Tuesday, January 21, 2020


Cold chain sector: Immense potential for value addition
Wednesday, 04 September, 2019, 08 : 00 AM [IST]
Shagun Sachdeva
Cold chain is undoubtedly one of the emerging markets in the logistics industry owing to its immense potential for value-addition, specially, within the food processing category. With consumers increasingly becoming health-conscious and proactively gravitating towards healthful food, manufacturers understand that they need to adapt to thrive and bring in increased innovation to overcome capacity and infrastructure constraints, and mitigating disruption risks to ensure quality delivery. The changing consumer behaviour, growth in the e-commerce industry, and advancement in technology are the key factors pushing growth in the cold chain sector.

Cold chain management has become more complicated and critical for FMCG players as consumers appetite for fresh foods has steadily increased. Right from operational challenges in terms of capital-intensive equipments, strict temperature requirements and energy dependence, the sector is grappling with additional challenges in form of quality standards, and mounting regulations.  

Sufficient and efficient infrastructure
In developing economies, the lack of sufficient and efficient cold chain infrastructure is a major contributor to product losses, waste, over production and loss of market value, leaving little profit for farmers, manufacturers and retailers. The underdeveloped supply chains of parts of Latin America, Asia and Africa is a growing problem as more middle class consumers demand better quality products to meet their increasingly sophisticated tastes.

The inefficient supply chains in these regions means that consumers are spending more money on poor quality food which in turn is hindering the entire market. As such, manufacturers that tap into the desire for better quality products will be able to capitalise on important markets that are expected to become the key drivers of global economic growth in the future. Therefore, developing coherent and unbroken cold chains that include chilled packaging of fresh produce, food processing, cold storage, temperature controlled distribution and refrigerated retailing will be vital to achieve growth in these emerging markets.

Looking at the growth opportunities of this sector in the emerging markets, manufacturers are investing across the supply chain to save costs and preserve food. Manufacturers have been using straightforward packaging technologies to lower

product temperatures without burdening or relying on the local infrastructure and relying on independent and reliable sources of energy, such as solar or wind power, to maintain constant temperatures throughout the production, transport and retailing of their products.

Beyond strategic investments, manufacturers are also focussing on developing functioning relationships with local officials, producers, distributors and retailers across the supply chain to enhance the infrastructure and cold chain ability in less developed countries. However, the key point to ponder here is that the short and medium term investments by manufacturers should be coupled with government grants, subsidies or investments to allow the supply chains to grow and benefit manufacturers, consumers and governments.

In the light of cold chain industry, it is imperative to analyse the trends that are shaping the future of cold chain management in the whole consumer sector are as follows:

Healthy is the Way: Consumers are gradually becoming health-conscious with evolving consumer preferences turning towards healthier options without compromising on the taste which in turn has impacted the sales of bakery, meat and other significant products.

Food Tracking: Leveraging various technological applications, companies can track down the food source and substantiate how foods remain fresh from farm to table which also indirectly helps in creating a competitive edge by building the authenticity of their brand.

Real-Time Data: Retailers and suppliers can ensure the quality of fresh foods in transit by maintaining unbroken temperature control. For instance, via sensors using IoT devices and cloud-based software applications, the refrigerated cargo containers can be remotely monitored and tracked down.

Cloud Platforms: Catering the demand for real-time data needs an IT infrastructure that can collectively analyse and share the data where and when its required. So only by harnessing IoT technologies, organisations can utilise the data that exists within their physical environments in unlocking business value across the cold chain in the form of reduced waste, brand equity and rapid RoI (Return on Investment).

Blockchain Meets Cold Chain: Blockchain aids in creating a more transparent route for fresh foods, and leading retailers are finding an innovative way to transform this data into marketing messaging to foster more loyal customers.

Talking about the Indian cold chain market, India comprises of around 7,640 cold storages with a total capacity of 34.9 Mn MT (up to 2017) and Uttar Pradesh stands out in the top list with a production of 14.1 Mn MT followed by West Bengal (5.9 Mn MT). The emerging urbanisation and sustained growth of organised retail in food servicing and processing unit has boosted the growth of cold chain in India with trend shifting towards establishing multipurpose cold storages to provide enhanced end to end services.

With more premium products finding the shelf space in the market with a shorter shelf life, greater sensitivity to temperature, and a much different level of demand, manufacturers are trying their best to mitigate multiple challenges and ensure an optimal experience to the consumers with the brand. They are eyeing at innovative approaches across the cold chain which include new age storage systems, real- time monitoring of storage and quality parameters, data recording applications, leveraging ICT tools as well as use of renewable sources of energy.

Cold chain is a promising sector especially for Indian food processing industry, which aims at waste reduction, value addition, crop diversification, and returns to farmers, creation of more jobs & employment opportunities and increase in export income.  

According to the National Centre for Cold Chain Development (NCCD), a gap of 3.2 Mn MT in cold storage capacity has been observed along with lack of 69,000 packhouses, 50,000 reefer vehicles and a gap of around 8,000 ripening chambers in India in 2018. This offers massive opportunity for multi commodity and multi value chain legs based interventions for the development of post-harvest logistics, storage, handling and marketing infrastructure.  

Technological advancements
From coffee and fish to wine and olive oil, technological advancement is getting incorporated in cold chain and refrigeration in ways that promise to benefit producers, distributors, retailers and consumers.  

Early applications of technology to cold chain and refrigeration suggest that cross-industry collaboration is becoming the norm, with specific initiatives bringing together IT leaders, technology startups, food retailers, NGOs and systems integrators.

With innovative packaging technologies for enhanced shelf life, retaining taste and texture and making it attractive and easy to handle with space efficiency, the cold chain supply can be enhanced for a reduced wastage production.  

Key take-outs
Cold chain development is an integral part of growing the economy due to linkage effect and what we need are long-term policies, strategies and action plans from the private and public sector, commercial financing at low interest rates and subsidies to encourage local and international cold chain investment,   greater education about food handling, cold chain technology and post-harvest activities in order to increase the efficiency of logistics processes throughout the food supply chain.

(The author is consumer insights analyst at GlobalData Plc. She can be contacted at shagun.sachdevv@gmail.com)
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