PowerPoint Presentation

Sector Analysis Nov-Dec, 2011

Rishab Sapra & Shridhar JoshiCold ChainLogisticstitle1Cold Chain LogisticsSector Analysis by Rishab Sapra rishabsapra@gmail.comShridhar Joshijoshridhar@gmail.com

Business Design, 2011-2013Welingkar Institute of Management and Research

What is Logistics ?Introduction to Cold Chain LogisticsHistory and BreakthroughsGlobal Scenario Indian Ice Age Value Parameters Users

Content of what all we are going to present3Logistics is the management of the flow of goods from origin to destination to meet customer requirementsRight Time, Right Place @ Minimum Cost

Started as a business concept in 1950sWhat is Logistics ?Military ScienceRoman, Greek and Byzantine Empire

Source: Global Agri System Pvt. Ltd. ReportWhat is logistics and then coming down to cold chain logistics.4What is Cold Chain Logistics?Major Sectors : Food and Beverages, Bio-Pharmaceutical

The Cold chain logistics infrastructure

Global Cold Chain Facts: Food SectorSource: China Cold Chain Industry Development Report, 2010 (www.researchinchina.com)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 industryCold chain in Food Sector

Industry Temperature StandardsBanana13CChill2CFrozen-18CDeep Frozen-29CTemperature andShelf LifeProductRefrigerated Shelf Life (Days)Optimum Temperature (Celcius)Apple90-2400Bananas7-2813.5Bell Peppers21-357Cabbage14-201Eggs1801.1Onions30-1801Lettuce12-140.6Fresh Meat (beef, lamb, pork, poultry)14-65-2Oranges21-907Pears120-180-0.6Potatoes30-5010Seafood (shrimp, lobster, crab)120-360-17.8Strawberries5-100.6Tomatoes7-1412Global Cold Chain Facts: Bio-PharmaceuticalSources: http://webcache.googleusercontent.com/search?q=cache:http://www.fiercebiotech.com/press-releases/todays-global-biopharma-cold-chain-market-5-1-billion-growing-6-6-billion-2011 Cold Chain Biopharma Logistics Sourcebook 2010

source: www.coldchainpharm.com/Global Bio-Pharma Cold-chain market2010 : $5.1 billion 2011 : $6.6 billion 2014 : 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/Cold chain in Pharmaceutical Sector

Global Cold Chain- Pharmaceutical SectorSources: 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 regionCold chain logistics spending expanded from $5.1 billion in 2008 to $6.6 billion in 2011HISTORY400 frozen carcases were shipped on a two month voyage from Australia to GB using a simple refrigeration plant. That marked the beginning of the modern agricultural trend.HISTORY & BREAKTHROUGHSBritish fishermen used natural ice to preserve their fish stock piles1797Movement of food from rural areas to urban consumption marketsLate 1820sMechanical refrigeration and Air-conditioning plant patented by Dr. John Gorrie1851sTrade of food between colonial powers and their coloniesFrance received mutton carcasses from South America Great Britain imported frozen beef from Australia, pork from New Zealand1870sThe refrigerated railroad car was patented by J.B. Sutherland of Detroit1867600,000 tons of frozen meat was being brought into Great Britain alone.

1910Source: http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a5en.htmlGroup of CFCs - Freon used in refrigeration was developed.

1920s1882SS Dunedin, the first ship to complete transportation of frozen meat.History from consumers point of view. How were fruits, veggies meats and drugs transported in the past maintaining the constant temperature.Along with breakthroughs.121857The first shipment of refrigerated beef was made from the Chicago stockyards to the East in an ordinary box car packed with ice.1866Parker Earle of Illinois shipped strawberries in iced boxes by rail from southern Illinois to Chicago.1867The first patent for a specialized refrigerator car (US Patent #71,423) was issued to JB Sutherland of Detroit, Michigan.1868William 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.1869Henry 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.1873Timothy 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.1876-1877French 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 & BREAKTHROUGHSSource: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp1877-1878The French vessel Paraguay, equipped with refrigeration machinery by Ferdinand Carr, 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.1878Gustavus 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.1879Henry 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.1879-1880The 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.1880The first patent for a mechanically refrigerated railcar was issued in the USA (#230615, to Charles William Cooper).1881Alfred Seale Haslam (1844-1927) of England equipped the liner Orient with Haslam refrigeration compressors. He bought the Bell-Coleman dense-air patents in 1878 and eventually equipped four hundred plants and ships with Bell-Coleman machines.HISTORY & BREAKTHROUGHSSource: http://www33.brinkster.com/iiiii/inventions/reftranstimeline.asp1885Berries from the Norfolk (Virginia) area were shipped by refrigerator car to New York.1887Parker Earle joined F.A. Thomas of Chicago in the fruit shipping business. The company owned 60 ice-cooled railcars by 1888, and 600 by 1891.1888An experimental Chicago-to-Florida shipment of beef from Armour and Company was made in a car cooled by ethyl chloride compression machinery.1888Florida oranges reached New York under refrigeration for the first time.1889The first cooled shipment of deciduous fruit from California entered the New York market.1890In London, first mechanically refrigerated barge introduced.1890After 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.1898Russia 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.aspHISTORY & BREAKTHROUGHS1899Refrigerated fruit traffic within the USA reached 90,000 t per year. Transport from California to NY averaged 12 days in 1900.1900A worldwide survey found 356 refrigerated ships, 37% of which had air machines, 37% ammonia compressors and 25% CO2 compressors.1900Refrigerator cars in the USA numbered about 50,000.1900During 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.1901The 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.1901Carl 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 1975.1902According 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.1904US 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.aspHISTORY & BREAKTHROUGHS1906Pacific 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.1907US traffic in refrigerated fruit reached a yearly total of 600,000 t, up from 430,000 t in 1905.1910Great Britain refrigerated meat imports rose to 760,000 t/year.1910By this time British company J. & E. Hall had installed 1800 CO2 refrigeration machines in ships.1913British fleet included 230 refrigerated ships with total cargo capacity of 440,000 t.1913The number of thermally insulated railcars in the USA amounted to about 100,000. Most of these were cooled by ice.1923London used 120 metal barges of 60 to 120 t, insulated or mechanically cooled, for transport of meat on inland waterways.1925The Pacific Fruit Express had 34,000 refrigerator cars and the Fruit Growers' Express 22,000.1925-1930Mechanically 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.aspHISTORY & BREAKTHROUGHS1931The 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 m, vs. 13 million m).1931The number of refrigerator cars in the USA reached a maximum of about 183,000.1935Refrigerated imports into Britain in 1935 totaled 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.1936The 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.1939The 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.aspHISTORY & BREAKTHROUGHSHISTORY400 frozen carcases were shipped on a two month voyage from Australia to GB using a simple refrigeration plant. That marked the beginning of the modern agricultural trend.HISTORY & BREAKTHROUGHSTemperature controlled movement of pharmaceuticals and medical supplies1950sRefrigeration system made its way into the trucking industry by roof-mounted cooling device, patented by Fred Jones.1949In the United States, Food and 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 born1950sBlown air containers were replaced by self powered containers.After 1960s*Fed ex using GPS for tracking. Fedex Sense Aware2010Source: http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a5en.htmlHistory from consumers point of view. How were fruits, veggies meats and drugs transported in the past maintaining the constant temperature.Along with breakthroughs.19

1970, Tropicana orange juice was shipped in bulk via insulated boxcars in one weekly round-trip from Bradenton, Florida, to Kearny, New Jersey.By 1972, 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 endTop icing of bagged vegetables in a refrigerator car

Unloading frozen pork from the Clan Line ship Clan MacDougall in the mid-20th centuryBREAKTHROUGHS IN INDIA

In 2004, 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, and packaging of bananas. The company provided end-to-end cold chain logistics support, besides undertaking training of local banana exporters in cold chain management.

BREAKTHROUGHS IN INDIA

Sun logistics, FlexiTank in 2010

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

BREAKTHROUGHS IN INDIA

AssociationsIARW: International Association of Refrigerated WarehousesWFLO: World Food Logistics OrganizationIRTA: International Refrigerated Transportation AssociationIACSC: International Association for Cold Storage Construction

Global Cold Chain PlayersAmericold logistics LLC , Canada, USA $ 1.62 billionVersacoldArgentina, Australia, Canada, New Zealand $ 900 million Millard refrigerated services, Canada, USA $ 230 millionNichirei logistics group inc., Japan, Netherlands, Poland $ 95 millionMUK Logistics GmbH, Germany $ 60 millionNordic cold storage LLC, USA $ 27 millionSwire cold storage, Australia, Vietnam $7.5 millionGruppo 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

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

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 FootprintTransportation Time *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 CROs ( Contract Research Organisations) InfrastructureWarehouse / Cold Storage OwnersRefrigeration and Cold Chain Equipment Technology suppliersRefrigeration Solution ProvidersSpecialized Equipment ProvidersICDs (Inland Containers Depots)Sea / Air PortsTransport VehiclesSecurityAuthorities 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 VegetablesStakeholdersIntermediariesLogistics Service Provider Cold 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 ConnectivityStakeholdersIn India 30 per cent of the fruits and vegetables grown in India get wastedbecause of lack of cold storage facilities and energy infrastructure.

Only 8% of the produce is processed in IndiaThe total cold chain market in India is estimated at $3.2 billion in 2009Expected to touch $9 Billion by 2015Growing at 20-25 per cent CAGRCold chain industry Cold storage 88 %Cold transport 12 %100 % FDI allowedSource: IBEFSegment Value(US$ Million)Imported Fresh Fruits & Vegetables1.67Exports By sea (Seafood, Meat, Poultry, Fruits & Vegetables)46Chocolate Industry2Dairy Industry2.67Meat & Poultry (domestic)1.33Ice-cream Industry4.90Processed potato4.45Frozen F & V1.67RTE, RTS, RTC, flavoured milk/yoghurt13.33Cool Chain Transportation40CommodityCold chain capacity (Percentage)Potato92.82*Multi purpose7.63Fruit & vegetable1.07Fish0.73Meat0.15Dairy & milk0.68Others (Pharma, Life sciences)0.36Cold Chain: India Commodity wise Capacity Utilization, 2000Source: Global AgriSystem Pvt. Ltd. ReportSource: Ministry of state for Food Processing Industries, CCI ReportCold Chain: India User IndustryIndia Growth ( CAGR )Pharmaceutical $12 Billion 10-11 %Clinical Research $ 2.2 Billion23 %Generic Drugs$ 11 Billion17 %Healthcare$ 36 Billion15 %Sources : AIMA, BCG, CII Bio-Pharmaceutical Sector User Industry Food IndiaGrowth ( CAGR )Processed Food$ 17.8 Billion13.5 %Agriculture$ 200 Billion 3.8 %Branded Frozen Food$ 212 Million 20-25 %Food SectorCurrent State: Cold Chain IndiaIndia has a total of roughly 5,400 cold storages with a capacity of 24 million MT, over 90 per cent of which are suitable to store potato products only and are fairly archaic.

State wise Distribution of Cold ChainsCommodity wise Distribution Of Cold Storages

Source: http://agmarknet.nic.in/coldstorage.htmCold Chain: Daily Consumption in India9000 trucks of fruit14000 trucks of vegetables4000 trucks of potatoes8000 trucks of onions13 Lakh ChickensSource: Ingersol Rand at ICE EXPO 2010

Top Players in India1) Snowman Frozen FoodsA 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 20102) Fresh and Healthy EnterprisesA subsidiary of the state-owned Container Corporation of India (Concor), which deals in transporting containers via railIndias largest CA store with capacity of 12,000 MT at Rai in Sonepat, Haryana.

3) Coldstar LogisticsIncubated by Tuscan Ventures, a $ 50 million venture capital fund in 2010.3 existing and 9 WIP warehouses across India

4) RK FoodlandA 35 year old 3pl company with pan-India presence.Clients include Dominos, Abbott, GSK, Cadbury.

5) GATI RedSunA leading cold chain company for perishable goods and frozen itemsThe Hyderabad-based Gati recently bought a majority stake in the company. Gati plans to scale up operations in cold chain logistics

6) Adani AgrifreshA logistics venture formed by the Gujarat-based $ 6 Billion Adani GroupHas invested $ 40 Millions in setting up 3 CA stores in HP.Promotes FARMPIK Brand in North India

SnowmansRK FoodlandFresh & HealthyCold StarGati RedSun Adani AgrifreshNo. of Warehouses18113 (7planned)Refrigerated trucks fleet110Capacity18000 MTDistributionNetwork100 cities and to more than 4400 outlets25 citiesPan India salesTemperature RangesFrozen-2C to -18C Chilled (+2C to + 8 CBackup Power100% with Multi GeneratorPallet Capacity16000+ Euro size pallet positionsCOLD CHAIN: TRENDS IN INDIA

Backward 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.Coming to current global scenario. 35Classification 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 ChainCold Chain: Front EndIndustry Expos : ICE EXPO (India Cold Chain Expo)Food Tec IndiaDairy and Food Tech EXPOFood And Bev TechTrade MagazinesLog IndiaTransREporterLogistics TimesFoodAndBevConsultants ACR ConsultingCross Tree ConsultantsFresh Food Technologies

AdvertisementsCompany WebsitesDirect SalesAdvertisementsIntegrated cold chain service providerTypical ads listing various services and stats. QR Code and helpline to guide customers towards further action

Advertisements

3rd Party and Warehousing solutions providerAdvertisementsBackend products providerProduct displayState wise contact details, QR Code, toll free no.

Ads of Equipment providers

Cold Chain: BackendRefrigeration systemInsulated Wall Panels, Metal Roofing systemMaterial handling equipment'sPallet racking systemDock equipment's and special doorsSpecial cold storage doorsContractors and Civil EngineersVehicle reefer unitsVehicle supply Fresh line Processing equipmentProcess Grading and SortingConsultantsFood Service Distribution Centre concept design consultantLocal Indian Architectural & Structural Consultant: Stup ConsultantsIntegrated Building Management System : Tata HoneywellSupply Chain Solution consultant : Keogh Consulting

Source: Primary Research ICE EXPO 2011Backend: 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

Source: Primary Research Akhil Lutharia, ConsultantInsulation ExpertsOwens corningLamifluxBayer Material SciencesMaterial Handling Equipment ForkliftsVoltas LimitedGodrej & Boyce

Pallet Racking and shelving systems SSI- SchaeferGodrej & Boyce

Doors and DocksMetaflexDan FossLloyd Insulations (India) LimitedSalcoHiConRite-Hite

Backend: Role of ConsultantsRefrigeration EquipmentInvestigate mechanical equipment (evaporators, compressors, condensers, humidifiers, etc.), Recommend and implement changes, if necessary, to improve functionality or reduce operating costs, or both.Utility AuditsReview of previous and current configuration, usage and billings.Ripening/Precooling TechnologyOptimize results with existing equipment, and also show how investments in new equipment could improve the bottom line.Project Design & ManagementNeeds Analysis, Design, and Construction Management for additional capacity.

Transportation

First Mile & Last Mile Delivery

Reefer trucks

Sample Cold Room

Cold Chain Cost breakupCapital ExpenditureCostsConstruction costRs. 300-350 per sq ft.Cooling EquipmentRs. 18,000-20,000 per MTPower Consumption3.5 KW per MTDiesel GeneratorRs. 50-80 lakhsForkliftsRs. 4-7 lakhsPalletsRs. 500Reefer Trucks Rs. 25-30 lakhs for 9-13 tonnes Source: Anderson Consulting Report on cold chainCold Chain Cost breakupOffice + LogisticsCostsCommunication System(VSAT Links)Rs. 8-10 lakhsOffice infrastructureRs. 50-60 lakhsComputing PowerRs. 5 lakhsWebsite DesignRs. 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 chainDriversGrowth in organized retailShift towards horticultural cropsGrowth in processed food sectorDemand from pharmaceutical sectorChanging consumption patternChallengesLack of logistical support Continuity of the cold supply chainUneven distribution of cold chainsCost structurePower supplyManagement of different temperaturesSpecific regulationsError Irreversibility

Growth in organized retail Reliance, future, bharti- walmart, etc.Growth in processed food sector $ 70 bn in 2010. Projected growth to $ 150bn by 2015Changing consumption pattern Increase in consumption levels 22 million MT supply against 31 million MT demandGovernment Initiatives Mega food parks, SubsidiesDriversChallengesLack of Road InfrastructureContinuity of the cold supply chainUneven distribution of cold chainsHigh 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 westManagement of different temperaturesAwareness and MindsetsError Irreversibility -Highly temperature sensitive cargo

Government Policy & Initiatives1. All the relevant schemes pertaining to the Cold Chain Industry have been outlined and 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 and Capacity BuildingResearch and Development Building standards through International benchmarkingInteraction with National / International bodies for development of cold chain infrastructure and trade in perishable

Government IncentivesSome of these incentives areBudget 2010-2011 proposed a concessional import duty of five per cent with full exemption from service tax to set up and 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 and semi-trailers used in agriculture from excise dutyThe Budget exempted air-conditioning equipment and refrigeration panels used in cold chain infrastructure, including conveyor belts, from excise duty. It also extended excise duty exemption to conveyor belts.Budget 2009-2010, Government of India introduced tax benefits for companies making investments in setting up cold chain facilitiesOther past incentives include access to external commercial borrowings, 100 per cent FDI and provision of up to 25 per cent project costs involved in setting up cold storage facilities provided by the Government under the Capital Investment Subsidy SchemeNeed GapsLack of knowhow and 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 Government of India, Cold chain industry is instead subjected to industrial power tariffs.Lack of trust concerning 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. Involve aggressive marketing and investment on backward and forward linkages. This is keeping potential investors away;

Lack of knowhow and trained manpower: Despite the increasing number of infrastructure projects, there is a severe lack of manpower with appropriate skill sets to handle modern technology.Lack of backward & forward linkages to supplement cold chain: Cold chain in itself is not a complete solution to address quality and marketability issues concerning perishable products. The commodities which are transported and stored in the cold chain should have enough market value to absorb the added cost.High operational costs due to high cost of power: Unlike the agricultural sector which is offered highly subsidized power tariffs by the Government of India, the cold chain industry does not enjoy this status and is instead subjected to industrial power tariffs. This significantly increases the operational cost for cold chain operators and act as a major deterrent for growth

India has 250 Reefer OperatorsNeed 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 haulagedelay timely deliveries and reduce the efficient utilization of fleets.

High capital investment A high level of capital is required at the initial stage of building a high-end cold chain facility, thus reducing the attractiveness of this type of investment. The lack of institutional investors has not helped to improve the sector. The result, to date, has been a disorganized approach to establishment of a truly efficient cold chain network of facilities and transportation companies; Problems of optimization in reefer transport Lack of two-way cargo movement/ back haulage, interstate barriers, intercity/state taxes, and bad roads are some of the issues which increase operating costs, delay timely deliveries and reduce the efficient utilization of fleets.

Approximately 104 million metric tons of perishable produce is transported between cities each year. Of this figure, about 100 million metric tons moves via non reefer mode and only four million metric tons is transported by reefer.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. Infrastructure: Investments are capital-intensive and will yield slow returns. However, 100% foreign direct investment (FDI) is allowed in this sector. The infrastructure consists of coolers, warehouses, refrigerated trucks, carriers, shopping malls and others. One needs to study of the potential risks and the return on investment (RoI) for this activity.

Third-party logistics: The food supply and cold chain is temperature-sensitive and manual- handling reduces the product quality and life. Logistics providers with air conditioned trucks, automatic handling equipment and trained manpower will provide end-to-end support. One can also adapt state-of-the-art techniques such as cross docking that will reduce the transit times and inventory.

Retail: Retail, one of the largest sectors in the global economy ($7 trillion), is going through a transition phase in India. Globally more than 72% of food sales occur through super stores. In India there are 12 million outlets selling food and related items including push carts, wet markets and neighbourhood kirana stores. The Indian retail sector is estimated to have a market size of about $180 billion but the organised sector represents only 2% share of this market. A strong retail front-end can also provide the necessary fillip to agriculture and food processing and other industries.

FP industry: The Central government allows 100% FDI in this sector. There are incentives for setting up processing plants either in agriexport zones or outside of them. Sourcing of raw materials - fruits and vegetables or flowers or meat - is easier with an AEZ since there are already participants with knowledge about the industry standards. There are opportunities to create Halal hub (export to southeast Asia, the Middle-East), vegetarian hub (20% of Indian population + overseas), organic food hub (Europe and the US) and seafood hub in the country. Need GapsReefer 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

Fruit and Vegetable Businesses223111321123Chocolates311212321221Diary312333331223Seafood Companies121222321222Livestock Producers121212322222Hotels132113223223Quick Service Restaurants332333333323Large Format Retailers and Wholesalers333332323223Small Retailers122112122112Segmentation Matrix

Network (Geographical coverage)Temperature Range AvailabilityTemperature & Humidity ControlTracking MethodsReal time information feedbackProduct SecurityCostTrust /Reliability of service providerFlexibility of service providerTechnical Standards ComplianceRegulatory CompliancesTransportation Time Strategy CanvasTRENDSPPP model for supply chainsIndian 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 sectorIncreased FDI in Multi-brand Retail on the anvilThis 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

Centers 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.TRENDSThank youreefersShipping linesMaersk Line, Evergreen Line,Hamburg Sud, Hapag-Lloyd,K Line, Mac Andrews, MISC, CSAV-Norasia, Rickmers Line, Safmarine,Yang Ming Line, UASC and Zim Line. Indias state-owned shipping company Shipping Corp. of India, is also a member.Source: http://www.livemint.com/2007/09/18020040/Shipping-refrigerated-cargo-fr.htmlIndustry ChallengesHigh energy costs: Operating costs for the cold storage business in India are approximately Rs 80-90 per cu ft per year as compared to Rs 40 per cu ft per year in the West. Energy expenses alone make up about 30 per cent of the total expenses for the cold storage industry in India, compared to 10 per cent in the West. Indias peak power deficit is around 17-18 per cent, which makes things even more difficult for an energy-intensive sector like cold-chain. Investment in back-up systems, on the other hand, increases capital investment costs, making it even more unviable for a small player.Rising real estate costs: An even bigger struggle for new entrants in the present day context is the increasing real estate price. Typically, a fully integrated, international class cold storage facility with one million cu ft of storage space will require an area of an acre to build, which could cost anything between Rs 1 crore and 1.5 crore, constituting 10-12 per cent of the project cost. Cooling units are not mobile units, and so location becomes a key factor, and with Indias small land holdings, getting a sufficiently large tract of land to build a cold storage unit becomes a major additional constraint.Lack of logistical support: The cold chain industry in India currently is very fragmented, with players not having the cash strength to invest in the technology needed to build high quality cold storage infrastructure or even be able to cover the entire value chain from procurement at far-flung farms through transportation in reefer trucks to delivery at retail centres in cities. Currently, fresh produce is left near the fields till a truck-load is accumulated for drop at the local market. To add to the problem, pre-cooling in most parts of India is unheard of, and the transportation is done in open body trucksUneven Distribution of capacity: A majority of investment into setting up cold storages in India has been in states like Uttar Pradesh, Uttaranchal, Maharashtra, Gujarat, Punjab and West Bengal. This needs to be more geographically diverse, and reflective of the production levels of fruits and vegetables in various parts of the country. Secondly, the cold storages that have been traditionally set up can cater to single commodities only. Different commodities require different ambient conditions for storage and the current technology in use at most Indian cold storages prevents that, resulting in poor capacity utilisation and low financial viability because of the expected seasonality of food products.FDI restrictions in retail: That large investments are needed to develop cold chain infrastructure in India, and to a significant extent from the private sector, is a theory with wide backing. There are not too many third party logistics players who have the balance sheet strength to make such investments. The other source of investments are large business groups that have a presence in the retail sector and need to set up a cold chain back-up to support their retail front that involves delivery of fresh farm products to all parts of the country. Even though business groups like the Birlas, the Future Group, the Reliance Group and the Bhartis have been investing in cold chain, easing restrictions on FDI in retail could open up the channels for further fund infusion from new foreign entrants into the retail business. Food chains, especially McDonalds, have also played an important role in development of cold chain infrastructure in the country. McDonalds has spent substantial resources in ensuring that the quality of potatoes used at its restaurants in India matches its international standards, and has invested not only at the farm level, but also in the transportation from the farm to its outlets.Private Investor Interest. Cold chain has been one of the prime areas of interest for private equity funds for the last few years now. Despite this sustained interest, we have not seen too many deal announcements in the sector because there are only a handful of players with any reasonable degree of scale. Unless a cold chain player reaches a threshold annual turnover of Rs 40-50 crore, the valuation and promoter stake dilution dynamics do not work out to merit a private equity investment. An interesting example here would be that of Tuscan Ventures, a leading logistics-focused private equity fund, which had been looking to participate in the cold chain story, but evidently did not see a sizeable investment opportunity in the sector. They went on to incubate their own in-house third party cold chain business instead, investing in both surface and transport infrastructure. Most of the other major players are part of larger logistics outfits like Gateway Distriparks, TCI, Container Corporation of India and Gati, and have been steadily growing in scale.Growth DriversThe key drivers for growth of the cold chain sector in India areGrowth in organised retail with the growing demand for fruits and vegetables all year long, acceptance of frozen food products and increase in income levels that makes people accept a premium for fresh food products, organised retail is the strongest driver for the development of cold chain in India.Large players like Bharti-Walmart and Aditya Birla are investing heavily in developing a strong back-up infrastructure that ensures preservation of produce over long periods of time. Growth in processed food sectorThere has been a marked improvement in consumer preferences for processed foods, and the Government has reciprocated by announcing intent to establish several Mega Food Parks. This augurs well for the development of the cold chain sector in the country.Government initiativesThe various measures taken by the Government, as discussed earlier in this article, are expected to go a long way in incentivising investment into the development of cold chain infrastructure.Shift towards horticultural crops: Due to increasing risks and investments in grain crops, farmers are moving towards cultivation of horticultural crops. These crops need refrigerated storage, and hence are expected to encourage the development of cold storages.Demand from the pharmaceutical sector: The Indian vaccine market is somewhere in the range of Rs 1,000 crore, and is growing at 25-30 per cent year-on-year (y-o-y). These vaccines require temperature control right from the manufacturing point to the consumption point, which makes cold-chain management imperative.

Government Policy & Initiatives taken1. All the relevant schemes pertaining to the Cold Chain Industry have been outlined and 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 and Capacity BuildingResearch and Development Building standards through International benchmarkingInteraction with National / International bodies for development of cold chain infrastructure and trade in perishable

Way forwardDespite the under-developed conditions prevailing currently, we remain optimistic about the industry. With the average capacity utilisation in the industry ranging between a dismal 30 per cent, to a profitable 75 per cent, the unit revenue potential of a cold storage facility is governed largely by its investment in technology and overall service standards. Of course, it ends up being a chicken-and-egg situation with a small logistics player not having the ability to invest in technology, and unless he invests in technology his margins remain abysmal. In a situation like this, sops from the Government do go a long way in creating the right atmosphere for investment and growthBut government incentives, including the ones in the recent budget, will not exactly open the floodgates for investment into the sector. There is still some time before the trickle develops into a steady stream of cash inflow, but we are getting there. We also foresee greater degree of public private partnerships in the sector as well as greater involvement of railways and airports in strengthening the cold chain infrastructure.Additional measures that the government should take to help the sector are:i) Aid in acquisition of land to set up facilities for cold storage, food processing, etc.ii) Examine reducing FDI restrictions in retailiii) Speed up the introduction of GST, which will generally help the development of large centrally-located warehouses. The key factor that will decide how the cold chain sector grows over the next few years would be how strong, and how sustainable, the investment flow into the sector is. Increasing investments from large business houses to create a backup for their interests in the retail sector, as well as increasing willingness on the part of consumers to pay a premium for higher quality of food products, and thus helping in equitable distribution of the cost of a strong cold chain infrastructure, will drive the growth of the industry. Matapurkar (left) is a Director and Sinha is an Associate at o3 Capital Global Advisory.

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Sheet1SECTORWISE DISTRIBUTION OF COLD STORAGES AS ON 31/12/2009http://agmarknet.nic.in/sectorwisecold2009.htmSl.No.State/UTPRIVATE SECTORCOOPERATIVE SECTORPUBLIC SECTORTOTAL NO.TOTAL CAPACITY IN MTsNo.CapacityNo.CapacityNo.CapacityNo.Capacity1Andaman & Nicobar Islands (UT) 01 17000 0001 40 02210TOTAL48852340674535693686514010704253812445065231Uttar Pradesh15059842000842760000015891011800018Maharashtra3795076785525346321372446654674833West Bengal41353800005030200000463568200026Punjab404130610118390920042213451939Gujarat372123019821306695643739812673042Andhra Pradesh26988555711115981034512909006065Bihar2361100641104640000246114704111Haryana2343783194340361139924439312119Madhya Pradesh172704270201013485243419780805215Kerala17655335610801116901935810516Karnataka13539088218668917959417040716529Tamilnadu1302257121375625526214823853627Rajasthan1003203809383211411032422624Orissa812487391638100442001012910398Delhi77103277252011617680951261587Chhatisgarh673418151291416934188514Jharkhand37142733827415004517014810Goa29770500002977054Assam19859481100041120248806813Jammu & Kashmir154068932134146194286912Himachal Pradesh912896276776195181985832Uttarakhand12604990038000156849930Tripura3127501500071170011294506Chandigarh (UT)511216110000061221621Meghalaya1120000220003320025Pondicherry(UT)2351500038523Nagaland150001115000261503Arunachal Pradesh1500000001500017Lakshadweep (UT)000011511528Sikkim0000120001200020Manipur0000000022Mizoram00000000

Sheet1COMMODITYWISE DISTRIBUTION OF COLD STORAGES AS ON 31/12/2009Source: http://agmarknet.nic.in/commcold3112009.htmSr.No.State/UTPOTATOESMULTIPURPOSEFRUITS & VEG.MEAT & FISHMILK & MILK PRODUCTSOTHERSTOTAL NO.TOTAL CAPACITY IN MTs1 2345678No.CapacityNo.CapacityNo.CapacityNo.CapacityNo.CapacityNo.CapacityNo.Capacity1Andaman & Nicobar Islands (UT)0000002210000022102Andhra Pradesh0021283945611984344260681568388184012909006063Arunachal Pradesh001500000000000150004Assam0024880680000000024880685Bihar228106984118772000000000024611470416Chandigarh (UT)110004111310018500006122167Chhatisgarh1439242523025430000310000693418858Delhi00541173731534123994757272736951261589Gujarat213967000972655742106360222112511440116398126730410Goa0013633002640042680029770511Haryana172225991661657870000613430024439312112Himachal Pradesh59748538376610017819500181985813Jammu & Kashmir51128112314730000211500194286914Jharkhand82741537142733000000004517014815Kerala008132000017843815610801101935810516Karnataka9165309637824493870345141153128725217040716517Lakshadweep (UT))000000115000011518Maharashtra00189413885115479146263263701840730327946654674819Madhya Pradesh11456460067237737425770011312511319780805220Manipur0000000000000021Meghalaya0033200000000003320022Mizoram0000000000000023Nagaland0026150000000002615024Orissa3913963035130060413737226412001120010129103925Pondicherry(UT)00001151201500038526Punjab344109760976236994000021059000422134519327Rajasthan196589679256445000081781410411032422628Sikkim0012000000000001200029Tamilnadu0067213966376755911908134512647514823853630Tripura31100081845000000000112945031Uttar Pradesh1286871953329413900214358024027280113815891011800032Uttrakhand00156849900000000156849933West Bengal402546000061222000000000004635682000TOTAL28621842631615845644659160 964274971884961916823087 26524538124450652