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Indian cold chain industry fragmented; Expected to witness CAGR of 28%
Tuesday, 14 November, 2017, 08 : 00 AM [IST]
Vishal Lather
The cold chain industry has evolved over the years, and has played an indispensable role in helping other industries thrive, ultimately boosting the Indian economy.

The Indian cold chain industry, expected to grow at a compound annual growth rate (CAGR) of 28 per cent over the next four years, is poised to reach a market size of $13 billion in 2017-2018 through increased investments, modernisation of existing facilities, and establishment of new ventures via private and government partnerships.

The Indian cold chain market is highly fragmented, with over 3,500 companies in the whole value system, with organised players contributing between eight and 10 per cent of the cold chain industry market.

However, the market is gradually getting organised and focus towards multi-purpose cold storages is rising.

In simple terms, a cold chain or cool chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of refrigerated production, storage and distribution activities, along with associated equipment and logistics, which maintain a desired low-temperature range.

It is used to preserve and to extend and ensure the shelf life of products, such as fresh agricultural produce, seafood, frozen food, photographic film, chemicals, and pharmaceutical drugs.

The major driving force behind the growth of cold chain facilities in India will be the growth of the end-user industries.

Cold chain has a host of industries as users and tangible growth in these industries will necessitate the development of the cold chain industries in India.

Importance of cold chain in user industries
Quick service restaurants
A fast-paced lifestyle, changing eating habits, higher purchasing power of consumers are not only fuelling expansion and growth of quick service restaurants (QSRs) across India, but also of the cold chain logistics industry, which helps food reach fast and fresh.

The market for chain restaurants, including cafes and QSRs, is expected to grow at 20 per cent a year to reach Rs 51,000 crore ($8 billion) by 2021.

The budding incidence of eating out and the growth of the QSR industry requires larger amount of perishable food products to be transported from point of origin to outlets.

Cold chains provide a solution in bridging this gap. They provides refrigerated storage to prevent the fresh produce from getting spoilt. They also play a key role in supplying food quick and fresh, enabling QSR industry to meet the growing demand.

The biggest challenge faced by any QSR in the Indian market, be it a domestic or an international player, is to maintain the consistency of the product and the quality of service across various outlets.

The QSR focuses on providing standardisation in both product and experience. Cold chains are crucial to ensure that the quality and taste of the product remain intact across various outlets.

Pharmaceutical industry
The current size of the Indian pharmaceutical industry is $27.57 billion, and it is expected to reach a mark of $55 billion by 2020.

In the next three years, India is projected to be among the top three pharmaceutical markets in terms of growth rate and the sixth-largest market globally in absolute size.

The growing pharmaceutical industry in India has led to the presence of sound cold chain services for the pharmaceutical industry, which is an avid user of cold chain services.

Cold chains are of utmost importance while transporting time constrained pharmacy products to various parts of the country.  

A large number of countries all over the world import various pharmaceutical products from India.

The process of shipping requires vigilant considerations like the type of shipping container, humidity control equipment and the type of environmental conditions that the drugs are expected to maintain.

For these reasons, establishing a strong cold chain has become a critical part for the industry.  

Processed food industry
The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.

It has become one of the largest industries in India due to changing lifestyles, working women and nuclear families.

Today, people prefer processed and frozen food in order to save time, resulting in the boom of the frozen food market.

For any processed food to reach the final consumer, an effective cold chain system is imperative.

Organised retail sector
The Indian retail industry has emerged as one of the most dynamic and fast-paced industries, due to the entry of Indian as well as foreign players.

It accounts for over 10 per cent of the country’s gross domestic product (GDP) and about eight per cent of the employment.

India is the world’s fifth-largest global destination in the retail space.

The growth of the organised retail sector will flow down to the cold chain sector as well.

Food retailing in India is often termed as the backbone of Indian retail industry, due to the changing consumer preference and rising urbanisation in the country.

Food and grocery items account for one of the most predominant categories in the organised retail sector and require effective cold chain logistics.

Way forward
The cold chain industry is indeed an emerging and fast-growing business sector in India.

Considering the current issues of food shortage and food security in India, the cold chain industry will play a critical role in the country.

The country’s cold storage and transport facilities, if capitalised on efficiently, will help address the existing problems.

Various initiatives of the government of India and other agencies are enabling the industry to adopt better and more efficient technologies to ensure year-round availability of perishable food products at reasonable prices to the consumers, and also equitable distribution to other parts of the country.

(The author is vice-president, operations, Snowman Logistics Limited.)
 
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