Press Centre

COLD is hot

Financial Express

TANEESHA KULSHRESTHA & ANANDITA SINGH

Andrew Livermore, chief executive of Hyperity, the Rahejas-promoted hypermarket chain, has horror stories to tell of vegetable and fruit sales at his department store: “We reject about 25% of all perishable produce that come to us due to poor quality.” Rohtash Mal, CEO of rival Field Fresh recalls the instance when any entire mushroom crop went to seed during shipment.

These tales point to a near-absent, yet critical, segment in the logistics infrastructure in India today: the cold chain. Without, a cold chain of significant scale, say analysts, the plans of farm-to-fork retailers’ won’t take off. According to Confederation of Indian Industry, there are around 3,443 cold storage warehouses with a capacity of about 10 million tonnes. CII says the capacity is not sufficient to handle even fruits, about 50 million tonnes of which is produced annually in India, or vegetables, which touch 95 million tonne.

Market research by Transport Corporation of India (TCI) puts the demand for cold chain facilities at around Rs 8,000- Rs 10,000 crore, a market growing at 20%-25%. Some like RadhaKrishna Foodland country manager Rajesh Shetty believe the market is double that. A cold supply chain has pre-cooling centres where the products are picked or processed to appropriate storage and transport temperature, a refrigerated warehouse from where they are shipped out in temperature-controlled trucks, and a refrigerated distribution centre.

Its not surprising then that Mukesh Ambani’s Reliance Retail is investing upwards of Rs 6,000 crore in building a logistics chain for its retail operations. About 20% of this will be specifically allocated to building cold chains as nearly half of the 10,000 Reliance retail outlets planned will be green grocery stores selling fresh fruits and vegetables from 10 states.

Others like Adani and state-owned Concor, apart from a number of small regional players, have thrown their hats into the ring as well. According to sources at Adani, the company will invest Rs 400 crore in cold chain facilities complete with refrigerated trucks and three cold storages in Himachal Pradesh, while Concor plans to spend an additional Rs 85 crore.

Players like Semblog India, TCI, Radhakrishna Foodlands, Snowman, Excel Industries and others have increased budgets for expanding their existing cold facilities in anticipation of an increase in demand. A number of small regional players are, say industry insiders, making their operations bigger or launching fresh operations sensing the increase in demand. “We have a couple of local people approaching us for cold chain service contracts,” say Field Fresh’s Mal.

Says TCI executive director Vineet Agarwal, “We will be adding another 20 refrigerated trucks to our 50 strong fleet in the next year. We will also be building cold storages going ahead as the business expands.” Semblog India, a wholly-owned unit of the $9-billion Sembcorp Logistics, Singapore has announced plans of investing up to Rs 250 crore over the next three years into a cold chain. Its marketing manager Hariharn P says the cold chain’s contribution to his company’s revenues will climb in coming years.

Cold chains don’t come cheap. While each refrigerated truck can set a company back by Rs 20-22 lakh, the cost of a cold storage can vary according to needs. According to National Small Industries Council, a cold storage with cooling at 4.5 degree and capacity of 1,200 tonnes could cost around Rs 19 lakh. Setting up a GPS (global positioning system)-tracking system on each truck can cost an additional Rs 20,000. “Growth of competition is expected to make companies invest in latest technology even more,” says Agarwal of TCI. Shetty avers the bigger problem is the absence of road networks and shortfall of skilled manpower, “both which are not the kinds easily solved”.

With a $6-billion organised retail market in India, growing 9-12%, and a $22-billion value added food industry expanding at 20-25%, the demand for cold chains could explode. Relaxed foreign ownership rules in retail could give a further fillip to demand. “There are a number of MNCs waiting in the wings to set up cold chain operations as soon as FDI opens for the retail sector,” says Shetty. It is no surprise that cold chains are becoming hot in India.