By Vikram S. Puri, Inventor, Entrepreneur and Rotarian with multiple technology patents and 34+years of Supply Chain Experience.
Cold Storage Facilities play an important role in improvement of shelf life of the products, and it also helps reduce wastage. Increased urbanisation and organised retail food processing and servicing sectors have accelerated the demand for products that need an efficient cold chain over the recent years. Following the COVID-19 outbreak, the demand is now being further fueled by a huge omni channel distribution of F&G across the tier I and tier-II cities in the country.
It is believed that brands and manufacturers, especially those engaged in the production of necessities, may tend to store more stock and keep inventory closer to consumption points and service locations. The demand for Industrial and Logistics( I&L) is increased due to maintaining higher stock levels locally, and is likely to transform how companies store goods, plan infrastructure, and serve their local customers going forward.
Importance of Cold Chain Infrastructure
Cold Storage Facilities acts as an important facilitator for several industries working across fresh food production and delivery; along with healthcare as seen with Covid Vaccines and many other sectors. CS segment in the country has unprecedented potential, consumer/industry-led factors in India would continue to attract the interest of leading players over the coming years.
With the rising demand for cold storage facilities, there is a growing need for cold chain infrastructures such as pack houses, ripening chambers, and reefer freight in the country. In India, states including Uttar Pradesh, West Bengal, Gujarat, Punjab, Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Haryana, and Karnataka account for 91% of the total CS capacity as of 2019. Following the COVID-19 outbreak, the demand for CS will further rise and the cold chain network would also play a vital role in reducing the loss of the produce and improving CS efficiencies. On the back of this, the overall CS real estate stock is estimated to reach 1,400 – 1,500 million sq. ft. By 2023.
A rise in Omni-channel distribution of F&G
As discussed earlier, urbanization and a rise in retail food processing, the demand of food products that need efficient CS facilities has accelerated in the country. In the coming next few years, the estimated growth of industries such as F&G, online F&G, dairy, food processing, and pharma is thus likely to drive demand for CS and reduce product wastage.
CS facilities also play an integral role in the promotion of the rural economy as they would link the marketplaces across all locations. In this age of digitisation and improved internet access, it is expected that the demand for online food delivery services in both rural and urban areas will grow and further propel the demand for cold chain infrastructure in the country. In addition to that, the emergence of the ‘cloud kitchen’ concept is also likely to boost demand for CS facilities.
Formalisation of the segment
In the Union Budget 2020-21, the government announced the formalisation of the cold storage segment by commissioning National Bank for Agriculture and Rural Development (NABARD) to map and geo-tag agri-warehousing, CS, and reefer van facilities. In addition to this, government initiatives around reducing post-harvest waste, encouraging investment, and improving logistics efficiencies are also expected to boost the overall CS capacity, value, and real estate stock.
Regular Policies as such and interventions would boost global investment in the CS segment, leading to increased regularisation and efficiency over the medium to long term in the future. Also real estate investments are expected to increase as investors will be increasingly attracted to the higher returns offered by cold storage and will see it as an opportunity to diversify their portfolio.