Cold Chain Market: Key Opportunities and Challenges

Northbrook, IL, USA, 2019-Nov-2 — /EPR Network/ —

The Cold Chain Market is estimated to account for a value of USD 203 billion in 2018 and is projected to grow at a CAGR of 7.6% from 2018, to reach a value of USD 293 billion by 2023, as per a report by MarketsandMarkets.

Why increasing FDI in emerging markets present an opportunity?

The cold chain market in emerging economies is growing faster than the global market. In the Asia Pacific, China and India are projected to be the fastest-growing emerging markets, propelled by the need to reduce food losses at each stage of the chain (from harvest to the retail market). Due to the lack of access to adequate refrigeration systems and refrigerated transport, a huge quantity of perishable food is wasted even as demand for chilled and frozen foods is increasing, and they are becoming popular among the younger generation in emerging economies.

Rapid urbanization, greater spending power, and a higher number of dual income households have spurred demand for chilled and frozen foods. Along with the emergence of an organized retail food sector, changes in foreign direct investment (FDI) laws are creating opportunities in the domestic food industry, including the cold chain sector. New legislations in retail that give foreign investors and multinational retail chains access to these markets also fuel growth. These retail chains have organized distribution channels in these markets, which lead to opportunities for setting up cold chains. For instance, the Indian government is supporting the cold chain sector through both monetary and budgetary measures. A large portion of the capital goods required for setting up these facilities can be produced in India, which is expected to support further improvement programs. Hence, international organizations that want to set up assembling units in India can take advantage of shorter lead-time, and reduced cargo and assembling costs.

Why lack of infrastructural support in emerging markets remain a challenge?

The cold chain industry is fragmented in emerging markets such as India, China, and in Latin American countries. Cold chain service providers do not have the technology required to build high-quality cold chain infrastructure. They are unable to cover the entire value chain, from procurement in rural areas, through to transportation in reefer trucks, and delivery at retail centers in urban areas. For instance, fruits & vegetables are often left near the fields until a truckload is accumulated. Pre-cooling facilities are not available, sanitation is poor, or there is an overloading of refrigerated storages and transport. The cold chain systems in these markets are not compatible with use for multiple perishable commodities.

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The Asia Pacific is estimated to be the fastest-growing segment between 2018 and 2023. The region is also estimated to account for the largest market share in refrigerated storage and refrigerated transport in 2018. Cold chain infrastructure in Asian countries is fragmented and under-funded; however, it is gaining momentum to keep up with the increasing storage demand for perishable foods. Countries such as India and China lack access to these cold chain requirements and are therefore unable to maintain cold chain integrity. Increase in awareness about the prevention of food wastage before consumption, the growth of the organized retail sector, the rise in consumer demand for perishable foods, and government support & initiatives indicate significant growth potential for the cold chain industry in this region.

The growing health-consciousness among consumers and the rise in the level of income have led to the consumption of a wide variety of frozen and chilled products, particularly fruits & vegetables, meat, fish & seafood products, and dairy products. The fruits & vegetables segment is projected to grow at the highest CAGR from 2018 to 2023. Frozen fruits & vegetables are packed within hours of harvest to ensure that their optimal flavor and nutritional value are preserved. Frozen fruits & vegetables contribute to a number of nutrients that help reduce the risk of chronic diseases and are relatively low in calories.

The cold chain market by temperature type has been segmented into chilled and frozen. The chilled segment is projected to grow at the highest CAGR from 2018 to 2023. The chilled segment is expected to grow due to the wide use of chilled temperatures for food preservation to extend shelf-life from few days to few weeks. Chilling provides effective short-term preservation of food products by retarding numerous microbial, physical, chemical, and biochemical reactions associated with food spoilage and deterioration. The increase in demand for processed food & beverages in developed economies is driving the chilled market, which is creating opportunities for cold storage.

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The cold chain market has been segmented into refrigerated storage and refrigerated transport. In the refrigerated storage market, the Asia Pacific segment is projected to grow at the highest CAGR from 2018 to 2023. Refrigerated storage expansion remains a brisk business, as the inter-trading of perishable foods is on the rise, globally. To maintain the quality and safety of perishable foods, the refrigerated storage capacities in Asia Pacific countries are growing.

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