Cold Chain Prospects in India

Cold Chain Prospects in India A cold storage chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of warehouse and distribution activities which maintain a given temperature range. It is used to help lengthen and make sure the shelf life of products such as marine products, frozen, fresh agricultural produce, photographic film, pharmaceutical drugs and chemicals. The chain needs to begin at the production/farm level (e.g. harvest methods, preprocessing, Pre-cooling) and cover up to the consumer level or at least to the retail level. A well managed cold chain reduces spoilage, retains the quality of the perishable products and guarantees a cost efficient delivery to the consumer given adequate attention for customer service. The main characteristic of the chain is that if any of the links is missing or is weak, the whole system fails. The Cold chain logistics and supply chain management systems infrastructure generally consists of: Pre-cooling facilities Refrigerated Carrier Cold Storages Warehousing Packaging Information Management systems (Traceability and Tracking etc.) Fig: Outline of a typical Cold Chain Some Snaps of cold storagesà ¢Ã¢â€š ¬Ã‚ ¦ Global Situation Analysis Today shippers of perishable products face an array of challenges in getting their products to market in the most efficient and cost effective manner, but lack of capacity in the logistics and warehouse service industry isnt one of them. The need for temperature controlled storage systems for storing both food and non food is increasing in many traditional and emerging markets worldwide. The producers and retailers are moving to emerging markets like Latin America and Asia, along with the changing preferences and tastes of customers in older market places, is having a strong impact on the logistics industry. This has led to high levels of investment by logistics companies and their associated suppliers as they have: They have gone for acquisition or entered into alliance with local companies for getting access to these markets They have established cold storage enabled operations in the areas to serve the growth in affluence of local consumers Simultaneously, demand for perishable products from these emerging markets is increasing, with a higher level of both perishable food and non food products being transported to the more traditional western markets of the US and Europe. This is causing problem on the already jam-packed shipping routes .Increasing volumes are leading to congestion issues at major ports of the world. Cold chain industry is showing tremendous increase in France, Germany, the Netherlands, Spain and Brazil. Total capacity for these countries for 2008 is 6,350.32 million cubic feet (179.82 million cubic meters).The industry is growing globally at approximately 15 percent (IARW Report 2009).The growth rate for China and India are higher compared to global average. Both have almost doubled their capacity in last ten years A phenomenal transformation is currently occurring that may significantly affect a multi-billion dollar global cold chain industry. The projected annual wastage of perishable products worldwide is 35 billion dollars. There are enormous opportunities for companies to distinguish themselves in the market place through effectively leveraging the upcoming technologies that improve logistics and supply chains. Most agribusinesses and Consumer Packaged Goods (CPG) companies are not just considering process improvements of their logistics and supply chains but they are investing in and overhauling the entire business model and strategies to survive in the continuously changing competitive environment. Especially for manufacturing and retailing companies handling temperature sensitive food and non food products, the substantial challenges may be emphasized by the additional cold-chain logistics involved with effectively preserving and handling these products. Other converging and substantial problems such as fierce competition, strict government regulations and global standards for product identification, security, and tagging; and the need for enhanced traceability to improve quality and operations are influencing important transformation in the Retail and CPG industry. The implications of resisting these changes and other related upcoming challenges are potentially lost delivery channels and a weakened competitive position. By allowing information computing power available anywhere and anytime, companies can more quickly adjust to these challenges and the continuously changing external environment. Apart from this, they can considerably improve what they deliver, how they operate, and potentially their profitability. Indian Situation Analysis The Indian cold chain industry is very large and estimated to be around Rs 10,000 to 15,000crore, which is growing at a rate of about 20-25 percent and is expected to touch Rs 40,000crore by 2015.It was about a century ago this Industry came into existence. In India majority of cold storage facilities are under-utilized or completely unused for most of the year. There is a large gap of around 60% in cold storage infrastructure and 80% in mobile cold storage facilities like refrigerated trucks and rail wagons. By the year 2012, the cold chain industry expects to see a huge capacity addition as there is an expected increase in the cold storage investment. Current status of cold storages in India: The cold storage infrastructure in India was built way back in 1960s mainly for potatoes and potato seeds and even the investments in cold storage were very less during that time. Nationwide provider of cold storage facilities is nonexistent at that time. The number of cold storages in India is about 5316 and the total capacity is around 23333694 mTs. The number of Private sector cold storages in India account for 4820 with a capacity of 222343607mTs, cooperative sector 363 numbers with 989445 mTs, Public sector account for 133 numbers with a capacity of 100642 mTs. The existent cold storage facilities mainly serve the potato products. There is a lack of facilities such as cold storage vegetable, cold storage fruits, cold storage tamarind, cold storage fish, cold storage meat, and cold storage milk and dairy products.. Cold storage services are available for only 10% of the produce. In India Transportation of fruit and vegetables through cold chain is almost negligible, whereas in US it is around 80-85% in the US and for Thailand it is around 30-40%. In India, due to the current inefficiencies in the supply chain around Rs 1 lakh crore worth of fruits and vegetables are wasted every year. Cold chain in India -Reality: Modern Post Harvest Management is non existent Lack of World Class Integrated Cold Supply Chain Across the Country and also Isolated Stores without Logistics Support Using Services of Cold Stores with Archaic Storage Technology The cold storage facilities are used mainly for low value products like potatoes The present cold storage facilities lead to Loss of quality and hence value of the perishables The duration time for storage largely influenced by the market imbalances India cold chains potential and opportunities: India is the second largest producer of fruits and vegetables in the world which contributes for about 10% of the total fruit production in the world. India is the largest producer of fruits (32mT anually) in the world, which is about 8 per cent of the global production; India is also the second largest producer of vegetables in the world (first being China), producing around 71 mT anually, which is about 15% share in the world market. The key area in India is Food processing and it processes about 1.3% of its total fruits and vegetable where as it is 80% in USA, 70% in France, 80% in Malaysia and 30% in Thailand. To become a top exporter and processor of fruits and vegetables, India needs a high quality cold chain. Due to lack of cold storage facilities and energy infrastructure about 40 percent of the fruits and vegetables grown in India (40 mT worth $13 billion) gets wasted every year, which is huge enough to feed countries like Brazil and Vietnam. The reason for this huge wastage is the wide gaps that are existing in the cold chain and there is no well equipped cold chain for the preservation of fruits and vegetables. The Infrastructure for Cold chain is not existing for the produced capacities and same is the case with storage, also these close storage facilities are not available close to the farms, in addition to these the transportation (temperature controlled) is also inefficient. So it is important to establish world class cold storage logistics, which play a crucial role in reducing the global foods shortage by eliminating wastages, which would provide us enough scope to feed many parts of the world. The major initiatives which government of India has taken to improve this sector are Allowing 100% Foreign direct Investment Provided full excise duty exemption on cold chain refrigeration equipment (consisting of compressor, condenser units, evaporator), which reduced the costs substantially by around 16%. These policy initiatives taken by the government have signalled the existing cold chain majors in India to setup their own back-end logistics. Existing Players in India The Leading Cold chain companies in India with established cold chain infrastructure are as follows: Container Corporation of India (Concor), Indraprastha Cold Chain, Glacio Cold Chain. Bulaki Deep Freeze Snowman Refcon Carriers Kausar Gatia Gateway Distiparks R.K. Foodland Adani Group Future Group Bharti ITC Reliance Godrej Tata Cochin. Mumbai, Delhi International airports Aditya Birla Group Apollo Everest kool Solutions The existing players are taking major steps in expanding their capacities, which are as follows: Snowman and Kausar, two major names in the cold chain Industry have been bought over. Gatia ,a logistics company in Hyderabad acquired Kausar India, Gateway Distiparks, the Transportation logistics major acquired a controlling stake in Snowman Frozen Foods.The Future Group has carried backward integration, from food retailing to storage and transportation; with the launch of Future Logistics. Ahmadabad based Adani Group revamped its cold chain logistics facilities recently. Major players like Bharti, ITC, Reliance, Aditya Birla Group, Bharti the Godrejs, the Tatas and the Future Group has announced billion dollar investments which offer a ready market for third-party cold chain logistics players. Apart from the Global giants and the Indian corporate the airport infrastructure companies and the railways are also planning to build refrigerated warehouses and perishable products cargo centres across the country in capture the share in the booming retail sector. The major airports like Cochin International Airport, Mumbai International Airport, Delhi International Airport and Greenfield international airport projects such as Bangalore and Hyderabad are also setting up refrigerated warehouses for perishable cargoes next to the airports and started to tap the cold chain market. Cochin International Airport is building a state-of-the-art centre for perishable cargo, which can handle about 40,000 million tonnes perishable cargo annually and which would help the farmers of the state who are cultivating such products.Apollo Everest Kool Solutions, which is a joint venture of Spire Group and Apollo has plans to set up at least 15 temperature-controlled warehouses in India. The other major companies showing interest in cold chain market in India include Snowman Frozen Foods (sold out), a joint venture between, Nichirei Logistics Group, Mitsubishi Corp Gateway Distiparks. Fresh and Healthy Enterprises has set up a 100 per cent subsidiary for cold ch ain logistics with an initial capacity of 12,000 tonnes at Rai in Sonepat, Haryana and has further plans to expand it to over a dozen cold storages in the near future, Apollo-Everest Cool Solutions a joint venture formed by the Delhi-based Apollo Tyres and the Spire Group of Canada have plans to construct 15 temperature-controlled warehouses in India with an investment of $250 million; Adani Agrifresh one of the Top retail chain sold its retail business to start a cold storage supply chain for fruits and vegetables in over a dozen top cities of the country. Cold Chains in Different Industries Special features of Indian Cold chain market for important product segments are given in the table below. Product Characteristics Potato Amounts upto 90% of existing cold storage capacity Chocolate High outsourcing demand. Seasonal-Large variation in peak and non-peak demand. No dominant player among service providers Poultry All the market is captured by Snowman and RK Food-both pan India players Fruits Vegetables Predictable, Stable and High demand throughout the year. No dominant player in the market. Market dominated by Domestic players. More than 60% demand met by small/ local/regional players Dairy products (Butter Cheese) High demand throughout the year. Major players not very active Significant share of small players Ice Cream -Seasonal High demand in peak season High growth 35% demand shared by small players The major products are Potato, apple which contributes Rs 16050 million to the cold chain market. Other products are: Segment Value(Million) Imported Fresh Fruits Vegetables 1.67 Exports By sea (Seafood, Meat, Poultry, Fruits Vegetables) 46 Chocolate Industry 2 Dairy Industry 2.67 Meat Poultry (domestic) 1.33 Ice-cream Industry 4.9 Processed potato 4.45 Emerging segments (flavoured milk/yoghurt) 13.33 Cool Chain Transportation 40 Source: Global AgriSystem Ltd Cold Chain in Pharmaceutical Industry In the pharmaceutical supply chain, the chain members have different requirements to meet for material handling, warehousing, storing, packaging and distributing the pharmaceutical products which are sensitive to the environment. The ideal pharmaceutical cold chain should be capable of dealing with changing product portfolios, the requirements for Good Storage and Distribution Practices, current regulatory trends, quality management, risk assessment factors, and temperature monitoring. Pharmaceutical cold chain trends: Manufacturers are being held responsible for any defects in the product in cold chain management. E.g. determining, maintaining and monitoring temperature levels during shipment. The management and control of environmental factors across the supply chain is being given greater emphasis. E.g. Vacuum packaging , Transportation choices in cold chain, etc. Temperature control and monitoring is being employed to reduce the risks and increase efficiency. 36% of all major and critical defects registered by the Medicines and Healthcare Products Regulatory Agency during 2003/2004 were related to the control and monitoring of storage and transportation temperatures. Heightened priority of patient safety due to the presence of multiple uncontrolled variables in the distribution process, developing an appropriate temperature and humidity monitoring program is essential to protect the quality of environmentally sensitive pharmaceutical product and ensure patient safety. Increased Importance of the Pharmaceutical Cold Chain In 2003, out of the $400 billion products, 10% were biopharmaceuticals. The biopharmaceutical markets compound annual growth rate(CAGR) was 21% which was notably more than the roughly 11% CAGR of the traditional pharmaceutical market in the period 1999 to 2003The biopharmaceuticals are highly sensitive to temperature. This increases the importance of the pharmaceutical cold chain. The standard procedures normally followed in the cold chain are: Information of shipping configuration and the type of packaging used, should be declared. In the labeling part, the storage rules and particular precaution that should be taken should be included. Mode of transportation should be approved by respective authorities. The finished products in the shipment are verified to check any tampering or damaging of the containers. The manufacturer should obtain the evidence that the requirements for shipping e.g. temperature control have been fulfilled. Some important aspects of Pharmaceutical cold chain are: Some leading logistics companies and carriers which have sophisticated infrastructure e.g. electronic tracking, online export documentation provide can assists the shipping party. In cold chain, the use of refrigerated warehouses, refrigerator trucks, refrigerated containers, refrigerated ships and refrigerator cars is common. Another important facility required is the insulated shipping containers or other specialized packaging. The role of Temperature data loggers and RFID tags is to help monitor the temperature history of the warehouse or truck etc. and also the temperature history of the product being shipped. They also help in determination of the remaining shelf life of product. The key part is documentation. There are set of rules for each step in the chain to maintain proper records. Incomplete or Inaccurate paperwork in customs can lead to delays. So all the established protocols should be followed e.g. number of copies and other information details. Quality Management Process (QMP) and Risk Assessment Process (RAP) Factors to be considered for the QMP may include but are not limited to the: Organization, roles and responsibilities, process, trained resources, implementation plan, compliance change control, on-time delivery of right product, quality metrics, continuous enhancements, and monitoring customer satisfaction. Areas to be assessed in RAP include: Compliance with regulations, guidances and quality standards product profile, physical and chemical stability environment (temperature Mapping, temperature control, temperature and humidity monitoring), mode of transportation (ground, air, sea), shipment destination (domestic, export), package (primary and secondary), people (standard operating procedure, training, communication, documentation, recognizing, addressing, correcting adverse events, and change controls). TMS- Temperature Monitoring System The determining factor of a temperature monitoring system (chemical, mechanical or electronic) is the amount of information required. Generally the temperature monitor equipment is the main part of the Cold chain system. If the suppliers are having the infrastructure for high quality checks, the firm may use more complex, precise and sophisticated temperature data loggers which provide all the relevant information in prescribed format. The data includes record of temperature and humidity including time and date as well as specific identification. All equipment used for recording, monitoring and maintaining temperature and humidity conditions should initially be validated and thereafter calibrated on a regular basis. The certifications are provided by the leading suppliers in the industry indicating the grades about the quality required for the monitoring. Cold Chain in Floriculture Industry Flowers are perishable in nature. It is observed that small temperature differences can bring about very significant flower quality changes. There is a negative effect on the useful life of the flowers with the increase in temperature in transportation. It is further affected by increase in the duration for which the flowers were exposed to such high temperature. In India, due to inadequate cold-chain management, the postharvest losses are very high. The estimated losses are 40%, depending upon the commodity at various stages. Flowers should be cooled to temperature ranging in 330 F to 410 F without any delay. Higher temperatures not only reduce the useful-life but also increase the respiration-rate. It is found that the respiration of cut flowers increased exponentially with increase in storage temperature. Proper cold-chain management of flowers improves the flowers marketability. Cold storage enables quality stems to be held for longer periods before sale and ensures that the flow ers still have a good shelf life(called as vase life ) when they reach the market-place. Cold Chain in Dairy Industry: Amul Case Study Life cycles of various product lines of Amul are different, for example products like milk, lassi and flavored milk needs to be refrigerated from procurement, processing to end distribution stage. Milk is procured from regional cooperative societies or contract procurers. Pasteurization, refrigeration and packaging are done in regional centers itself. These centers are fully owned by Amul in some places and outsourced in other places. Thirty to forty SKUs of packaged milk, flavored milk and other similar products are supplied in plastic crates filled with ice for end mile distribution to the nearest market i.e. different parts of cities, suburbs and even to rural areas. Since crates are small loading and unloading is done manually, so it does not require complex equipments. Empty crates are brought back as a part of Reverse Logistics for next day dispatching of milk. For ice creams, Srikhand, Butter and other such products High-Tech refrigerated transportation system is used. Amul is first mover in India for tetra packed milk products. It sells these under the brands Amul Sakthi and Nutramul. It has also introduced products like cold coffe, butter milk and Lassi in tetra packs. These have a life span of six months to one year. These do not require cold storage facilities and delivered in corrugated boxes in combination with stretched plastic. Amul has the largest cold storage network in India (more than 18000 facilities). Challenges Issues Cold storage industry is facing following challenges 1. Lack of Uniform Technology standards: There is lack of uniform electronic and bar code standards. International standards vary widely, and domestic standards are almost as disparate, creating unnecessary paperwork and profit-eating delays. 2. Consolidation: The trend toward consolidation sprung from the growing tendency for warehouses to act as shipping venues, as well as the entry into the market by warehouse holders. Though consolidation spurred overall industry growth, smaller warehouses have struggled to compete with larger industry players. 3. Capital Investment and Technology: The cold chain Storage and logistics is a capital-intensive industry (investment for refrigeration equipments and real estate) with a large capacity cold storage chain has a high payback period of around five years.    4. Incumbency advantages independent of size: Existing players like Snowman have built expertise by operating in this industry for longer periods in time use imported hi-tech equipment, which new entrants find difficult. 5. Economies of scales: It is a largely untapped, fragmented full of unorganized small size players. No player has achieved economies of scale and thus a new a new entrant with deep pockets can enter this industry and still be at a major cost advantage. 6. Human Capital and Domain Skills: It requires skilled human resources for operating and controlling the cold storage facilities. Lack of technically qualified employees is also one of the hindering factors for Indian cold storage industry. 7. Lack of logistical Support: Small land holdings remain a challenge because it requires multiple farm gate collection centers. Also Fragmented cold chain industry has not encouraged the growth of cold logistics for horticulture produce. Standard refrigerated systems are inefficient and poorly designed. Also, domestic market for fresh perishable produce is underdeveloped. 8. Uneven Distribution of cold stores: Available capacity is mostly focused on single commodities. Problem of financial viability is also their due to seasonality. Other pertinent issues are 1. Erratic power supply 2. High operational costs and low yield models. 3. High insurance/ Risk coverage premiums. 4. Large gap in demand supply conducive to small unorganized service providers. 5. Government tax and commercial regulations. Role of Government Government policy acts as a catalyst in this industry. Following are the salient features of Government policies for cold storage sector: 1. Encourages Investments Agri food is identified as priority sector. 2. Encourages organized sector- ECB route opened, Import duty relaxed. 3. Liberalizes Marketing Norms- Focus on increased retail, improved supply chain. 4. Rationalizes Tax Laws- Moving towards uniform VAT/GST. 5. Provides Grants and subsidies- VG funding, Grants, Infrastructure status 6. Eases foreign investment- 100% FDI in food sector. ECB for cold chain. Government of India Initiatives 1. Excised waved on FV, meat preparations, ice-cream, other RTE food mixes. 2. Automatic approval for 100% foreign equity in processed food items. External commercial borrowing opened (except in beer, alcohol etc.) 3. Priority lending status; Duties reduced on imports; Zero service tax on installations. 4. EOI floated for 30 mega food parks- allocated US $ 1.02 billion by 2012. Objective of the scheme is to provide backward and forward linkages as well develop reliable and sustainable supply chain. 5. GOI initiating National Highway Development Program and partnering with Indian railways to establish cold chain infrastructure. Indian railway is planning to invite private parties to run refrigerated container trains for transporting agricultural products across the country. 6. Integrated food law(FSSA) notified and ready for implementation. 7. Task force on Development of cold chain established and national centre for Cold Chain Development (NCCD). In Budget 2011- Cold chain Industry Industries like fertilizer and cold-storage chains will benefit, with capital investment in fertilizer being treated as infrastructure investment. Hyderabad based express distribution and supply chain solutions provider Gati logistics has said the endowment of infrastructure status to cold-storage chains logistics in the Budget will help in realizing its plans to build cold storage units across the country. Gati is setting up 10 cold storage plants across the India at an investment of about Rs 200 crore in the coming four years.