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Temperature Controlled Logistics: Configuring key demand drivers

Vijayendra Acharya
27th May 2020

It is a travesty that a country that sees a high rate of malnutrition also sees a high rate of produce loss because of improper storage and transport. India has lagged in temperature controlled logistics. Temperature controlled logistics is imperative for many products – fresh produce, meat and fish, pharmaceuticals, processed food, among others. As demand for perishable products grows, efficient and effective cold chain management requires strong partnerships and quick reactions. In this article, Vijeyandra Acharya looks at the demand drivers of temperature controlled logistics in India and its outlook.

Vijayendra Acharya
Research Consultant & Author

Integrated supply chain is increasingly becoming the standard norm for operational benchmarking and excellence and in achieving reduced logistics costs, reduced transit time, seamless value chain linkages of raw material suppliers, manufacturers and final end-users across industries, product groups and services. Concurrently, there has been an explosive growth in a range of supply chain management services industry in India. These include a wide range of 3PL and warehousing companies, transportation service operators across transport modes (air, sea, surface) and innumerous medium and small asset-based companies, each offering their discrete services. The SCM services industry in India, despite its relatively short existence, has evolved rapidly in response to sudden increase in demand and also seen through a great deal of value segmentation in terms of range of vertical and horizontal services, going by the industry and product categories, like in automotive, pharmaceuticals, agri and horticultural products,

New Demand Clusters

The temperature controlled logistics is set to play a very important role in rapidly growing sectors such as processed and packaged food, fruits and vegetables, milk and milk products, poultry and processed meat, marine products, pharmaceutics ( especially vaccines ) and chemicals. The temperature-controlled logistics is very critical in the efficient functioning of retail food chains as well as bulk of the products sold through such chains be they fruits, vegetables, dairy and poultry products and meat and other seafoods need to be stored, moved in transportation in refrigerated vehicles. An effective temperature-controlled industry thus, essentially guarantees the availability of safe and hygienic food products as well as prevents spoilage of medicines due to improper handling and storage conditions.

Overall the agri and processed foods sector is likely to be the biggest of drivers for the growth of temperature-controlled logistics, both in terms of volumes of business and in providing the necessary scale of business for a take-off

Agri & Processed Foods: Agriculture, a primary source of livelihood for about 58 percent of India’s population. Gross Value Added by agriculture, forestry and fishing is estimated at Rs 18.55 lakh crore (US$ 265.51 billion) in FY19(PE). The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food and grocery market are the world’s sixth largest, with retail contributing 70 per cent of the sales. Reefer food products constitute 14% of India’s total exports. Rising demand for fish and meat has increased the commercial farming of fish and livestock in India over the years. As per the data available, export volume of reefer foods increased five times over decade from 4.6 million tonnes in 2008 to 15.6 million tonnes in 2018.

The Indian food processing industry accounts for 32 percent 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 contributes around 8.80 and 8.39 percent of Gross Value Added (GVA) in manufacturing and agriculture respectively, 13 percent of India’s exports and six percent of total industrial investment. During 2018-19* crop year, food grain production is estimated at record 283.37 million tonnes while in 2019-20, the Government is targeting food grain production of 291.1 million tonnes. Milk production was estimated at 176.3 million tonnes during FY18, while meat production was 7.4 million tonnes. India is the second largest fruit producer in the world. Production of horticulture crops is estimated at record 313.9 million metric tonne (MMT) in 2018-19 as per third advance estimates. Total agricultural exports from India grew at a CAGR of 16.45 percent over FY10-18 to reach US$ 38.21 billion in FY18. In FY19, agriculture exports were US$ 38.54 billion. Overall this sector is likely to be the biggest of drivers for the growth of temperature-controlled logistics sector, both in terms of volumes of business and in providing the necessary scale of business for a take-off.

Pharma logistics, yet another of key driversof temperature-controlled logistics is growing parallel with pharma industry in India

Pharma& Healthcare: Pharma logistics, yet another of key drivers of temperature-controlled logistics is growing parallel with pharma industry in India. India contributes the second largest share of pharmaceutical and biotech workforce in the world. Indian pharmaceutical sector industry currently supplies over 50 percent of global demand for various vaccines, 40 percent of generic drug demand in the US and 25 percent of all medicines sold in the UK. The pharmaceutical sector in India was valued at US$ 33 billion in 2017. India’s domestic pharmaceutical market turnover reached Rs 1,29,015 crore (US$ 18.12 billion) in 2018, growing 9.4 per cent year-on-year (in Rs) from Rs 1,16,389 crore (US$ 17.87 billion) in 2017. The Indian pharmaceuticals market stood at Rs 12,492 crore (US$ 1.79 billion) for the month of September 2019 and recorded sales of Rs 36,725.2 crore (US$ 5.25 billion) in the three months ended September 2019. Indian pharma companies received a total of 415 product approvals in 2018 and 73 tentative approvals. 

Healthcare services, allied with India’s pre-eminence in the pharma sector, has become one of India’s largest sectors – both in terms of revenue and employment. It comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well private players. India’s competitive advantage lies in its large pool of well-trained medical professionals and India is also cost competitive compared to its peers in Asia and Western countries. The healthcare market can increase three-fold to Rs 8.6 trillion (US$ 133.44 billion) by 2022.Indian medical tourism market is growing at the rate of 18 percent year on year and is expected to reach US$ 9 billion by 2020. There is a significant scope for enhancing healthcare services considering that healthcare spending as a percentage of Gross Domestic Product (GDP) is rising. The Government is planning to increase public health spending to 2.5 percent of the country’s GDP by 2025.

With the constant shift in client business, more customized and value-added services are required along with standardized services offerings

Retail Food Chains: The cold chain services market will be majorly driven by rise in trading activities involving perishable and time sensitive products. The increasing demand for convenience foods, advancements in freezing technology and cold chain logistics will further support frozen food sales. The growth of online grocery stores such as BigBasket, Grofers and rise in e-retail market will create demand for Just in Time cold chain services. With the constant shift in client business, more customized and value-added services are required along with standardized services offerings.

The retail sector in India has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. Total consumption expenditure is expected to reach nearly US$ 3,600 billion by 2020 from US$ 1,824 billion in 2017. It accounts for over 10 percent of the country’s Gross Domestic Product (GDP) and around 8 percent of the employment. India is the world’s fifth-largest global destination in the retail space. India is the world’s fifth largest global destination in the retail space. Revenue generated from online retail is also projected to grow to US$ 60 billion by 2020. Revenue of India’s offline retailers, is expected to increase by Rs 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20. India is expected to become the world’s fastest growing e-commerce market, driven by robust investment in the sector and rapid increase in the number of internet users. Various agencies have high expectations about growth of Indian e-commerce markets. Luxury market of India is expected to grow to US$ 30 billion by the end of 2018 from US$ 23.8 billion 2017 supported by gro. The healthcare delivery system is categorised into two major components – public and private. The healthcare delivery system is categorised into two major components – public and private. The Government, i.e. public healthcare system comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas.


India cold chain industry poses a compelling future albeit with incumbent challenges of rapid technology adoption, creation of large-scale infrastructural assets and need for large scale institutional as well as private sector investments. The market will be increasingly facilitated by favourable government initiatives and enhancement in technology absorption and adoption to improve the quality of storage and transportation facility. The market will also witness a transition from traditional cold storages to fully integrated cold chain projects, which would bring about efficiency and increased productivity of cold chain companies. Furthermore, with the rising exports of seafood, dairy products and other perishable items, major players will upgrade their facilities in order to store broad variety of products under a wider temperature range.

The growth in formed retail, turning interest in horticultural crops, demand for temperature-controlled logistics from pharmaceutical industry and assorted initiatives by government are some of the reasons why there is a regenerated interest in this sector especially by private sector players. ♦♦♦♦♦

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