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“More cold storages will help reduce wastes”
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Monday, 12 September, 2011, 08 : 00 AM [IST]
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Nandita Vijay
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Snowman Logistics Limited has always been known for its technology and services. With daily distribution of 500 metric tonnes, the company garners a fair share of India's cold storage business pie. Ravi Kannan, Chief Executive Officer, Snowman Logistics Limited, in an email interaction with Nandita Vijay, reveals more about the company in particular and the industry in general. Excerpts:
How would you describe the current scene for cold chains / storages in the country?
India has 7,486 cold storages with a capacity of 34.82 million tonnes. Uttar Pradesh accounts for the highest number with 2,709 storages having a capacity of 165.46 million tonnes. Gujarat is the second with 636 of 17.99 million tonnes capacity followed by Maharashtra with 8, 50,440 tonnes capacity in 579 storages and Punjab which has 553 storages with 17.75 million tonnes capacity.
According to Frost & Sullivan, the total market revenues for temperature controlled market (TCL) are estimated at Rs 7,470 crore by 2012-13. Transportation revenues expected to increase at a faster increasing share from 38.1% to 41.2% of total revenues. Outsourced activity accounts for 91.4% of revenues in transportation and 94.7% in warehousing.
The ministry of food processing views the cold chain infrastructure as a key requirement and expects to invest over Rs 4,500 crore over a period of five years. Preference among multinational companies to deal with organised service providers is expected to see the organised TCL warehousing market to grow at the industry growth rate. The fruits and vegetable addressable market for TCL services is 155.2 million tonnes in 2010-11. In the beverages market, only the in-bound logistics (fruit pulp and concentrates) require TCL services and this is estimated to reach Rs 180.8 million by 2012-13 growing at a CAGR of 22%.
In 2009, India as per the ASSOCHAM and KPMG report, requires over 31 mt, but has facilities for only 21.7 mt cold storage. Would you describe this as grown or fallen?
According to the Directorate of Marketing & Inspection (DMI), the apex body regulating the cold storage in India, the total cold storage space in India in 2008 was 23.3 million tonnes. Out of the total cold storage capacity, approximately 78% is used for potato storage.
Requirement may grow as Foreign Direct Investment (FDI) in retail may get nod which will allow growth of organised TCL players. The segment will grow at a CAGR of 20% in the next 5 years. Requirement for cold storages has grown to 35 MT with current facilities limiting to 25 MT only. The demand and availability of cold storages have been growing linearly instead the rate of development of cold storages should be more than requirement. Government initiatives in this sector as per the Union Budget 2011-12 show that there would be huge development in the cold chain industry. It could accord the infrastructure status for cold chain storage facilities. Ensure additional capacity for food grain storage. Go in for 15 more mega food parks. An additional 20 m tonnes storage capacity has been planned, approval for 107 cold store projects over 5 m tonnes and approval for 24 cold storage projects over 1.4 m tonnes was announced.
What is the lacuna in the Indian cold chain space that despite government support the sector has failed to achieve growth?
The need of the hour is an economically viable cold chain solution that will create total integration of the food supply linkages from production centres to consumption centres, thereby reducing physical wastages and loss of value of perishable commodities which in turn leading to the development of the processed food industry. The chain needs to start at the farm level and cover up to the consumer level or at least the retail level.
The Indian Fruit and Vegetables (F&V) supply chain is characterised by large number of intermediaries where farmers mostly do not use TCL services because of poor economies of scale, aggregators refrain from it because of lack of sufficient volume. While traders / wholesalers use TCL services mainly for high value produce, the sub-wholesalers / small retailers do not use the same.
Another hurdle is the last mile distribution where multiple product-handling due to lack of cold chain facilities is degrading quality at retail store end. Thus less intermediates and efficient cold chain use will maintain product temperature and quality. This is where seminars / workshops should be arranged to create awareness among retailers / distributors to use cold chain at grass root level so that people know the advantages of using these facilities.
What according to you are the visible trends in the industry?
A well developed cold storage and food processing industry is expected to increase farm gate prices, reduce wastages, ensure value addition, promote crop diversification, generate employment opportunities as well as export earnings.
The TCL market in the agriculture industry is estimated to touch Rs 51.4 billion by 2012-13 at a CAGR of 10%. Increase in irrigation levels resulting in higher yield & migration from conventional crops to F&V.
In the chocolates segment, the TCL market is estimated to touch Rs 1,861 million by 2012-13 at a CAGR of 19%. In total beverages market, only the in-bound logistics (fruit pulp and concentrates) require TCL services which are estimated to be Rs 18.08 crore by 2012-13 growing at a CAGR of 22%.
The TCL market in ice cream is estimated to touch Rs 349.9 crore by 2012-13 at a CAGR of 25.3%. The TCL market in meat Industry is estimated to touch Rs 645.04 crore by 2012-13 at a CAGR of 7.7%, which is driven by meat exports, value-added products and strict regulation by meat importing countries with respect to hygiene & safety. Road reefer transportation is set to grow at a high rate subject to removal of ban on road transportation of red meat. Ready-to-eat market is expected to grow at a CAGR of 27% over the period of 5 years and the road reefer transportation will register 11% growth from Rs 259.35 crore to Rs 441.9 crore by 2012-13.
What are the challenges before cold chain companies in the country to succeed?
Challenges before TCL players in the agriculture (F&V) segment are that the post-harvest losses are estimated at 30% of the produce. There is lack of access to market and technology. In the chocolate segment, there is lack of storage at the retail level to hold the stock and last mile distribution. There is lack of human capital with domain expertise, high capital cost and erratic power supply.
The Indian cold chain industry has not matured to the level of other emerging economies. There is a huge business opportunity with booming retail market and pharmaceutical industry. FDI in retail is in progress and we can hope for positive outcome. As the product moves across the supply chain, the product quality and temperature need to be same from post-harvest to end-retailer.
In terms of technology for cold chain is India at par with the Western world?
In India, most of the cold storages are single commodity storages with refrigeration through an air conditioner or ammonia as refrigerant. But developed countries have gone far beyond these and now advance technologies like liquid nitrogen, eutectic plate technology and CO2- environment-friendly refrigeration systems are used. Snowman keeps experimenting on new technologies to give its customers cost-effective solu
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