The Edge Factor - May 2016

 

Contributions by: Mayank Kumar, Sahil Kapoor

 

Will it work in India

Retail Cold Chain: Will it work in India?

India being world’s largest milk producer and second largest producer of fruits and vegetables ends up wasting about 20-50% of the total produce, valued at USD 440 billion annually (Includes food grain wastages) in the absence of suitable cold storage and transport modes.

Although, the sector is fragmented and not mature but there is huge potential for retail to grow. The growth may require change the way of working and develop new capabilities around handling food collection, storage and transportation posing huge advantage given the current situation.

How it currently works in India?

India has about 6300 cold storage facility with the capacity of 30.11 million metrics, which are only able to store about 11% of the country’s total perishable produce. About 60% of this capacity is spread across states of UP, West Bengal, Gujarat and Punjab. But still situation is severe in the south of the country where there are almost no cold storage units and the climate is hotter and far more humid.

To provide the boost to the sector, Government of India has taken initiatives like forming National Center for Cold Chain Development (NCCD), allowing 100% FDI in cold chain infrastructure and investing USD 15 billion in cold storage infrastructure. While it will still take some time to get the expected outcomes of these initiatives, the industry is still highly fragmented and organised players make up only 10% of the industry with overall 3500 companies working in this space.

One of the major roadblock for the sector to grow further is the operating cost of cold storage which lies at USD 60 dollar per cubic meter in India compared to USD 30 dollars in the west. The reason for this huge difference is on the account of higher energy expenses in India and shortage of adequate infrastructure.

How to make it work?

Setting up cold chain involves high cost and higher infrastructure cost for operations. Given the expected growth in grocery retail to USD 847.9 billion by 2020 from USD 500 billion in 2012, there are some changes expected by the industry as a whole to ensure the three significant areas of handling food collection, storage and transportation be more cost effective for retailers.

To start with, cold storages can be established closure to the source or agricultural land which will help in increasing the shelf life significantly, availability of agile and reliable logistics system to ensure reduce in transit wastage, robust planning, scheduling and execution which is again very critical given the limited capacity of cold chain and high requirement.

Technology interventions like GPS and sensors which can be monitored centrally to track the temperature and position of truck to ensure better control on product quality.

Conclusion

While retail cold chain as a sector is currently struggling to be more efficient, there is a lot of headroom for improvement with the help of operational and technology level changes which can be brought into the overall system. With government also taking up many initiatives for the betterment of sector, it might be a good idea for retailers to look at long terms gains rather than looking at the current model of low operating cost.

REFERENCES:
http://www.crosstree.info/Documents/ChOCold%20Chain%20India.pdf
http://www.onicra.com/images/pdf/publications/coldchainindustryreportjune2014.pdf
http://naturalleader.com/wp-content/uploads/2016/04/UTC-Nottingham-Report_3-30_FINAL.pdf
http://www.emerson.com/en-in/News/Pages/india-food-waste-and-cold-infrastructure-report.aspx
http://www.valuenotes.biz/insights-publications/publications/infographic-indian-cold-chain-industry/
http://nccd.gov.in/PDF/CCSG_Final%20Report_Web.pdf
http://www.nccd.gov.in/PDF/ChallengeColdChain-Development.pdf
http://www.nccd.gov.in/PDF/RTC_Conclave.pdf

Something we found interesting

"Here is an interesting presentation to understand the importance of cold chain to retailers with current status of the cold chain in countries like China.
Download this Presentation"
 

Read this article at: http://bear.warrington.ufl.edu/oh/IRET/Slides/slides/6.3Cold%20Chain%20for%20Grocery%20Items.ppt

 

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