Captain Pawanexh KohliPresented at Copenhagen, Founder, CrossTree techno-visorsMaersk Global Strategy Team for emerging markets
Minimal touch points; Cold Supply Chain Technology Driven DSD or DC as preferred OD Pairs; Cold Supply Chain Spoke Cold Supply Chain Knowledge Driven Cold Supply Chain Traceablity & speed; Spoke Spoke Cold Supply Chain HUB Time Driven Specialised packaging; Spoke Perishability (Product knowledge) strives to be. and Everything the ordinary Supply Chain Existing (Layered) Supply Chain
Supply / End Transport Storage Distribution Procurement Customer• Manufacturer • Climate Controlled • Cold Storage • Refrigerated • Retail • Farms Haulage • Distribution Centre Secondary move • Consumption A cold chain is a climate-controlled supply chain, consisting of storage and Cold Chain distribution activities which maintains a product at a given ambient range. Refrigerated Transport Surface StorageSegments Uses refrigerator trucks, cars, van, rail, containers and ships for Consists of refrigerated warehouses for storage of transporting perishable products perishable products Transportation Quality Assurance Key Activities related to transportation Activities to assure Technical and Activity of produce to the market from production locations Quality parameters to ensure Shelf Life and saleability.
• Nascent Yet increasingly Demanding, Estimated USD 9 billion in 2015. • Increasing Volumes and global exposures. Market • Domestic development, burgeoning parity. • Fragmented and disjointed. Drivers: Challenges: – Growth in Organized Retail – Human Resources Drivers & – Shift Towards Horticultural Crops – Lack of Logistical SupportChallenges – Growth in Processed Food Sector – Uneven Distribution of Cold chains – Government Initiatives – Cost Structure – Growth in Bio-Pharma sector – Power Supply • Cold Chains based on Public Private Partnership (PPP) model • Rail Based Reefers, organised distribution. Trends • Backward Integration, forward economy. • Cold Chain Facilities for exports. • Minimal: Few Private and State owned players. • Surface Storage comprising of both organised and unorganised.Competition • At least 50 companies are offering refrigerated transport services in India • Captive establishments & New entrants.
Globalisation Process Integration. Bilateral trade. Diminishing world, singular demands. Right Cost Country optimisation. Business friendly Global Banking. Borderless consumers.
5th largest retail market worldwide. 62% of retail – food; fresh & processed. Farmers shifting to horticultural crops. Expected to be 3rd largest by 2030. 1% 3% 2% U$ Billion Retail 4%600 4% Food Fashion500 6% Leisure / entertainment400 Fashion accessories300 8% Consumer durables 543200 Health, beauty, Pharma 353 Furniture100 205 62% Telecom 10% 0 Books and music 2002-03 2009-10 2014P Retail Segments Source IBEF
Industry turnovers (US$ bn) Size–output/value Projected Processing Organised 98 Segment (2007–08) growth levels players Dairy products US$ 62.67 billion 15% 37% 15% Fruits & Vegetables 2.33 million tonnes 20% 2% 48% 49 38 Meat and poultry US$ 13 million 10% 1% 5% 22 24 18 Fisheries 6.4 million tonnes 20% 12% N/A10 Packaged foods US$ 2 billion 8% 3% 80% Beverages US$ 155 million 27% N/A 77% Source IBEFFood processing (US$98 bn), 9% of GDP, growing at 15% last 3 years.Vision 2015 (GOI) action plan to double processed foods to US$210 bn.MoFPI Envisages investment of US$21.05 bn in next 5 years.FICCI-E&Y study sees investment opportunities to shoot up by 42.5% toUS$ 181 billion in 2015 and to US$ 318 billion by 2020.
Changing consumer trends for convenience and processed foods. Government of India’s setting up 30 mega food parks To propel demand for cold storage and transportation.
700 608 Market Clinical Trials Indian clinical trials market 600 468 currently sized at US$ 250 millUS$ Million 500 400 360 to US$ 275 mill and expected 300 275 to grow at CAGR of 30%, at 211 200 124 161 almost double the global 95 average. 100 0 Indian Pharma Industry: US$ 20 billion in 2009; the domestic retail market is expected to cross the US$ 10 billion mark in 2010 and reach an estimated US$ 12 billion to US$ 13 billion by 2012. Source: IBEF, CRIS INFAC
Challenges Human Capital, Domain SkillsDrivers Lack of Logistical SupportGrowth in Organized Retail Uneven Distribution of Cold StoresShift towards horticultural crops Cost Structure (Capital), ParityGrowth in Processed Food Sector Power Supply (Erratic)Government InitiativesDemand from all user sectors
Lack of Logistical Support (Agri-produce) Small Land holding; remains logistical challenge Requires multiple farm gate collection centres. Fragmented cold chain industry has not encouraged the growth of cold logistics for horticulture produce. Minimal cooperative farming Irregular parameters in one catchment area. Underdeveloped domestic market for fresh perishable produce. Standard Refrigerated Systems inefficient & poorly designed.Uneven Capacity distribution Capacity mostly for focused on single commodities. Financial viability due to seasonality. No proper origin/destination pairing.
Capital Intensive Infrastructure. Restrictive land use and other regulations. High Operational costs, Low yield models. High Insurance/risk coverage premiums. Nascent, Limited knowledge, limited experience. Large gap in demand supply conducive to small unorganised service providers. Users have developed captive resources. Federal tax and commercial regulations. No fast-track perishables corridor.
Government policy as a ‘Catalyst’ Encourages Liberalises ForeignEncourages Rationalises Grants & Organised Marketing InvestmentInvestments Tax Laws Subsidies Sector Norms Eased Focus on Moving VG Funding, 100% FDI in Agri/Foods ECB route increased towards Grants, food sector, identified as opened, Import Retail, uniform Infrastructure ECB for coldpriority sector duty relaxed improved VAT/GST status chain. supply chain.
Excise waived on F&V, meat preparations, ice cream, other RTE food mixes. Automatic approval for 100% foreign equity in processed food items. External Commercial Borrowing opened (except alcohol, beer, etc). Priority lending status; Duties reduced on imports; zero service tax on installations. EOI floated for 30 mega food parks – allocated US$ 1.02 billion by 2012. Objective of the scheme is to provide backward and forward linkages as well develop reliable and sustainable supply chain GoI initiating National Highway Development Program and partnering with Indian Railways to establish cold chain infrastructure. Indian Railways is planning to invite private parties to run refrigerated container trains for transporting agricultural products across the country. Integrated Food Law (FSSA) notified and ready for implementation. Rs 1000 cr corpus for agro-processing industry and market development. Task Force on Development of Cold-Chain established & National Centre for Cold Chain Development (NCCD). 100% capital deprecation for cold chain. Weighted deduction 200% for R&D in Pharma. Infrastructure Status – income tax exemption for 10 consecutive years
Farmer Groups Self Help Groups Individual farmers Field Collection Centers GoI PPP venture -Primary Processing--Cluster based Approach. PPC PPC PPC Precooling, Grading,-Food Processing Focus. Sorting, Waxing, packing,-Backward & Forward Integrated. Temporary storage-Shared enabling Infrastructure.- Common facilities/amenities. -Central Processing- Processing Units, Aseptic Importer packing, Pulping, RTE units, CA chamber, Dairy products, Mega Logistics center, Warehouse, QC Labs, Utility, Supply Lines, Exporter Food Park etc CPC Industries Domestic Distribution Domestic Retail
Market Size and Growth• Large area spreads. 10 USD Bn 8.8• Increasing volumes is each 5 sector, large service gap. 2.2• Rising Demand, yet misaligned / 0 fragmented. 2008 2015 12%• Demand Supply mismatch. Market Segments• Supply chain not matching need. Storage• Production Infrastructure with low 88% Transport evacuation fulfilment. Source: USTDA, 2008 ; Supply Chains.com July 2009 ; Transport Reporter
Cold Supply Chain (India): Poised for a Quantum Jump Best practises for India Market. Demand for training establishments. Gaps in appropriate Infrastructure development. Adoption of energy efficient technology. Adapting to Indian backdrop – move from mass storage to direct access storage. Partner with networked Indian logistics companies. Manage and develop Multiple complexities in human capital development. Anticipate ahead of a developing market. Here is History in the making and the Opportunity to be part of it. A market develops to oblige!
Technology Provision and implementation. Cold Logistics and Supply Chain services. Infrastructure designers and planners. Scalable Refrigeration technology. Refrigerated Vehicles and delivery systems. Alternate energy, environmental protection expertise. Shipping and international food trade. Innovators and solutions biased companies. Education, Training & Cold chain experts. Knowledge Managers and Integration specialists. There is a fledgling Cold chain awaiting shape – to serve a billion people.
Product Safety and Shelf life. Market penetration, Reach. Traceability across supply lines. Differentiate to consumer. Sustainability & Green.
Modify practices • Traceability • Profitability processes -take • Quality • Savings advantage! What do Is it viable Users to market? Keep it in motion – desire? streamline the Is it Can it be supply chain! sustained? technically feasible? • Renewable • Existing, or From FIFO/LIFO to • Life cycle • Development FEFO (First Expire, First Out)!
• Green solution, Clean Small carbon footprint image, sustainable. • Mix profiles, direct-to- Portability options home inter-modal. • Limits thermal Thermal Integrity excursions. • Monitor, trace Operational Savings operational costs.Load security, Traceability • Maximum compliance. Solution bias • Easy to replicate. Temperature Packing & • Utilise existing asset Control Hygiene Minimal Capital cost base. Custody Cost Savings • Never the least
Uses feeder service to consolidate. Long haul with transit times extension. Optimised routing via various touch points. Door step delivery through last mile feeders. Low cost option, mixed load option.
Feeder SystemPick-up Point Distribution Centre Operating Unit
Allows Inclusive logistics in future plant and distribution site planning Superior planning of service expansions Establish Quality Agreements between custodial stakeholders Limits potential for a logistics logjam and a storage nightmare.
Port-side Trading Trader Side Logistics Trawlers/Catch Storage in at Sea Flaked Ice IQF/Belt Frzr Frozen ProductPackaging Quality Check/ Sorting Milk-run deliveries to Retail Stores Transport to Storage at Distributors Distributor facility
Composite Milk Processing Plants Raw Milk collected from Co-operatives/ Chilled Milk Transported milk producers, farmers to Dairies and chilled Dairy by-products: Processed Butter, Cheese and Packaged alike Milk storageDistribution to Retail Locations Intra-city Transportation to deliveries Distributors Storage at Distributors
Sausage Processing Meat Cutting and Ready to eat FreezingMeat Packaging Bacon & Ham processing Milk-run deliveries to Retail Stores Transport to Distributor Storage Facility Storage
Procurement from Collection at Sorting/ Grading Farms Centralized Facility Product Packaging IQF Unit Cleaning/ Processing Milk-run deliveries to Retail Stores Transport to Distributor Storage Storage Facility
Non reefer/reeferSorted & Graded Pack house Pre cooler Ripening chamber Cold Store Display and sale
Profitability Revenue Costs Infrastructure Sales KAM CapitalCoverage Pricing Maintenance Manpower Receivables Leakage Sourcing Pipeline Practices Infusion Operating Subsidy Scheduling Transport VAS Processes Own / Lease Costs Grants Holding / Optimisation Solution Solution Spares Partner Investors Transport Business staged for progressive growth Business management tools a must before growth. Reserve Logistics for reefer trade. Asset monitoring and tracking tools required. Innovative model for sourcing transport and drivers. Exports hinge on production parameters Tap into Existing exports and pace growth. Facilitate back end through cold chain initiators. Overcome lack of reefers to capture export lanes. Liaise with rail infra to fast track export lane. 34
Government of India is supporting the development of cold chain infrastructure Current Status Future Plans • Currently operating cold chain facility: 100% deduction of profit for 5 years • Financial assistance (capital subsidy) to 25% for next 5 years be increased further for setting up cold • Capital Grants of 25% to 50% of the total chain facilities cost of project. • Exemption of excise duty, custom duties, • Cold chain facilities to be eligible for tax 100% FDI breaks and cheaper credit facilities • Import of Reefer trucks duty free. Government support to the expansion of cold chain by providing financial assistance as well as tax exemptionsSource: Primary interviews, Industry Literature
Likely centers for development of cold chain storage facilities Region Planned retail built- up area (Mn. sq. ft.) North 47 West 37 South 25 East 12Source: Tata Strategic Analysis
INDUSTRY OVERVIEW (1/2) NORTH• Capacity at the 1800 Trucks Northern zone 1000 of them > 25T predominantly handles Deployed for meat load for west , east and transport north. 1500 600• Capacity at West zone Trucks 4800 Trucks WEST EAST Mix of Predomin caters majority of load Reefer both heavy antly for south and west. and light Trucks small• South and East zones’ trucks trucks capacity caters predominantly for local 900 trucks supplies only. Predominantly small trucks SOUTHSource: Primary interviews/TSMG estimates
INDUSTRY OVERVIEW (2/2)Refrigerated truck market is expected to grow at a CAGR of 15% in the next five years Refrigerated Truck Market (Units) • The demand for refrigerated 8,000 trucks is poised to grow at 15- 20% driven by 4,800 Low penetration Growth in organized retail Growth in exports Growth in end user 07-08 14-15 segments Source: Tata Strategic Research
KEY END USER SEGMENTSMeat, Dairy and Fruit and Vegetables are the major users of reefer transportation Refrigerated Trucks 2007-08 Expected Growth (Units)* Meat 1100 5% Dairy 1250 15% Ice Cream 750 15% F&V# 1300 25% Pharma & Chemicals 400 10%# F&V – Fruits & Vegetables* Indicative break-up of vehicles used
Road Rail Average Trailer Turn Around Time for Circuit Average Rake Turn Around Time for Circuit – – 8 days @ speed of 16kms/hour 4 days @ speed of 30kms/hour Max carrying capacity per Trailer 27 MT Trailers for evacuation/week – 150 numbers vs Max carrying capacity per Rake 2,430 MT Rakes required for evacuation/week – 1 rake Cost to customer is USD 42 / MT Cost to customer is USD 27 / MT NET ADVANTAGES OF RAIL Cost per ton for movement lower by 37% Increased efficiency by double with respect to time Controlled Handling and safer journey. Container Rail Movement – India Currently carries approximately 2.8 billion MT; off which the road transport system has 60-65%, rail 30-32% and coastal shipping by 6-7%. Demand expected to grow to 5.2 billion MT by 2015. Rail market share needs to increase to a minimum of 50% in order to bring required efficiency
India market size USD 2.2 Billion Cold storage - 88% Cold Chain Market U$ Billion Cold transport - 12% Storage Transport 7.1 Storage & transportation include facilities like pre- cooling, grading & sorting. 4.1 Cold chain Logistica has potential to grow to - 2.1 1.7 0.9 ~ USD. 8.8 Billion by 2015 and to 0.2 ~ USD 13 Billion by by 2020 2007-08 2010-11 2014-15 Investment expected over the next 3 years is USD 2.8 Billion. Reefer Transport Vehicles Estimates Additional requirement of 65000 reefer vehicles by 100000 90000 2015. 80000 43000 60000 Reefer Transport for - 40000 25000 Exports 2.5 million MT 20000 Domestic consumption 1.5 million MT 0 2007-08 2010-11 2014-15
Global containerized growth figures per commodity Source: Seabury Global Ocean database * = 2011 full year is based on Q1 actuals and Seabury estimates of remainder of the year
Trade growth2005 – 2010 (CAGR) Global average Volatility Global average trade growth Volatility 2005 – 2010
Existing frozen market – EXIM / Domestic. Existing dairy market – frozen and chilled. Existing fruit imports – chilled. Future Areas- Develop domestic food chain for agri-produce. Tap into volume growth in Pharmaceuticals. Target global Food trade - Asia as driver for new markets. Dedicated supply chain for QSR. Innovate to extend producers market reach. Drewry forecasts perishable reefer trade to reach 203 million tonnes in 2015 (from 157 million tonnes in 2009).
Land option for logistics hubs & Rail network. Fragmented loyalty of service users. Producer dependant on supply link for growth – captive distribution. Training and skill sets. Link to export markets. Reverse logistics. Require multifarious Strategy.
With land banks, for infra build. With rail networks, long haul connectivity. With logistics firms, distribution. Inherent Integration of Services. Comprehensive Logistics Parks/Free Trade Zones. Govt tie-ins to develop back end. Retail industry as user market. Foreign importers – Japan, Europe. Technology suppliers. Create provider brand vis Producer owners.