The Indian cold chain network has the potential of growing to a Rs 32,000 crore industry by 2015.
The Indian cold chain network has a bright future ahead of itself with the new government´s support and changing consumer dynamics. The Indian market has started to recognise the significance of reducing food wastage and shortage of healthcare facilities due to lack of cold chain infrastructure. With more than 3,500 companies in the entire value system, the current issues can be addressed and improvised to a great extent with a move from fragmentation towards consolidation. The current industry does not comprise of any comprehensive cold chain network, but it is estimated potentially to grow to Rs 32,000 crore by 2015 as per a report by Technopak Research & Analysis. The cold storage in India till now has been largely utilised for short term storage of potatoes, onions and high value crops viz apples, grapes and flowers comprising 88 per cent of the total capacity. However, in the last decade the trend has changed with facilities focusing on all fruits, vegetables, poultry dairy, processed foods and FMCG product categories.
There are approximately 5,381 number of total cold chain storages in India with 95 per cent of total storage capacity under private players of which around 36 per cent cold storages have capacity below 1,000 MT. More than 75-80 per cent of India´s cold chain storage capacity is spread across the States of Uttar Pradesh, Gujarat, Maharashtra, Punjab and West Bengal.
According to industry estimates, approximately 104 million metric tonnes of perishable produce is transported between cities each year out of which about 100 million metric tonnes moves via non- reefer mode and only 4 million metric tonnes is transported by reefer. Even though India has about 250 reefer transport operators (mostly small & non-integrated firms) that transport perishable products and more than 30,000 refrigerated vehicles currently ply in India, a majority of these vehicles (about 80 per cent) are utilised for milk and milk products transportation.
The various players in the market are focusing on cold storage and transportation solutions to various food companies of which cold storage forms 85 per cent and the rest 15 per cent is contributed by transportation, but these are not enough to cater to the growing food demand and the quantity of food produce wasted due to short shelf life.
To understand how big the impact is of effective cold storage and transportation let us take potatoes as an example, which contribute to 75 per cent share of the overall cold chain market. The shelf life of potatoes without any storage facilities is 4-6 weeks whereas with enhanced facilities the shelf life shoots up to 3-8 months.
The biggest companies in the market also cater mainly to organised retailers, Quick Service Restaurants (QSRs) and frozen food companies. Crisil expects the QSR market to double to about Rs 7,000 crore in 2015-16 from Rs 3,400 crore in 2012-13, driven largely by new store additions in smaller cities opening more opportunities for development in the cold chain market.
Cold chain forms the back bone of another industry-pharmaceutical distribution. The market value of vaccines in India is valued at around $180.5 million. The industry is growing at a healthy pace of around 25-30 per cent annually. Vaccines require end-to-end support of temperature controlled environment right from the point of their initial stage of production to their final distribution. This indicates the unexplored potential for both the domestic as well as the international players which are present in the cold chain management system.
India has been able to create a capacity of over 30 million tonnes, but the concept of cold chain is still in its nascent stage with enormous growth potential owing to climatic diversification and geographically vast size of the country. As a comparison, the percentage of movement of fruits and vegetables through cold chain in the US is around 80-85 per cent and Thailand is 30-40 per cent whereas India (at 11 per cent) is yet to climb up these numbers. There are certain issues which need to be addressed, which will allow the cold chain sector to be at par with global standards of the industry:
i. Trained manpower and expertise: Infra-structure projects are increasing but lack of manpower with appropriate skill-sets to handle modern technology needs to be solved.
ii. Lack of backward and forward linkages to complement cold chain: The transported and stored commodities in cold chain should have enough market value to absorb the added cost. Other processes should also be enhanced to ensure overall quality of the product.
iii. Lack of trust concerns viability of cold chain projects: Cold chain projects are still seen by investors as high on capital, low on volume and requiring a long payback period for the investment. Cold chain projects also involve aggressive marketing and investment on backward and forward linkages. This, coupled with a dearth of successful demonstration projects in the sector, is keeping potential investors away.
The continued support from the Government in terms of subsidies for cold storage, consolidation in the industry with more national level players coming in, along with FDI will help the sector expand, with the key growth drivers being meat products export, rising demand for confectionary, frozen foods, i.e., changing patterns of consumption on the whole.
(The article has been authored by Manish Agarwal, Vice-President, Gati Cold Chain).