply to R404A on larger systems, equivalent to above 10 kg charge.

But because the EC didn’t match it to the 2018 quota drop, there will not be much virgin high-GWP refrigerant around between 2018 and 2020.

You would be mad in 2019 to buy R404A equipment when the service ban applies a year later. To my mind the high-GWP ban applies now.

The other key message is don’t take the eye off the ball on the simple stuff – leak prevention will become even more important as the price of refrigerant inevitably becomes higher.

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