Cold storages and cold chains are important proposition for any developing country and is an integral part of supply chain. India’s Food & Beverage (F&B) industry that enjoys a market size of
2, 50,000 crore ($69.4 billion) needs to be backed by a robust, dedicated cold chain network. This is absolutely essential to maintain the reliability and maximum shelf life of the food products and also help retain the freshness and the nutritional value in it.
Cold chain market in India
The cold chain industry in India is estimated to be as large as Rs 10,000-15,000 crore, growing at 20-25 per cent and is expected to touch Rs 40,000 crore by 2015. It is still at a nascent stage with a very few players operating in the space. Food and pharma are the two fastest growing sectors today and they require adequate cold chain facilities. There is a huge scope for the development of cold storage facilities in India, especially in areas like organised retail and F&B that are growing really fast. “But there is still lots need to be done as this industry is going through a long gestation period. We have seen several JVs falling apart in the past only because of this,” admits Ravi Kannan, CEO, Snowman Logistics.
The cold chain industry is largely constituted of two components – storage and transportation. While storage makes up a total of 95 per cent of the market, transportation or logistics forms only 5 per cent.
Cold chain and F&B industry
The changing lifestyle and food habits of people in metros have spurred the growth of the F&B industry. Shopping malls and supermarkets are coming up really fast, and with it, sales of frozen foods, like ice cream, vegetables, fruits, sea foods, meat, etc, are also on the rise. To cater to this demand, manufacturers and retailers need to streamline the supply process of perishable foods while still emphasising on quality, freshness and reliability of the product. This calls for the establishment of a robust nationwide cold chain.
“The QSRs have their own cold chain requirements. For example, burgers need boiled potatoes, lettuce leaves, seasonings, yeast and other species. The requirement will be strictly in lines with food safety standards, considering the hygiene, shelf life and temperature requirement. The products may need chilled, frozen and ambient temperatures,” explains Kannan.
Cold warehouses are designed for specific cooling and storage needs of different food items. It is ideal for storing items that are sensitive to extreme temperatures or those required for immediate use, like fruits, vegetables, seafood, meat, seeds, and hygroscopic items as well as milk and dairy products. Temperature controlled cold rooms (also known as open chillers) with multiple refrigerators are ideal for preserving items like meat (-20°C), vegetables, fruits and curd (- 2°C), ice-cream (-25°C). They can store two days of stock without getting perished.
Refrigerated trucks are designed to carry perishable products at specified temperatures. These temperature regulated trucks cater to the F&B industry by transporting multi-temperature products at varying temperatures. “There are set temperature levels for different products. For example, frozen foods is to be stored in the temperature below -18°C, fast food in the median of 0 - 5°C and Chocolates in 18°C,” explains Gagan Sethi, Director, Evergreen Foods Pvt. Ltd.
Challenges on the way
India is the world’s largest producer of vegetables and milk and the second largest producer of fruits. But post harvest, owing to the lack of adequate cold storages, the country bears a loss to the tune of Rs 60,000 crore. The total cold storage capacity is over 100 million tonnes per annum, resulting in an estimated wastage of Rs 23,000 crore annually. This deficiency in cold storage is already causing a huge loss to the country’s economy.
However, with the Government intervening in and focusing on food preservation, the cold storage sector is undergoing a major metamorphosis. In the 2011-12 union budget, the government has classified cold chain as an ‘infrastructure’. A lot of stress is also being laid on energy efficiency as the cold stores are energy intensive. “The Government of India has come up with a subsidy for setting up cold storages and mega food parks. Twenty-four cold storage projects with a capacity of 1.4 lakh metric tones have been sanctioned till 2010 under National Horticulture Mission. In addition, 107 cold storage projects with a capacity of over 5 lakh metric tones have been approved by the National Horticulture Board. Still much financial assistance is waiting due to lack of funding from GOI,” says Kannan. A large number of cold storages have come up with heavy subsidies and loans from the cooperatives and the government.
Use of obsolete technology and erratic power supply further pose as a potential hazard to the entire cold chain infrastructure. Logistics is also faced with a lot of challenges, as Sethi points out. Getting entry permissions into states is the biggest problem that these logistics companies have to deal with. “We have to go through a lot of procedures and formalities before we are finally given the permits. We are also given entry timings to enter so that the traffic remains unhindered in the cities. Then there are police atrocities that become really harassing at times,” he says. Being an unorganised sector is a big challenge for the logistics industry.
Cold store warehouse if built near to the city can facilitate a faster and a more convenient movement of perishable goods. But again the escalating prices of real estate in tier I and II cities have made land acquisition a huge investment and thus a bottleneck.
The silver lining
Netscribes India that launched its report on the “Cold Chain Market in India 2011” reveals that the current cold chain market is primarily dominated by the private sector. The government aid that it received in the last two budgets has boosted more players to enter this still maiden industry. Given that the industry is still in its nascent stage, it has a long road to traverse before it finally becomes an organised industry.
Adoption of advanced technology is the need of the hour to ensure a hassle-free, energy efficient cold chain operation. Technological upgradation can make it cost effective in the long run. Attracting foreign direct investment in this sector can also trigger further demand but this is unlikely to happen in the near future.