The document discusses setting up a privately owned cold supply chain service provider in India. 35-40% of fresh fruits and vegetables are wasted due to a lack of cold storage infrastructure. The proposed business will procure, store, and transport perishable foods like fruits, vegetables, meat and food products from producers to retailers and restaurants on a regular basis using refrigerated trucks and centralized distribution hubs with cold storage facilities. The goal is to utilize 70% of capacity in the first year, increasing to 90% by the fifth year through long term contracts with customers.

1. 1
The supply chain as a concept & a reality is moving
far beyond the confines of an individual organization.
It has become a dynamic process that involves the
simultaneous acquisition & continuous reevaluation
of partners, technologies, & organizational
structures. The building blocks of successful supply
chains are numerous & their interactions are
complex, but businesses have no choice but to
embark on such an initiative: the supply chain has
evolved from corporate necessity to enhancing
competitive advantage for savvy industry leaders.
-- ZUBIN POONAWALLA

2. 2
Executive Summary
35% to 40% of the total production of fresh fruits & vegetables is wasted in India. This alone builds up
a case sufficient to set up a cold supply chain infrastructure in the country. The service being offered
here is essentially a privately owned & operated cold supply chain service provider. Scope of work
involves procuring the produce from the place of growth, manufacture or packaging, getting it to the
central distribution hub, storing at the hub under controlled conditions & then transporting the stuff to
the customers premises as and when required. The customers are the large retail chain operators in who
require a regular supply of fresh fruits, vegetables, meat & other perishable food products. Also,
caterers, hotel, restaurants would be the customers as their requirements are also the same.
The needs of the customers are:
Due to a dearth of cold storage facilities, the seasonal production deteriorated rapidly & had to be sold
within weeks.
A proper cold chain facility could also help meet the demand-supply gap of various food products
including fruits & vegetables.
Marketing objective
Sales target is to have an 70% capacity utilization in the first year, thereafter increasing by 5% every
year till it is 90% at the end of the fifth year.
Marketing objective would be to enter into long term contracts with the retailers & hotel/restaurant
owners to give that level of capacity utilization.
Positioning
Better customer service in the delivery of orders.
These benefits can be achieved while at the same time reducing costs in the supply chain through
greater efficiency,
lower inventories
shorter lead times.
Communication
The communication strategy would involve meeting a lot of potential clients in the beginning &
carrying out direct marketing of the service
Advertisements in trade journals and similar publications
Holding seminars & workshops in conjunction with government agencies
Pricing
Pricing would be dynamically decided depending on the capacity utilization of the whole chain
The price charged would be higher for the value-added service being provided.
Special prices could be negotiated with the customers who enter into a long-term contract
The competition charges a price equal to INR 1600 per pallet.
Operations plan:
Logistics
A hub and spoke systemwould be utilized for the distribution of the perishable commodities
Hubs would have state of the art cold storages so that the perishable stuff does not leave the cold chain
Financial plan
The capital expenditure for the project.
The project is to be financed by a capital structure of 50:50 debt/equity. The revenue model is based on
the utilization of the storage services, transportation services, or a combination of both, plus value
added services would be charged more. There are a few uncertainties regarding the project. They are:
high demand risk, electricity fluctuations & charges, fuel for the trucks, objections by the trucker’s
union, objections by local wet market operators & political interference.

3. 3
Table of Contents
1. Introduction
2. Service Description
3. Industry Analysis
4. Customer Analysis
5. Marketing Plan
6. Operations Plan
7. Financial Plan
8. Uncertainties
9. Conclusions
10. Financial Projections

4. 4
INTRODUCTION
This report is a detailed business plan for a privately owned cold chain infrastructure service provider.
The aim of the report is to clarify the business goals & the means to achieve them. It will also serve as
a standard against which the actual performance of the business can be checked in future to determine
if it is on the right course. The rationale for setting up of this business venture is linked to the need for
setting up a cold storage infrastructure in India, which is as follows:
In order to service so many outlets throughout the country, India has a unique but unsophisticated
network of up to 6 or 7 intermediaries between the primary source (producer & growers) & the end
consumer
Because of the presence of so many layers & the lack of adequate storage facilities, 35 - 40% of all
perishable food produce in India is spoilt before reaching the end consumer
Food forms less than 14% of organised retail trade in India, while an average Indian middle class
consumer spends around 50% of his/her income on food & food products. This mismatch is purely due
to infrastructure constraints
Shortage of cold storage facilities & refrigerated transport equipment lead to inefficiencies in handling
perishable products which manifest themselves in the wastage, which according to some estimates, is
more than the total production of fresh fruits & vegetables.
As most of the companies in the food-processing sector are in the Small-Scale Sector (as part of
Government policy) economies of scale is very difficult to attain in storage & transportation. This
builds the case for a service provider to whom these small companies can outsource their storage &
transportation functions. However, there is a no commonly understood or accepted definition of a state-
of-the-art cold chain in India. There is no defined common goal. There is no evidence of an industry
association, or other organization, in which common understandings could be formulated, or in which a
common voice could be developed to propose changes in tax laws that would assist the development of
the industry. Moreover, the lack of understanding of a state-of-the-art cold chain extends to the higher
levels of state government planning & policy making causing plans to be developed that ignored the
basic economic principles of the business. There is, however a great deal of private enterprise interest
in building the cold chain, & some state government organizations willing to consider public & private
participation
The issues to be addressed include:
Whether newer refrigeration technologies can provide lower costs ofcold storage services;
How the scale of operation of cold storage facilities has an impact on capital investment & operating
costs;
Whether perishable foods distributed by cold chains are safe;
Whether the cold chain industry requires any safety regulation;
How to increase the demand for refrigerated products;
How food imports impact cold-storage services. The cold chain infrastructure would basically consist
of cold storages & refrigerated trucks. Along with the above mentioned infrastructure, the service
would be provided using the following:
Hub & spoke network
Use of vehicle routing algorithms to optimise
Use of technology to improve service levels
Process orientation
Cross docking Cold Chain In
SERVICE DESCRIPTION

5. 5
The retail outlets,where we do our purchases of the food products,or for that matter the
restaurants where we eat, are just the tip of the iceberg. The products travel a long way
from all parts of India. To make it happen efficiently, a new systemof food transport
needs to be developed - what is called as 'cold chain', in India. This systemprocures
ingredients from their places of growth & manufacture, spread across vast geographical
area & brings them to the centralized distribution hub. At this hub, the products are
stored in controlled conditions. From here, all retail supplies move on to the customer’s
premises on a daily basis.By transporting the products at a particular temperature, the
cold chain ensures freshness & adequate moisture content of the perishable food
products like fresh fruits, vegetables,meat, sea food etc. This temperature is maintained
inside the storage chamber of the specially made refrigerated trucks throughout the
journey. The drivers would be instructed specifically not to switch off the chilling system
even in case of traffic jams to save electricity.
The business would provide complete solution for operational logistics support.The
challenge would be in handling India's weak logistics infrastructure & the ability to
meet the strict standards set by the customers for safe & timely delivery of material to
each outlet as well as the physical movement of material & inventory control in a
country with unreliable roads & otherbasic infrastructure bottlenecks. To meet
customer’s high standards,the business would ensure that requirement for quality,
temperature & packaging are met. At the same time, unused capacity in the vehicles
would be used to transport goods from other vendors,which might not require
refrigeration, which would help the business deliver the lowest cost with the highest
quality.
Just-in-time delivery
The parameters of cost & quality matter only if the final product reaches the customer
each time, every time. While the quality is easily maintained at the source of the supply,
it becomes all the more important to retain the same quality once the products reach the
customer’s premises. All along, the focus would be on smooth feeding of the retail outlets/restaurants
with optimum quantity & yet keeping inventory for the customer undercontrol.
The business would not only provide outward movement of perishable food products
from the villages & the places of manufacture, but also would utilize the return journey
of the trucks to transport goods for daily consumption into these areas. This would result
in the capacity utilization of the trucks. But servicing widely dispersed,relatively small
population clusters would be a logistical complication of its own, let alone, with poor or
lack of adequate road infrastructure. However, the rural market is so significant that it
cannot be ignored & presents a lucrative opportunity to exploit the return journey of the
trucks. Rural retail establishments represent 68% of the total retail trade in the country
& are growing at a faster rate than the urban areas.
INDUSTRY ANALYSIS

6. 6
The cold storage industry in India is over a hundred-years old. It has adopted gradual
change in technology.Cold storage units in the 1960s were built only for storage of
potatoes & potato seeds but as the commodity base increased, different types of cold
store facilities were built. At present there are 3252 cold stores in the country with an
installed total capacity of 8.7 Mn. tonnes & further 250 cold stores are under
implementation. On establishment of all the cold stores,the total capacity would increase
to 10 Mn. tonnes.But growing needs indicate that it is likely to fall short of the
requirement by 0.5 Mn. tonnes during the peak period.
Out of the total cold storage capacity in the country,nearly 48% (4.83 Mn. Tonnes)of the
share is with a single state i.e. Uttar Pradesh where the cold storages are mostly used for
potato & potato seed.It is followed by West Bengal with a cold storage capacity of 2.24
Mn. tonnes (Share 26%). The Western part of India has a cold storage capacity of 0.5
Mn. tonnes,out of which the State of Maharashtra has a capacity to store 0.35 Mn. Tonnes.
The rank wise commodities stored in the cold storage are potatoes,apples,spices,dairy
products,marine products,otherfruits & vegetables.Nearly 80% of the capacity gets
utilized in the storage of potatoes & potato seed.
The major commodities transported by reefer trucks are:
Cut Flowers & grapes from production location to air port. Majority of floriculture
units owns such vehicles.
All Ice cream products.
Chocolates
Fish & Meat products for domestic & export purpose.
All frozen fruits & vegetable products.
Pharmaceutical Products.
Dry Fruits
Apart from the reefer trucks, reefer containers are used for exporting grapes,apple &
pomegranates. There are no Indian reefer container companies leasing out the containers.
MAERSK or American Presidential Lines lease-out most of the reefer containers from
abroad to Indian exporters. A few trials were recently conducted on shipment of mangoes
by adopting special containers with controlled atmosphere technology.
Mumbai sea port & airport are principal export points for high value produce from
Northern & Western India to Middle East, North America & Europe. The Mumbai
metropolitan area is also a major consumer of high value products due to its higher
standard of living & large population from higher income group.
The export of fresh fruits & vegetables from the state has shown an increasing trend in
the past five years and has doubled in value and volume. The quantity of grapes exported
alone has increased from a negligible level to 15,500 tonnes (which is 75% of the total
Indian grape exports), in the past seven years & with an increase of 40% to 100% per
year over the previous year. Among other fruits being exported are strawberries,
pomegranates, mangoes & cashew nuts.
The growth rate of flower exports i.e. roses,has shown an increase of 536% in the past
five years. The value of roses exported in 1994 was Rs. 59 Mn. while in 1995 it was Rs.
180 Mn. and in 1996 it crossed Rs. 400 Mn.
Pack Houses
The pre-cooling capacity of Cold Storages & Pack-houses ranges from 4 tonnes to 10 tonnes per 6
hours cycle & the cold storage capacity ranges from 20 to 50 tonnes
Based on an average of 3 tonnes of pre-cooling and 30 tonnes of cold storage the capacity developed is
125 tonnes & 325,000 cu.ft. However, most of these facilities are used for two months while some are
used for 6 months.
In India, the horticultural production is increasing rapidly with increase in the productivity & area
under fruit crops. Orchard growers organizations are very particular in production of quality produce

7. 7
with the application of hi-tech methods relating to insec ticides, hormones & fertilizers. To assist them
better post harvest technology & infrastructure needs to be developed.
Infrastructure at Production Point
Scope exists in India for all those industries,which could invest in following areas
of agro infrastructure.
Roads, speedier transport facilities.
Storing & grading sheds.
Packing & grading infrastructure with controlled temperature.
Cold storage (medium capacity)
Store houses for storing packed material, such as insecticides, pesticides, fertilizers etc. Cold Storages
Nearly 80% of the cold storage capacity is owned by the private sector. The balance 20% is owned by
co-operative & public sector undertakings. The average cold storage capacity utilization in the private
sector is 70% & that of others is 50%. The capacity of these cold storage units range from 500 tonnes
to 1000 tonnes. The total capacity of these cold warehouses is approximately 50 Mn. Cu ft. However,
there is no cold chain as such in existence. In the early 1970s the cold storage was mainly used to store
potato seeds and a few frozen food products but later with the increas e in production of ice cream &
export of fruit produce pre-cooling, the cold store gained importance. Now there is substantial scope
for a cold storage chain.
Produce Flow
The agricultural produce flows from the production region to the markets. It flows not only to
destinations within the state but also to cities outside the state
The major markets receive the produce & redistribute them to the nearby regions or sell
the produce to the retailers within the city. The rapidly perishable produce such as leafy
vegetables coming to the marketing centers rarely goes to long distance markets. The
production of produce & its marketing is highly de-centralized, hence except for a few
fruits like grapes,oranges,mangoes most of the vegetables & fruits are available round
the year.
Transport Infrastructure
The major centers for marketing the agriculture produce are the metro cities & township
with industrial development. The production centers for vegetables are located in a radial
distance of 300 kms from the city or township. Even if this is true there is some produce which has to
travel a long distance i.e. bananas are transported over 800 Kms to New Delhi or 400 Kms. to Mumbai.
The transportation mode adopted to transport the produce, coming from the villages or taluka places to
nearby places or distant cities, vary & depend on availability & affordability.
The following is the usage pattern for transportation of agriculture produce from production sources to
market yards.
1 Trucks ordinary 21%
2 Tractors 18%
3 Tempo-trucks 8%
4 Bullock-carts 49%
5 Others 4%
Total 100
The produce going through the wholesale market varies from season to season,fruit to
fruit, vegetable to vegetable, & location to location.
The mode of transport adopted for transportation of produce over long distance may be as
follows:
1 Unrefrigerated mode, traditional packing – 83%
2 Unrefrigerated mode, cartons & boxes – 10%
3 Refrigerated trucks 4
4 Freezer trucks (frozen products)– 1%
5 Railway – 2%
6 Air - negligible

8. 8
Refrigerated Transport
Reefer transportation has been in existence for two decades but has now been considered
important with the increase in export of fruits & floriculture produce. Initially, reefer
transport systemwas used for transporting life saving drugs,ice-cream, frozen food &
meat products only. Presently only grapes & flowers are being transported from the
production location to the exit point at the seaport or the airport in reefer containers. The
flower exporters usually own refrigerated trucks & send flowers to the airports where
these are re-loaded on to 3-D containers.
The growth in horticulture exports will be on an average 7.5 % over the next five years.
The growth of major metropolitan markets such as Mumbai & New Delhi is expected to reach 8%.
This growth will substantially raise demand for transport services & infrastructure & hence the need
for reefer trucks.
Up-Coming Infrastructure Projects
Several recent infrastructure developments
Policy
The policy for setting up a cold chain infrastructure is investor friendly. The government has been
empowered to issue licences for establishment of cold storages. No permission is required from
revenue department.
Finance from the National Horticulture Board is available at 5% rate of interest to a limit
of Rs. 10 Mn. loan. Besides these there are subsidies on plastic crates, refrigerated trucks
and othermiscellaneous items. Agriculture and Processed Food Products Export
Development Authority (APEDA) a Central Government agency offers subsidy &
financial assistance for market promotion, packaging materials & airfreight concession
for specific commodities for export oriented units.
CUSTOMER ANALYSIS

9. 9
Who are the customers?
The customers of the proposed service would be large retail chain operators in the cities
who need to source fresh fruits, vegetables,meat etc. from the villages. Also, large
caterers/hotel/restaurant operators would be the customers of the service, as these also
need to have access to fresh food products.In this regard, it would be the endeavourof
the business to enterinto long term contract with the customers to provide efficient &
value added service to them without bothering about scouting for customers in the
absence of long term contracts.
The demand for the service would be a derived demand with the end consumers of the
food products being the ultimate customers of the service. The demand for the service is
ultimately derived from the demand for perishable food products by the consumers.For
this reason,the business must closely monitor the buying pattern of the ultimate
consumers. The demand would tend to be volatile, because a small percentage change in
the demand by the consumers may cause a large percentage change in the demand for the
service due to the bull whip effect.
Most buyers in the business would prefer to buy total solution from the sellers i.e. total
supply chain outsourcing.Therefore, this total solution would be used as a marketing
tool.
What are the customer’s needs?
Two effects, one cause.The urban Indian cannot access ready-to- eat matar paneer for the
same reason as the farmer in the rural India loses 30-40% of his produce every year - the country lacks
a cold chain infrastructure.
Due to a dearth of cold storage facilities, the seasonalproduction deteriorated rapidly &
had to be sold within weeks. A proper cold chain facility could also help meet the
demand-supply situation of various food products including fruits & vegetables.
There is a consensuson the issue of requirement of cold chain facilities & services in
India to help reduce post-harvest lossesoffresh fruits & vegetables.The need to change
people's mind-set on eating stored food products is another area, which needs the
attention of both the Government & industry.The Government & the industry need to
work togetherto assure consumers of a safe & high quality frozen food supply. It is also
important for customers to understand that chilled & frozen foods in most cases offer
better quality, nutrition & value for money than the regular foods available in the
market place.
The dearth of cold chain facilities in India narrows down to the most basic of all
economic fundamentals, demand & supply.However, there are adequate cold chain
facilities for products that can bear the price, ice-cream & meat movements do not
suffer from lack of cold chain storage,& neither does sea food.
People do not yet perceive the value of frozen foods.A common perception is that fresh
vegetables from the neighbourhood vegetable vendorare more ``fresh'' than packed
vegetables in supermarkets. By cooling/freezing horticultural products,their freshness is
captured & retained as the rotting process is arrested at low temperatures. Shelf lives
can be extended by a few days/weeks/months depending on the product.
Once a demand for frozen/chilled products is set into motion, there will be a pressure
from the market to supply the products.More cold chains & cold storages will be set up
throughout the country.With larger volumes, the cold network will also become
economically viable. Most important, it can take care of the over Rs. 9,000 crore worth
agricultural produce that goes waste every year, purely for want of post-harvest storage
facilities. In fact, immediately after harvest, the produce contains field heat (akin to body
heat in animals). The soonerthe field heat is removed, the longer the product can be
stored.
MARKETING PLAN

10. 10
Marketing objective
Sales target is to have an 80% capacity utilization in the first year, thereafter increasing
by 5% every year till it is 95% at the end of the fourth year. Marketing objective would
be to enter into long term contracts with the retailers & hotel/restaurant owners to give
that level of capacity utilization.
Positioning
Increasingly, businessesare examining their logistics requirements & discovering that a
competitive advantage can be gained through better customer service in the delivery of
orders. In addition, these benefits can be achieved while at the same time reducing costs
in the supply chain though greater efficiency, lower inventories & shorter lead times.
Furthermore, due to the cost a developing systems & the challenge of matching
performance to promises, customers are increasingly turning to outsourcing their logistics
requirements. The business would be positioned to take advantage of this growth by
offering advanced supply chain solutions to customers seeking an effective method of
improving their own customer service and reducing costs.
Communication
The success ofthe business is based on the fact that the business would enter into longterm
contracts with the customers to provide complete cold supply chain logistics support
system. Therefore, the communication strategy would involve meeting a lot of potential
clients in the beginning & carrying out direct marketing of the service. The top
executives would have to convince the potential customers of the benefits of the new
service being offered.
In terms of the effort required as far as communicating the benefits of the new service is
concerned,the initial effort would be quite a lot. Once a few long-term contracts are
established & a presence is built in the market such that the market perceives the
benefits being offered by the service, then the incremental effort required to secure new
clients would be minimal.
In addition to direct marketing to the potential clients, the business would be advertising
in trade journals & similar publications communicating the benefits of the service &
educating the customers. Apart from this,awareness would be spread by holding
seminars & workshops in conjunction with government agencies like Agriculture &
Processed Food Products Export Development Authority (APEDA), ministry for food
processing industry etc. & other similar non-government agencies where beneficiaries
of the proposed service would be invited & their doubts & apprehensions cleared.
Pricing
Pricing of the service would depend on the service being offered. If the material required
special handling in terms of temperature & humidity control etc. then the price charged
would be higher for the value-added service being provided. Otherwise, the price charged
would be at par with the competition. Special prices could be negotiated with the
customers who enter into a long-term contract.
Ultimately, the pricing would be dynamically decided depending on the capacity
utilization of the whole chain. Since the business is highly capital intensive, in the short
run, it might be worth while to charge a price equal to the variable cost of operation. In
the market, for a similar service, the competition charges a price equal to Rs. 1600 per
pallet per year. This would be the initial offer price of the service that would be offered.
OPERATIONS PLAN

11. 11
While establishing a cold chain, the essentialcomponents of the cold chain are the cold
storage & refrigerated trucks. Using these two, & efficient utilization of information
technology,a world class cold chain infrastructure can be built up.
Logistics
A hub & spoke systemwould be utilized for the distribution of the perishable
commodities. In a hub & spoke system, the shipment to a region is delivered first to a
primary hub & then transported to its final destination,whether by rail, road or inland
waterways. Similarly, shipments from the region are collected in the primary hub,then
transported to final destination.There are usually two primary characteristics that are
used to select the location of the primary hubs
(a) Tend to be geographically central to the region (with a substantialhinterland - that is,
it attracts a considerable amount of movement of goods that would in any case flow
through that city);
&
(b) Has the basic infrastructure like roads,power availability for the cold storages etc. in
place
The main purpose for this type of network is the precise timing of banks of arriving
trucks to offer a seamless onward transfer to banks of departing trucks & to maximize
the number of attainable connections for incoming goods,without the need for storage in
the cold storages.At the same time, the connecting times should be kept within defined
& acceptable limits. Two major types of hub-and-spoke networks can be discerned, the
hourglass & hinterland networks.
Through an hourglass hub,trucks come in from one region, are consolidated at the hub
& diversified in the opposite direction. A hinterland hub uses spokes,short-haultruck
journeys to feed the hub & consolidate for long-haul routes. In the business,hinterland
hub would be utilized.
Cold storages
Construction of cold storages requires high-tech engineering services, whereas in India
currently, cold storages are being constructed & operated by people who do not have
any formal education in engineering & design. Across the country,there is no
standardization in construction & equipment of the cold storages.The practices are
rather localized & based upon erroneous concepts ofheat transfer & principles of cold
storages resulting in substantialextra spending in construction & regular loss of energy.
Insulation plays a major role (nearly 80%) in the performance of the cold storages, but
not much attention is paid to this aspect during construction.In fact only about 10% of
the total cost of installation & machinery is spent on the insulation. The principle on
which our cold storages are being designed is again standing upside down. Our cold
storage engineers focus more on retaining coldness in the cold container than to make
necessary arrangements to retard the heat & vapour transfer from outside (higher
temperature) to inside of cold storage (lower temperature). Similarly, they resist any
modern research about insulation materials & techniques of cold storage insulation for
energy saving.
Following are the design issues which would be considered while setting up of cold
storages:
proper temperature guidelines for fruits, vegetables & otherimportant imported
perishable items,
the importance of humidity control to maintain product quality;
the use of ethylene oxidizers to prevent premature ripening of fruits & vegetables;
incompatible perishable food items & associated storage guidelines;
methods to improve air circulation/velocity in chiller rooms;
the importance of defrost cycles in cold storage facilities;
storage time limitations for various imported perishable foods;
methods to optimize stacking/shelving parameters in cold storage facilities; &
use of automated cold storage inventory control technologies.

12. 12
Keeping cold on the road
Cold warehousing facilities are one important link in the cold chain; temperature controlled
transportation is another.While all types of goods suffer from slow or
inefficient transportation modes in India, the problems are particularly critical in the
distribution of refrigerated & frozen goods,which require special equipment to
maintain product quality. India's rail system--historically best suited for the shipment of
commodities--is predictably a weak link in the cold chain.
Nonetheless,railways continue to be the most common channel for the large-scale
distribution of food in India, but it hardly includes frozen food products.Transporting
frozen goods by rail in India has enormous drawbacks, including the need for advanced
bookings & special connections.As temperature-controlled equipment is usually
unavailable, food products,in some cases,are simply cooled with bagged ice & covered
with a blanket. Marketers of consumer-oriented, temperature-sensitive food products
have additional concerns, including excessive loading & unloading under less than ideal
conditions,excessive damage potential, & unreliable delivery times.
Fortunately, India's trucking industry is growing rapidly, fueled by the competitive
demands of free markets. Even though road networks in India are notoriously
underdeveloped,improved highway segments are making regional truck distribution a
more practical option for the food industry.
Such improvements are much welcomed, as the flexibility of truck transport makes it
especially suited to the movement of perishable foods. Many of India’s restaurants &
supermarkets require frequent deliveries of food products.By delivering shipments via
truck, the distributor can supervise door-to-door service to accommodate the demanding
schedules.
The increasing viability of trucking in India has enabled some companies, like HLL & Mondelz (for
which I was instrumental in setting up their tailor made resources) to adopt an integrated India
manufacturing strategy & to attempt inter-regional transport. With the further development of road
network, several large international shipping & logistics companies would make inroads into India’s
distribution system, in some cases providing controlled-temperature trucking services. The business
licenses for these firms in India may also include warehousing in the specified scope of business, but
for the most part these firms concentrate on transporting goods
At the local level
Whetherthe goods travel initially by road or rail, efficient transport for the final few
miles of food distribution is essential.Traffic problems & regulatory hurdles make
timely distribution to retailers in Indian cities a challenge. Many of India's cities have
adopted traffic controls as a means of combating gridlock, & restrict trucks from
entering the central business district during daytime hours.When the truck enters the
central business district,the driver will likely have some difficulty finding a place to
"stop & drop." Using three-wheeled bikes with thermal containers on the back to make
deliveries to small retail outlets can be one viable strategy.
A last but critical link in the cold chain is food retailing. Despite the fact that Indian
tastes,customs,& culinary culture dictate a strong preference for freshness & a bias
against packaged foods,supermarkets are beginning to make their mark.
The advent of supermarkets in India also promises greater sales potential for chilled
products such as packaged meat or fish, which offer consumers the taste advantages of
fresh products as well as the flexibility to store the wrapped & sealed product in the refrigerator for
consumption a few days later. Meat or fish purchased at a wet market, in contrast, usually must be
prepared & consumed immediately. Consequently, packaging will play an increasingly important role
in cold chain management & the extension of product shelf lives. For example, the need for high-
quality, high-barrier plastic packaging for vacuum or modified-atmosphere packing of meats goes
hand-in-hand with the development of the delivery systems to get these packaged products to the retail
outlet. While traditional Indian wet markets will continue to be a mainstay, the needs of urban
dwellers, with smaller household units, greater household discretionary spending, & more hectic
working days, favor the development of supermarkets and the popularity of chilled and frozen

13. 13
products. And central- & local-level policies are encouraging the development of large-scale chain
stores.

14. 14
FINANCIAL PLAN
Financial objectives
positive NPV project
operating profits from the first year
ROCE of 20%
Capital expenditure
Warehouses
Location:
Areas: 1 lakh sq ft (20 lakh cubic ft)
Capacity of 700 tons
Precooling – 12 tons per 6hrs cycle, Cold Storage: Remaining
With construction cost of Rs 150 per square ft, this works out to Rs 1.5 crore per
warehouse.
Cold Storage Equipment:
To maintain Temperatures below –15 degree celsius, Cooling capacity required for the
above areas is about 500 tons.
At a cost of Rs 15000 per ton,this works out to Rs 75 lakhs
For precooling the cost for 12 tons is Rs Rs 1.8 lakh
Approximate cost – Rs 77 lakhs
Backup Diesel Generator equipment (2 nos.@ Rs. 50,00,000) = Rs. 1 crore
Total cost of 2 warehouses (+ 15% for insulation) = Rs 5 crores
+ 4 forklifts each warehouse (8 @ Rs 5 lakhs) = Rs 40 lakhs
+ Cost of 80000 pallets (@ Rs 250) = Rs 2 crore
Pack Houses:
Capacity of 30 to 50 tonnes,Average 3.25 lakh cu.ft (20000 sq ft)
Total cost of construction = Rs 30 lakhs,
Cost of equipment (cooling + cold storage)- Rs 4.5 lakhs.
Total cost (+ 10 % for insulation) – Rs 40 lakhs
For 10 such packhouses,totalcost – Rs 4 crore
1 forklift per packhouse - Rs 0.5 crore
Truck fleet of reefer trucks:
Estimated cost for a 5 ton reefer truck = Rs 16 lakh
For a fleet of 25 trucks, cost = Rs 4 crore; the fleet will need to be subsequently expanded
to 50 trucks for value added services like ‘Just in Time’ delivery (costing anotherRs 4
crore).
Office + Logistic Systems:
Cost of Communications System: (2 option: VSAT link: One at Mumbai, Pune and
Nashik) - RS 10 lakhs
Computing Power (Server: Rs 1.5 lakh, 6 desktops – Rs 3 lakhs)
Office infrastructure (Rs 45 lakhs)
Website Design and Hosting: (One time cost of Rs. 20 lakhs, Hosting fees operational
cost)
So total infrastructure cost = Rs 22 crore
+ Working capital (Rs. 1 crore)= Rs 23 crore
Total investment in the project = Rs. 23 crore
Capital Structure
Typically, for infrastructure projects of such magnitude, the capital structure is in the
form of 50:50 debt/equity.
For equity, the customers who are targeted for long term contracts for the capacity
utilization would be approached to take up stake in the project. A few private equity
funds would also be approached. Development agencies also can take up equity stake in
the project if they find it viable & attractive. For debt, government agencies provide
subsidized financing for such projects.
Revenue model
Customers would be charged for the storage services provided in the cold storages

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Customers would be charged for the transportation services provided, with or without
refrigeration.
Higher charges for value added services like just in time delivery to customer’s
premises, specialized storage conditions for certain items etc.
The NPV of the project is coming out to be Rs. 4.2 crore at a discount rate of 20%
UNCERTAINTIES

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Demand risk
This is the most critical element of the project. This risk can be mitigated by having the
long term partners take equity stake in the project.
Electricity fluctuations & charges
The most important cost element is the electricity charges for the refrigeration plant. The
risk is both in terms of the supply of power as well as the tariff charged. To mitigate the
supply risk, a back up source of power is provided at both the cold storages.The tariff
risk would still be present in the project & it can affect the profitability to a large extent.
Fuel for the trucks
Most important cost element in the trucking business.Would be totally dependent on the
cost of the fuel prevailing in the market.
Objections from the trucker’s lobby
Fifty refrigerated trucks coming suddenly onto the roads would elicit negative response
from the existing truckers associations.
Objections from the wet market operators
Since this project would impact the wet market operators directly, they will have a thing
or two to say against this project.
Political interference
This is always present and no amount of planing can mitigate this risk. The best way to
deal with this risk is to be prepared for it and take it as it comes.
CONCLUSION

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Through the establishment of this business,it is envisaged that the following goals could
also be accomplished, in the larger interest of development of cold chain infrastructure in
India.
The development of an industry association would provide an opportunity for
members of the cold chain to develop commonly accepted understandings & to
speak with one voice in favor of constructive changes in government policies to
increase the rate of growth in the industry.
Standards for the handling & storage of all perishable items would improve the
quality of fruits & vegetables,which would increase the price & consumption,
which in turn, would provide a better return to the farmer.
Thinking of the cold chain as a pipeline through which perishable products flow from
the growing site to the point of consumption would enable the public sectorplanners
& managers to identify bottlenecks which break the chain or damage the products.
Considering the encouragement of private sectorinvestment & participation with
the public sectorat critical points in the cold chain, for example, airports, terminal
markets, & field chilling might help remove the critical bottlenecks that are
reducing the quality of products.
A public sectorfocus on major infrastructure factors critical to the cold chain,
including highways & interference with the flow of traffic, for example, octroi
taxes, would enable the cold chain to make vast improvements.
There would be certain social benefits attached to the development of this project.
 High standards ofhygiene & cleanliness - reduced risk of disease
 Reduction in wastage - lowers costs to end consumer
 Fewer intermediaries - producer receives higher prices
 Organised sectorentrant builds economies of scale & scope - cold chain instead of
 many cold storages