Logistics and key trends — part 3

Cold storage and the untapped potential to reduce 90,000 cr of post harvest losses!

Let us focus on the warehousing part in this segment especially the cold storages segment.

Cold storages are majorly used for

What is the significance of cold storage for India:

India is an agrarian economy. Below are the key commodities where India is the key producer:

1. Largest milk producer
2. Second largest fruits and vegetables producer
3. Amongst biggest pharma exporter after china

One would assume that since these are all major commodities which need cold storage, India would have a very strong cold chain linkage. The answer is NO!

India has a major deficit of cold storage infrastructure needed which can be categorized as:

• Cold storages, controlled atmosphere
• Pack houses
• Ripening chambers
• Refrigerated vehicles

Do you know the post harvest losses for fruits are in the range of 15–25% and for vegetables it is 18–35% and as high as 50% for leafy vegetables like Spinach. Out of this around 1/3rd of the losses are due to lack of proper cold storages, post harvest facilities.( Source — Indian Council of Agricultural Research). This results in a staggering loss of 63,000 cr.

Cold storage capacities across the country:

Cold storage model has been established for pharma and certain products like potatoes as evident in the chart above. For perishables like Fruits, vegetables the supply demand mismatch is huge.

As seen above, the concentration of cold storages is big for potatoes and in states like Punjab and Haryana where Potato is cultivated the most.

One of the few reasons, cold storages haven’t take off for other commodites is due to:

1. Poor logistics — In the 1st blog, we saw, logistics contributes to 14% of cost.
2. Heavy capex — Upfront cost needed to build cold storage
3. Inability to pass on the price of cold storage services to consumers
4. Poor shelf life and price volatility of major fresh produce

The rest of the article will cover, the various steps being taken by the government to give a boost to cold storages and also the current players.

First let us see how to typical cold storage looks like:

source:CBRE research Q4’2020, Asia pacific cold storages

The key parameters of cold storage are : Single product or multi-product, size or tonnage of cold storage, Ancilliary services like ripening chambers and technology like controlled atmosphere

What is the government doing about heavy capex?

• 100% FDI permitted in cold storage under the automatic route
• Excise duty for certain imports related to cold storage reduced
• GST exemption in 2017
• Granted infrastructure status hence making it eligible for priority sector lending
• Government subsidy. This is by far the biggest intervention amounting to almost 35–40% project cost. Understandably, we do a small detailing below

National horticulture board(NHB) is the govt. agency responsible to see the growth and adoption of cold storages amongst other agri related activities.

NHB is running schemes for anyone interested in putting up a cold storage to the tune of 35%-40% of the project cost. However, the project cost is capped by NHB as per the chart below. So someone putting up a cold storage of 5000 MT, will be eligible for a subsidy of 8000*5000*35% = 14,000,000 Rs. A relatively more complex technology called controlled atmosphere would cost almost 4x.

That’s the govt’s way of saying we are going to have “skin in the game”

Besides, this there are various government incentives on pack houses, ripening chambers details of which can be found here. We can see the sense of urgency with the government is having for this.

The goverment has also devised a subsidy on Refer vehicles ( These are nothing but temperature controlled or insulated vehicles for perishable products).Refer this post to see how government is reducing various friction points of logistics.

Let us now look at key players in this segment:

Adani agrifresh:

Would you believe if I told you that the fresh apples you are buying from the market may actually not be fresh but rather more than 6 months old coming straight from a controlled atmosphere storage owned by Adani in Himachal pradesh. Apple can remain fresh when nitrogen, oxygen and Carbon di-oxide levels are controlled in the cold room

Adani has been quietly building controlled atmposhere storages in HP, since 2006 to source apple from farmers directly, which is now impacting the life of 17,000 farmers. Adani has 22,400 MTs of storage dedicated almost entirely to Apples. In fact, it has become the single largest buyer of apples in the country. The philosophy is: “Buy low from the farmers, leverage the controlled atmosphere storage to increase the shelf life and sell at favorable price”

Snowman logistics:

Snowman is India’s biggest cold chain network owner promoted by Gateway distriparks. The company has 43 temperature-controlled warehouses located across 17 cities near to various major ports and major consuming cities in India with a 130k pallet capacity.

Snowman posted revenue of 286 cr in FY22 with a net profit of 2 cr.

Industry Wise concentration for snowman is:
Dairy & Ice-cream — 24%
QSR & RTC — 23%
Meat, Seafood & Poultry — 17%
Agriculture — 15%
FMCG & Others — 11%
Healthcare & Pharma — 6%
E-Commerce — 5%

Coldex:

Coldex is purely a logistics company owning more than 800+ refer vehicles, 5 temperature controlled warehouse. It is the largest supply chain and distribution company.

Gati Kausar:

Gati has more than 180+ refer vehicles with majorly serving the pharma clients like Cipla, intas etc. In 2021, Gati exited its stake to a PE firm to focus on its express business.

Other than this, companies like Patanjali are creating integrated food parks which brings manufacturers, brands. logistics — warehousing and transportation hubs all under 1 roof. Patanjali’s upcoming foodpark at Nagpur at a cost of 750cr.

The below diagram shows an integrated foodpark. There are subsidies for foodparks as well.

This sector is still in a nascent stage and with the growing aspiration of Indian consumer to consumer more processed food, social governance to reduce the food wastage i.e food security and consolidation of organized players will make this the fastest growing sub sector after e-commerce.

With this, we conclude deep dive on the logistics sector.