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Sector Analysis By Zubin Poonawalla 10-11-2012 Cold Chain Logistics
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Page 1: Cold chain logistics   sector analysis

Sector AnalysisBy

Zubin Poonawalla10-11-2012

Cold ChainLogistics

Page 2: Cold chain logistics   sector analysis

Cold Chain Logistics

Sector Analysis

by

Zubin Poonawalla

[email protected]

2nd May, 20132

Page 3: Cold chain logistics   sector analysis

• What is Logistics ?

• Introduction to Cold Chain Logistics

• History and Breakthroughs

• Global Scenario

• Indian Ice Age

• Value Parameters

• Users

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Page 4: Cold chain logistics   sector analysis

Logistics is the management of the flow of goods from origin to destination to meet customer requirements

Right Time, Right Place @ Minimum Cost

Started as a business concept in 1950’s

What is Logistics ?

Logistics

Transportation

Inventory

Warehousing

Information

Management

Packaging

Security

Source: Global Agri System Pvt. Ltd. Report4

Page 5: Cold chain logistics   sector analysis

What is Cold Chain Logistics?

Major Sectors : Food and Beverages, Bio-Pharmaceutical

The Cold chain logistics infrastructure

Supply

Procurement

• Precooling System

• Farms (Rural Markets)

• Manufacturers

Transport

• Refrigerated Trucks

• Refrigerated Railway Wagons

• Refrigerated Cargo Containers

Storage

• Cold Storage

• Warehouses

Transport

• Refrigerated Trucks

• Refrigerated Railway Wagons

• Refrigerated Cargo Containers

End Customer

• Retail, Terminal, Markets, Factory, Ports, Airport

LOGISTICS

TEMPERATURE

CONTROL

(REFRIGERATION)

COLD CHAIN LOGISTICS

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Global Cold Chain Facts: Food Sector

Fruits & Vegetables

Meat Fish & Seafood Dairy Products Beverages

In European and American developed countries, the rate of refrigerated transport is up to 80-90%, pre-cooling preservation is up to 80-100%, and the loss rate is below 5%.

25% of the total food production is processed foods. A booming industry

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Cold chain in Food Sector

Industry Temperature Standards

Banana

13°CChill

2°CFrozen

-18°CDeep Frozen

-29°C7

Page 8: Cold chain logistics   sector analysis

Temperature &Shelf Life

ProductRefrigerated Shelf Life (Days)

Optimum Temperature (Celcius)

Apple 90-240 0

Bananas 7-28 13.5

Bell Peppers 21-35 7

Cabbage 14-20 1

Eggs 180 1.1

Onions 30-180 1

Lettuce 12-14 0.6

Fresh Meat (beef, lamb, pork, poultry)

14-65 -2

Oranges 21-90 7

Pears 120-180 -0.6

Potatoes 30-50 10

Seafood (shrimp, lobster, crab)

120-360 -17.8

Strawberries 5-10 0.6

Tomatoes 7-14 128

Page 9: Cold chain logistics   sector analysis

Global Cold Chain Facts: Bio-Pharmaceutical

Pharmaceutical Biotech Vaccines Blood Products Clinical Trials

source: www.coldchainpharm.com/

Global Bio-Pharma Cold-chain marketFY12 : $5.1 billion FY13 : $6.6 billionFY14 : 7 of the top 10 global pharma products in will require cold-chain handlingVaccines growing on average 8% per year for the next five years

Source: www.fiercebiotech.com/press-releases/

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Cold chain in Pharmaceutical Sector

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Global Cold Chain- Pharmaceutical Sector

Sources: http://www.aircargoinsights.com/news/cold-chain-pharmaceuticals-worth-billions/http://www.aircargoinsights.com/more-market/global-biopharma-demand-on-the-rise/

Bio-pharma logistics spending growth

Cold chain shipment growth by region

Cold chain logistics spending expanded from $5.1 billion in FY08to $6.6 billion in FY11

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HISTORY & BREAKTHROUGHS

British fishermen used natural ice to preserve their fish stock piles1797

Movement of food from rural areas to urban consumption marketsLate 1820’s

Mechanical refrigeration and Air-conditioning plant patented by Dr. John Gorrie

1851s

Trade of food between colonial powers and their coloniesFrance received mutton carcasses from South America Great Britain imported frozen beef from Australia, pork from New Zealand

1870s

The refrigerated railroad car was patented by J.B. Sutherland of Detroit1867

600,000 tons of frozen meat was being brought into Great Britain alone.1910

Source: http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a5en.html

Group of CFC’s - Freon used in refrigeration was developed. 1920’s

1882 SS Dunedin, the first ship to complete transportation of frozen meat.

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1857 The first shipment of refrigerated beef was made from the Chicago stockyards to the East in an ordinary box car packed with ice.

1866 Parker Earle of Illinois shipped strawberries in iced boxes by rail from southern Illinois to Chicago.

1867 The first patent for a specialized refrigerator car (US Patent #71,423) was issued to JB Sutherland of Detroit, Michigan.

1868 William Davis of Detroit developed a refrigerator car cooled by a frozen ice-salt mixture, and patented it in the USA. The patent was sold to George Hammond, a local meat packer who went on to amass a fortune in refrigerated shipping.

1869 Henry Peyton Howard (1829-1913) of the United States transported a shipload of beef frozen in a salt-ice mixture from Indianola, Texas, to New Orleans and served it in hospitals, hotels and restaurants.

1873 Timothy C. Eastman exported chilled beef by ship from America to London, and shortly thereafter built up his trade to an annual tonnage of around 10,000 t. The insulated cargo space was cooled by ice, which was loaded on departure. The success of this method was limited by distance and climate.

1876-1877

French engineer Charles Tellier and the steamship Frigorifique achieved the first overseas shipment of meat under artificial refrigeration. Three methyl-ether refrigerating machines kept the cargo in a chilled state during the 12,000 km voyage from France to Argentina and the return trip. The preservation of the meat was less than perfect; full success would have to wait until the voyage of the Paraguay.

HISTORY & BREAKTHROUGHS

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp13

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1877-1878

The French vessel Paraguay, equipped with refrigeration machinery by Ferdinand Carré, traveled from France to Buenos Aires and back. 150 t of meat, kept at -27 to -30 deg C, arrived in Argentina in excellent condition after 50 days.

1878 Gustavus F. Swift (1839-1903) of the United States put into operation a refrigerator car to ship fresh meats. The car body was well insulated and the interior cooled by ice. Fifteen years later the operation had expanded to 97 thousand units.

1879 Henry Bell (1848-1931) and John Bell (1850-1929) of Scotland and Joseph James Coleman (1838-1888) of England completed the Bell-Coleman dense-air machine on the Anchor liner Circassia, which successfully brought a cargo of chilled beef from the USA to London.

1879-1880

The Strathleven, equipped with a Bell-Coleman air machine and loaded with beef, mutton, butter and kegs, sailed from Melbourne to London and arrived with the frozen cargo in good condition after a 9-week voyage of about 24,000 km.

1880 The first patent for a mechanically refrigerated railcar was issued in the USA (#230615, to Charles William Cooper).

1881 Alfred Seale Haslam (1844-1927) of England equipped the liner Orient with Haslamrefrigeration compressors. He bought the Bell-Coleman dense-air patents in 1878 and eventually equipped four hundred plants and ships with Bell-Coleman machines.

HISTORY & BREAKTHROUGHS

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp14

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1885 Berries from the Norfolk (Virginia) area were shipped by refrigerator car to New York.

1887 Parker Earle joined F.A. Thomas of Chicago in the fruit shipping business. The company owned 60 ice-cooled railcars by 1888, and 600 by 1891.

1888 An experimental Chicago-to-Florida shipment of beef from Armour and Company was made in a car cooled by ethyl chloride compression machinery.

1888 Florida oranges reached New York under refrigeration for the first time.

1889 The first cooled shipment of deciduous fruit from California entered the New York market.

1890 In London, first mechanically refrigerated barge introduced.

1890 After acquiring the patent rights of Franz Windhausen's CO2-compression refrigeration system, J. & E. Hall installed the first marine CO2 machine on the Highland Chief.

1898 Russia put its first refrigerator cars into service. Russia had 1900 such cars by 1908, 3000 by 1910, 5900 by 1916. The cars were employed mainly for transport of Siberian butter. The journey from Siberia to Baltic ports lasted about 12 days. Reicing stations were set up each 2000 km.

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp

HISTORY & BREAKTHROUGHS

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1899 Refrigerated fruit traffic within the USA reached 90,000 t per year. Transport from California to NY averaged 12 days in 1900.

1900 A worldwide survey found 356 refrigerated ships, 37% of which had air machines, 37% ammonia compressors and 25% CO2 compressors.

1900 Refrigerator cars in the USA numbered about 50,000.1900 During the year, Great Britain imported 360,000 metric tons of refrigerated meat:

220,000 t from Argentina, 95,000 t from New Zealand, and 45,000 t from Australia.1901 The first refrigerated banana ship, the Port Morant, was equipped with a CO2

machine and carried 23,000 stems at controlled temperature from Jamaica to England.

1901 Carl von Linde equipped a Russian train with a mobile mechanical refrigeration plant to distribute cooling to the cars carrying the goods. Similar systems continued to be used in Russia through at least 1975.

1902 According to a study of Lloyd's Register, 460 ships had refrigerating plants in 1902. The marine refrigeration industry at this time was dominated by the British.

1904 US pomologist G. Harold Powell introduced the technique of precooling, or removing field heat from the crop as rapidly as possible before transport.

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp

HISTORY & BREAKTHROUGHS

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1906 Pacific Fruit Express began operations with more than 6,000 refrigerated cars, transporting fruit and vegetables across the United States from Western producers to Eastern consumers.

1907 US traffic in refrigerated fruit reached a yearly total of 600,000 t, up from 430,000 t in 1905.

1910 Great Britain refrigerated meat imports rose to 760,000 t/year.

1910 By this time British company J. & E. Hall had installed 1800 CO2 refrigeration machines in ships.

1913 British fleet included 230 refrigerated ships with total cargo capacity of 440,000 t.

1913 The number of thermally insulated railcars in the USA amounted to about 100,000. Most of these were cooled by ice.

1923 London used 120 metal barges of 60 to 120 t, insulated or mechanically cooled, for transport of meat on inland waterways.

1925 The Pacific Fruit Express had 34,000 refrigerator cars and the Fruit Growers' Express 22,000.

1925-1930

Mechanically refrigerated road vehicles, especially for the delivery of milk and ice cream, began to appear around this time.

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp

HISTORY & BREAKTHROUGHS

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1931 The total volume of ice-cooled railcar cargo space in America was of the same order as that of public cold stores at the time (12.5 million m³, vs. 13 million m³).

1931 The number of refrigerator cars in the USA reached a maximum of about 183,000.1935 Refrigerated imports into Britain in 1935 totalled 1 million metric tons of meat,

500,000 t of butter, 130,000 t of cheese, 430,000 t of apples and pears, and 20 million stems of bananas.

1936 The Italian army used 150 refrigerated containers to transport frozen meat to its troops on the Ethiopian front. Great Britain and the Netherlands had also built prototype refrigerated containers by this time.

1939 The USA had roughly 18,000 vehicles for refrigerated road transport, between 2000-2500 of which were mechanically cooled. Many of the rest were kept cold by solid carbon dioxide ("dry ice"), regular ice, or eutectic plates. The number of these vehicles, as well as the proportion that were mechanically refrigerated, steadily grew during the next few decades with the growth of the trucking industry and the development of superhighways.

Source: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp

HISTORY & BREAKTHROUGHS

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HISTORY & BREAKTHROUGHS

Temperature controlled movement of pharmaceuticals & medical supplies1950’s

Refrigeration system made its way into the trucking industry by roof-mounted cooling device, patented by Fred Jones.

1949

In the United States, Food & Drug Administration restrictions over the stability of the cold chain incited many of these companies to rely on specialty couriers rather than completely overhauling their supply chain facilities. A specialized cold chain industry was born

1950’s

Blown air containers were replaced by self powered containers.After 1960’s*

Fed ex using GPS for tracking. Fedex Sense Aware2010

Source: http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a5en.html19

Page 20: Cold chain logistics   sector analysis

FY70, Tropicana orange juice was shipped in bulk via insulated boxcars in one weekly round-trip from Bradenton, Florida, to Kearny, New Jersey.By FY72, they were carrying around 1,000,000 US gallons (around 38,00,000 Litres )

HISTORY & BREAKTHROUGHS

Illinois Central Railroad #14713,a ventilated fruit car dating from 1893

A circa 1870 refrigerator car design. Hatches in the roof provided access to theice tanks at each end

Top icing of bagged vegetables in a refrigerator car

Unloading frozen pork from the Clan Line ship Clan MacDougall in the mid-20th century

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BREAKTHROUGHS IN INDIAIn FY04, Safexpress Pvt Ltd first company in the Indian logistics industry to use the GPSMaersk India, had taken steps to facilitate research in the production, harvesting, warehousing, & packaging of bananas. The company provided end-to-end cold chain logistics support, besides undertaking training of local banana exporters in cold chain management.

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BREAKTHROUGHS IN INDIASun logistics, FlexiTank in FY10

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Kale Logistics India Develop UPLIFT with ICAAI ( Air Cargo Agents Association of India )

BREAKTHROUGHS IN INDIA

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Global Cold Chain Players

• Americold logistics LLC , Canada, USA $ 1.62 billion

• Versacold Argentina, Australia, Canada, New Zealand $ 900 million

• Millard refrigerated services, Canada, USA $ 230 million

• Nichirei logistics group inc., Japan, Netherlands, Poland $ 95 million

• MUK Logistics GmbH, Germany $ 60 million

• Nordic cold storage LLC, USA $ 27 million

• Swire cold storage, Australia, Vietnam $7.5 million

• Gruppo Marconi Logistica Italy

The Global top cold chain companies includes PRW companies from Argentina, Australia, Canada, China, Denmark, Finland, Germany, Italy, Japan, Mexico, Norway, Sweden, Vietnam and United States of America

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Value ParametersProduct Safety – Physical / Chemical / MicrobiologicalNetwork (Geographical coverage)Transportation Time Temperature Range Availability (Product Range Covered)End to End Solutions (Integrated approach)Temperature & Humidity ControlTracking methods - Temperature and LocationTrust and Reliability of service providerRegulatory CompliancesSecurity*Carbon FootprintCost

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Page 26: Cold chain logistics   sector analysis

Value Parameters (Revised)Network (Geographical coverage)Temperature Range Availability (Product Range Covered)End to End Solutions (Integrated approach)Temperature & Humidity ControlTracking MethodsReal time information feedbackSecurityCostTrust /Reliability of service providerFlexibility of service providerAbility to meet Tech SpecsRegulatory CompliancesCarbon Footprint

Transportation Time *27

Page 27: Cold chain logistics   sector analysis

StakeholdersUser IndustriesFruit and Vegetable BusinessesFood Processing BusinessesHorticulture Livestock ProducersSeafood CompaniesPharmaceutical companies Hotels and RestaurantsLarge format retailers and wholesalersSmall RetailersLaboratories/ Healthcare CentersMedical Equipment ManufacturersOil refineries and chemical industries CRO’s ( Contract Research Organisations)

InfrastructureWarehouse / Cold Storage OwnersRefrigeration and Cold Chain Equipment Technology suppliersRefrigeration Solution ProvidersSpecialized Equipment ProvidersICD’s (Inland Containers Depots)Sea / Air PortsTransport VehiclesSecurity

Authorities and AssociationsGovernment Agencies (Planning commission, customs, etc.)DCGI (Drugs Controller General of India )CDSCO (Central Drug Standard Control Organization ) IARW ( International association of refrigerated warehouses )Global Cold Chain AlliancesAcademic and Research InstitutionsGrowers Association of Fruits and Vegetables 28

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StakeholdersIntermediariesLogistics Service ProviderCold Logistics players (Shipping lines, Transporters, Container Companies) Warehousing AgentsSupply Chain Solution ProvidersPackaging Service ProvidersBanks and Financial InstitutionConsultants from the relevant spheres who are interested in knowledge building.

OthersPower / ElectricityShelf LifeTemperatureHumidityDistanceSeasonal ChangesRoads Connectivity

Stakeholders

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Page 29: Cold chain logistics   sector analysis

In India 30 per cent of the fruits & vegetables grown in India get wasted because of lack of cold storage facilities & energy infrastructure.

Only 8% of the produce is processed in India

• The total cold chain market in India is estimated at $3.2 billion in FY09

• Expected to touch $9 Billion by FY15

• Growing at 20-25% CAGR

• Cold chain industry Cold storage 88 %Cold transport 12 %

• 100 % FDI allowed

Source: IBEF

Commodity Cold chain capacity

(Percentage)

Potato 92.82*

Multi purpose 7.63

Fruit & vegetable 1.07

Fish 0.73

Meat 0.15

Dairy & milk 0.68

Others (Pharma, Life

sciences)

0.36

Cold Chain: India

Commodity wise Capacity Utilization, 2000

Source: Global AgriSystem Pvt. Ltd. Report30

Page 30: Cold chain logistics   sector analysis

Source: Ministry of state for Food Processing Industries, CCI Report

Cold Chain: India

User Industry India Growth ( CAGR )

Pharmaceutical $12 Billion 10-11 %

Clinical Research $ 2.2 Billion 23 %

Generic Drugs $ 11 Billion 17 %

Healthcare $ 36 Billion 15 %

Sources : AIMA, BCG, CII

Bio-Pharmaceutical Sector

User Industry Food India Growth ( CAGR )

Processed Food $ 17.8 Billion 13.5 %

Agriculture $ 200 Billion 3.8 %

Branded Frozen Food $ 212 Million 20-25 %

Food Sector

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Current State: Cold Chain India

India has a total of roughly 5,400 cold storages with a capacity of 24 million MT, over 90% of which are suitable to store potato products only & are fairly archaic.

State wise Distribution of Cold Chains

Commodity wise Distribution Of Cold Storages

Source: http://agmarknet.nic.in/coldstorage.htm32

Page 32: Cold chain logistics   sector analysis

Cold Chain: Daily Consumption in India

• 9000 trucks of fruit

• 14000 trucks of vegetables

• 4000 trucks of potatoes

• 8000 trucks of onions

• 13 Lakh Chickens

Source: Ingersol Rand at ICE EXPO 201033

Page 33: Cold chain logistics   sector analysis

Top Major Players in India1) Snowman Frozen Foods

• A joint venture between Gateway Distiparks, Mitsubishi Corp & Nichirei Logistics Group. Nichirei of Japan is the fourth largest in this business in the world

Income $10.2 million in FY10

2) Fresh & Healthy Enterprises

• A subsidiary of the state-owned Container Corporation of India (Concor), which deals in transporting containers via rail

• India’s largest CA store with capacity of 12,000 MT at Rai in Sonepat, Haryana.

3) Coldstar Logistics

• Incubated by Tuscan Ventures, a $ 50 million venture capital fund in 2010.

• 3 existing & 9 WIP warehouses across India

4) RK Foodland

• A 35 year old 3pl company with pan-India presence.

• Clients include Domino’s, Abbott, GSK, Cadbury.

5) GATI RedSun

• A leading cold chain company for perishable goods & frozen items

• The Hyderabad-based Gati recently bought a majority stake in the company. Gati plans to scale up operations in cold chain logistics

6) Adani Agrifresh

• A logistics venture formed by the Gujarat-based $ 6 Billion Adani Group

• Has invested $ 40 Millions in setting up 3 CA stores in HP.

• Promotes FARMPIK Brand in North India34

Page 34: Cold chain logistics   sector analysis

COLD CHAIN: TRENDS IN INDIABackward Integration by Retail companiesMany Ice factories have converted their factories into cold storages

FOOD SECTORIncrease in frozen food consumption, meat, fish, canned, instant food itemsAcceptance of frozen vegetables, changing mindsetIncrease in per capita income increases dairy, poultry consumption

BIO-PHARMA SECTORDevelopment of vaccines,Increase in clinical trials logisticsIncreased share of refrigerated drugs

TECHNOLOGICAL TRENDSSome reefers are equipped with a water cooling system, which can be used if the reefer is stored below deck on a vessel without adequate ventilation to remove the heat generated.Water cooling systems are expensive, so modern vessels rely more on ventilation to remove heat from cargo holds, and the use of water cooling systems is declining.

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Classification of cold chains• Negative temp. (Frozen Material) Cold Chain

• Positive Temp. (Chilled Material) Cold Chain

• Single Product Cold Chain

• Multi Product Cold Chain

• Supply Side Cold Chain

• Distribution Side Cold Chain

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Cold Chain: Front End• Industry Expos :

ICE EXPO (India Cold Chain Expo)Food Tec IndiaDairy and Food Tech EXPOFood And Bev Tech

• Trade MagazinesLog IndiaTransREporterLogistics TimesFoodAndBev

• Consultants ACR ConsultingCross Tree ConsultantsFresh Food Technologies

• Advertisements

• Company Websites

• Direct Sales

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Advertisements

• Integrated cold chain service provider

• Typical ads listing various services and stats.

• QR Code and helpline to guide customers towards further action

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Advertisements3rd Party and Warehousing solutions provider

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Advertisements

• Backend products provider

• Product display

• State wise contact details, QR Code, toll free no.

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Ads of Equipment providers

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Cold Chain: Backend• Refrigeration system

• Insulated Wall Panels, Metal Roofing system

• Material handling equipment's

• Pallet racking system

• Dock equipment's and special doors

• Special cold storage doors

• Contractors and Civil Engineers

• Vehicle reefer units

• Vehicle supply Fresh line Processing equipment

• Process Grading and Sorting

• Consultants

– Food Service Distribution Centre concept design consultant

– Local Indian Architectural & Structural Consultant: Stup Consultants

– Integrated Building Management System : Tata Honeywell

– Supply Chain Solution consultant : Keogh ConsultingSource: Primary Research – ICE EXPO 201142

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Backend: Refrigeration ProvidersWAREHOUSES (Static Refrigeration)

Major Compressor Manufacturers: FREON: Danfoss (Major market share – 50%), Emerson, BitzerAMMONIA: Kirloskar Pneumatic Ltd (60% Market share), Frick (Indian Companies)

TRANSPORT REFRIGERATION (Refrigeration on the move)

Carrier, Thermoking, Blue Star – Total of 70 % Market share

Voltas Carrier KirloskarNeumatic

Ingersoll Rand

IBK Refrigeration

Alfa Laval

Source: Primary Research – Akhil Lutharia, Consultant43

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Insulation Experts

• Owens corning

• Lamiflux

• Bayer Material Sciences

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Material Handling Equipment – Forklifts• Voltas Limited

• Godrej & Boyce

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Pallet Racking & shelving systems • SSI- Schaefer

• Godrej & Boyce

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Doors & Docks• Metaflex

• Dan Foss

• Lloyd Insulations (India) Limited

• Salco

• HiCon

• Rite-Hite

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Backend: Role of Consultants

• Refrigeration EquipmentInvestigate mechanical equipment (evaporators, compressors, condensers, humidifiers, etc.), Recommend & implement changes, if necessary, to improve functionality or reduce operating costs, or both.

• Utility AuditsReview of previous & current configuration, usage & billings.

• Ripening/Precooling TechnologyOptimize results with existing equipment, & also show how investments in new equipment could improve the bottom line.

• Project Design & ManagementNeeds Analysis, Design, & Construction Management for additional capacity.

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Transportation

First Mile & Last Mile DeliveryReefer trucks

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Sample Cold Room

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Cold Chain Cost breakup

Capital Expenditure Costs

Construction cost Rs. 300-350 per sq ft.

Cooling Equipment Rs. 18,000-20,000 per MT

Power Consumption 3.5 KW per MT

Diesel Generator Rs. 50-80 lakhs

Forklifts Rs. 4-7 lakhs

Pallets Rs. 500

Reefer Trucks Rs. 25-30 lakhs for 9-13 tonnes

Source: Anderson Consulting Report on cold chain 51

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Cold Chain Cost breakup

Office + Logistics Costs

Communication System(VSAT Links)

Rs. 8-10 lakhs

Office infrastructure Rs. 50-60 lakhs

Computing Power Rs. 5 lakhs

Website Design Rs. 1-2 Lakh

Working capital Rs. 3 crores

Blanket Costs( Excluding civil constr.)

Rs. 50,000-52,000 per MT + reefer vehicles

Source: Anderson Consulting Report on cold chain52

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• Growth in organized retailReliance, Future Group, Bharti Group, Walmart, etc.

• Growth in processed food sector$ 70 bn in FY10. Projected growth to $ 150bn by FY15

• Changing consumption pattern• Increase in consumption levels

22 million MT supply against 31 million MT demand• Government Initiatives

Mega food parks, Subsidies

Drivers

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Challenges• Lack of Road Infrastructure

• Continuity of the cold supply chain

• Uneven distribution of cold chains

• High capital investment

-Rs.80-90/sq.ft.($ 1.6-2.0) against Rs.30/sq.ft. ($ 0.6) in west

• Power supply

-17-18% power deficit

-30% of total expenses against 10% in west

• Management of different temperatures

• Awareness & Mindsets

• Error Irreversibility

-Highly temperature sensitive cargo54

Page 54: Cold chain logistics   sector analysis

Government Policy & Initiatives1. All the relevant schemes pertaining to the Cold Chain Industry have been outlined & a separate compendium has been prepared containing all these schemes.

2. A Special Purpose Vehicle has been set up for the Cold Chain Logistics

3. Setting up of National Centre for Cold Chain Development (NCCD).

NCCD Activities are:

• Training & Capacity Building

• Research & Development

• Building standards through International benchmarking

• Interaction with National / International bodies for development of cold chain infrastructure & trade in perishable

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Government IncentivesSome of these incentives are

• Budget FY10-FY11 proposed a concessional import duty of 5% with full exemption from service tax to set up & expand cold chains. The proposal also included duty-free import of refrigeration unit, which is required to make refrigerated vans or trucks. It also exempted trailers & semi-trailers used in agriculture from excise duty

• The Budget exempted air-conditioning equipment & refrigeration panels used in cold chain infrastructure, including conveyor belts, from excise duty. It also extended excise duty exemption to conveyor belts.

• Budget FY09-FY10, GOI introduced tax benefits for companies making investments in setting up cold chain facilities

• Other past incentives include access to external commercial borrowings, 100% FDI & provision of up to 25% project costs involved in setting up cold storage facilities provided by the Government under the Capital Investment Subsidy Scheme

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Need GapsLack of knowhow & trained manpower

Lack of backward & forward linkages to supplement cold chain (High VDC - Variable Distribution Cost)

High cost of power: Agricultural sector is offered subsidized power tariffs by the GOI

Cold chain industry is instead subjected to industrial power tariffs.

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Need Gaps104 million metric tons

Perishable produce is transported between cities each year.

Only 4 million metric tons

moves via reefer mode.

Optimization in reefer transport

• Lack of two-way cargo movement/ back haulage

• delay timely deliveries and reduce the efficient utilization of fleets.

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Need GapsInfrastructure: Coolers, warehouses, refrigerated trucks, carriers, shopping malls and others. Needs to study the potential risks and the return on investment (RoI)

Third-party logistics:

• Manual- handling reduces the product quality and life.

• Lack of end-to-end solutions. One can also adapt state-of-the-art techniques such as cross docking that will reduce the transit times and inventory.

FP industry: The Central government allows 100% FDI in this sector.

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Need Gaps• Reefer location tracking challenges (Technology

effectiveness & penetration low)

• Discontinuous Energy Supply for hours (Backup power is very expensive)

• Lack of 3 Party solution providers for small players. Geographical and service range expanding on project basis from big players. Logistics providers with air conditioned trucks,

automatic handling equipment and trained manpower will provide end-to-end support.

• Education and awareness. Low acceptance due to high costs

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Fruit and Vegetable Businesses2 2 3 1 1 1 3 2 1 1 2 3

Chocolates3 1 1 2 1 2 3 2 1 2 2 1

Diary3 1 2 3 3 3 3 3 1 2 2 3

Seafood Companies1 2 1 2 2 2 3 2 1 2 2 2

Livestock Producers1 2 1 2 1 2 3 2 2 2 2 2

Hotels1 3 2 1 1 3 2 2 3 2 2 3

Quick Service Restaurants3 3 2 3 3 3 3 3 3 3 2 3

Large Format Retailers and Wholesalers3 3 3 3 3 2 3 2 3 2 2 3

Small Retailers1 2 2 1 1 2 1 2 2 1 1 2

Segmentation MatrixN

etwo

rk (Ge

ograp

hical co

verage

)

Tem

pe

rature

Ran

ge A

vailability

Tem

pe

rature

& H

um

idity C

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Tracking M

etho

ds

Re

al time

info

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n fe

ed

back

Pro

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ct Secu

rity

Co

st

Trust /R

eliab

ility of se

rvice p

rovid

er

Flexibility o

f service

pro

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r

Tech

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dard

s Co

mp

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Re

gulato

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mp

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s

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ortatio

n Tim

e

61

Page 61: Cold chain logistics   sector analysis

Strategy Canvas

0

1

2

3

4

5

6

Snowman

RK Foodland

Fresh & Healthy

ColdStar

GATI Redsun

Adani Agrifresh

ColdEx

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Page 62: Cold chain logistics   sector analysis

TRENDSPPP model for supply chains

• Indian cold chain business is fragmented in a big way.

• Organised retailers can give a boost to the much needed supply chain logistics in the country.

• More private sector investment is required in the areas of infrastructure especially in warehousing, technology, cold chain and logistics in order to harness the full potential of the Indian food processing sector

Increased FDI in Multi-brand Retail on the anvil

This will boost the investments in the cold chain infrastructure.

Backward Integration by Large Format Retailers

These companies are investing in developing their own cold-chains eg. Future Supply Chains

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Page 63: Cold chain logistics   sector analysis

Center’s NCCDThe Central government has established the National Centre for Cold Chain Development (NCCD) as an autonomous body.

The NCCD has constituted the following committees:● Technical specification and Standards Committees● Project preparation, Appraisal and Project Certification Committee● Training and HRD Committee● R&D Committee● Test Laboratory and Product Certification Committee● Application of Non-conventional Energy Sources in Cold Chain Infrastructure.● The establishment of cold chain is being supported through programmes of NHM, NHB, APEDA and Ministry of Food Processing Industries.

TRENDS

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Page 64: Cold chain logistics   sector analysis

Thank you

65

Page 65: Cold chain logistics   sector analysis

reefersShipping linesMaersk Line, Evergreen Line, Hamburg Sud, Hapag-Lloyd, K Line, Mac Andrews, MISC, CSAV-Norasia, Rickmers Line, Safmarine,YangMing Line, UASC and Zim Line. India’s state-owned shipping company Shipping Corp. of India, is also a member.

Source: http://www.livemint.com/2007/09/18020040/Shipping-refrigerated-cargo-fr.html 66