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Portable cold storage industry in India – Growth & sustainability
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Thursday, 03 June, 2021, 15 : 00 PM [IST]
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Sagar Neve
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The Indian cold chain market reached a value of Rs 1425.49 billion in 2020. Cold chains impart storage and distribution services for products that have to be maintained at a given temperature. India is currently the world’s largest producer of milk, second largest producer of fruits and vegetables and has a substantial production of marine, meat and poultry products.
Drivers of cold storage market
Growth of Indian food industry among which 32% of the food processing relies on the cold chain industry. Shift of the cultivation from seeds and crops to fruits and vegetables have led to the further increase of the cold storage facility. Increase in the pharmaceutical and cosmetics industry has given a further rise to the end to end cold chain requirement. Among the trends, the organic and farm to table fame has led to an increase of the industry further.
Portable cold storage industry
The limitations to the traditional Cold Chain Facility have given a rise in the Portable Cold Chain Facilities. It is expected that the growth of temporary cold chain facilities will have upto 40% increase in the segment share.
Temporary facilities are recommended when the storage is time specific or construction of the Insulation unit is unachievable. Further to this, better economical options of leasing a portable cold chain unit instead of building one have been emerging. This avoids the capital required to build a cold chain unit and favours the new in the markets, hence leading to larger opportunities. With the benefits of the modern cold storage units, the units are also used for the cultivation of temperature specific products. With the increase in the processed food industry in retails and B2B, the demand of the local as well as national level cold chain links have been increasing.
The increase of the fruits and vegetable farming and the education towards food wastage, yield management have directly resulted in the demand of the portable cold storage. This solution helps customers avoid huge investments in creation of storage space, enabling them to focus their investments and energy into their core business.
Refrigerated storage containers are excellent vacancies to stock fruits and vegetables, and also other products such as dairy, meat, fish and many more, as they increase endurance and further restrict deterioration of foods. Introduction of Solar powered cold storage facilities have also attracted government subsidies.
Another excellent impression about these storage units is that they can be utilised as a dehumidifier to regulate the moisture content when dry warehousing is required. This has created a demand due to certain temperature or atmospheric conditions specific products. These products are generally food and beverage or pharmaceuticals. The demand of the Coastal Seaweed industries has played a major role in the increase of the portable cold storage.
Start-ups like 'JustCool' have been exploring the current market by assembling portable cold storage as several market places for retail public use. The demand of this segment has been increasing rapidly due to organisation of the majority retail food industry. The increase in personal pharmaceutical storage has given them a further boost.
Investment in portable cold storage
Increase in the demand, limited human resource and less operative cost are the reasons why it is being compared to the real estate industry. The return on investment (ROI) for any specific cold chain operation will depend largely upon the market value of the food commodities being cooled and stored and the use efficiency of the facility (i.e. whether operated at full capacity or not). Investment in the cold chain, specifically in pre-cooling (Portable Storage Units predominantly used to preserve fresh farm produce, meat, pharmaceuticals) can reduce food loss by 76 percent and CO2 equivalent emissions by 16% in India.
JustCool aggregators profit rose by 32% with a larger access to the distance marketers, distributors and retailers. The payback for their first storage unit was achieved in 1.2 years, while a general payback for a large scale cold storage facility would require 4 years. The industry is expected to grow at CAGR 16.29%. The growth of the public and private sector is inevitable. Government currently provides subsidies through the National Horticulture Board (NHB) and the Ministry of Food Processing Industries (MOFPI) to help cover the upfront costs of deployment for packing houses, pre-cooling facilities, cold storage and refrigerated vehicles.
Thanks to Government continuous efforts and favourable policies such as providing infrastructure status to cold chain industry, profit linked tax holiday, priority sector lender and lower GST, the sector is developing at an accelerated pace.
Investors are confident in the growth opportunities and diversification of the current industry. In just a span of three years, JustCool has risen up to 16 times in their valuations. Offshore investors are also getting trapped by Government subsidiaries and foreseeing high profitability in the business of portable cold storage. Currently 60% of the cold chain is unorganised. With the demand, the demand for organised sector is rapidly increasing, It becomes a very lucrative business for the first timers or traditional investors.
(The author is owner of Neve Hospitality)
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