Retail Cold Chain: Challenges & Opportunities

Press Release: 17 January 2017

Retail Cold Chain-1

The cold chain market is estimated to be valued at USD 167.24 billion in 2016 and is projected to reach a value of USD 234.49 billion by 2020. The cold chain market has grown steadily in the last few years and this trend is projected to continue until 2020. The primary factors driving the global success of cold chain is growth in international trade for perishable food products and changing consumer preferences.

On the basis of application, the cold chain market is segmented into fruits & vegetables, bakery & confectionery, dairy& frozen desserts, meat, fish & seafood, and others. Cold chain plays a key role in storage and transport of meat, fish & seafood products as they require refrigeration right after slaughter, during processing, and during packaging. Meat, fish & seafood accounted for the largest market share in 2014 due to increasing consumer preference for packaged food products.

On the basis of temperature range, the cold chain market is further segmented into chilled and frozen. With the increasing trade of perishable food products, the demand for cold chain is expected to enhance the market growth in the near future.

Globally the focus now has shifted from increasing the production to better storage and transportation of food produce. Cold Chain now has become an integral part of the supply chain management for the storage and transportation of temperature sensitive goods. Utilization of cold chain logistics includes both the cold storages as well as refrigerated transportation and is used to increase the shelf life of food produce. The Indian cold chain market in the last few years has witnessed various positive changes.

But in India operating cost of cold storage is very high which is – $ 60 per cubic meter as compared to $ 30 in the west –and this is one of the major roadblocks for the sector’s growth.

Retail Cold Chain-2

India being world’s largest milk producer and second largest producer of fruits and vegetables ends up wasting about 20-50 percent of the total produce, valued at $ 440 billion annually (includes food grain wastages). Moreover, the quality of the product also diminishes as it reaches to the customers. The major reason for this is the poor arrangement of cold storage in India.

Cold chain is the process which involves the transportation of temperature-sensitive products along a supply chain through thermal and refrigerated packaging methods to protect the integrity of these shipments. There are several means in which cold chain products can be transported – refrigerated trucks & railcars, refrigerated cargo ships, and air cargo.

Although, the sector is fragmented and not mature but there is huge potential for retail to grow. The growth may require change the way of working and develop new capabilities around handling food collection, storage and transportation posing huge advantage given the current situation.

How It Currently Works in India?

India has about 6300 cold storage facility with the capacity of 30.11 million metric tonnes, which are only able to store about 11 percent of the country’s total perishable produce. About 60 percent of this capacity is spread across states of UP, West Bengal, Gujarat and Punjab. But still situation is severe in the south of the country where there are almost no cold storage units and the climate is hotter and far more humid.

To provide the boost to the sector, Government of India has taken initiatives like forming National Center for Cold Chain Development (NCCD), allowing 100 percent FDI in cold chain infrastructure and investing $ 15 billion in cold storage infrastructure. While it will still take some time to get the expected outcomes of these initiatives, the industry is still highly fragmented and organised players make up only 10 percent of the industry with overall 3500 companies working in this space.

One of the major roadblock for the sector to grow further is the operating cost of cold storage which lies at $ 60 per cubic meter in India compared to $ 30 in the west. The reason for this huge difference is on the account of higher energy expenses in India and shortage of adequate infrastructure. The major concerns that the cold storage sector faces are power supply, lack of trained personnel, outdated technology and infrastructure. However, inconsistent power supply and poor electricity is the biggest obstacle in the development of cold storage industry.

How to Make It Work?

Setting up cold chain involves high cost and higher infrastructure cost for operations. Given the expected growth in grocery retail to $ 847.9 billion by 2020 from $ 500 billion in 2012, there are some changes expected by the industry as a whole to ensure the three significant areas of handling food collection, storage and transportation be more cost effective for retailers.

Technology interventions like GPS and sensors which can be monitored centrally to track the temperature and position of truck to ensure better control on product quality.

In Conclusion

While retail cold chain as a sector is currently struggling to be more efficient, there is a lot of headroom for improvement with the help of operational and technology level changes which can be brought into the overall system. With government also taking up many initiatives for the betterment of sector, it might be a good idea for retailers to look at long terms gains rather than looking at the current model of low operating cost.

Courtesy: Business Standard 

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