CRISIL Research expects three key segments – meat, seafood and bio-pharmaceuticals – to buoy growth of the cold chain industry in the next five years. These segments cater mainly to the export markets, where organised players are preferred due to stringent quality requirements and regulations.

We expect the cold-chain industry to log a compound annual growth rate of 13-15% in the five fiscals through 2022, compared with 11-13% in the previous five. This will swell the industry to Rs 47,200 crore in fiscal 2022 from Rs 24,800 crore in fiscal 2017.

In the meat segment, growth would be led by carabeef, or buffalo meat, which also has the largest share of exports at ~45%. Bulk of this is routed through either the JNPT port in Maharashtra or via inland container depots in Uttar Pradesh as these states are the largest meat production centres in the country. Also, frozen meat is moved via railways from Uttar Pradesh to Maharashtra for export via JNPT port.

In the seafood segment, growth would be led by shrimps, which contributed 38% in volume and 65% in value terms to total seafood exports in 2016-17. Around 70% of the seafood exports are routed from four major production centres -- Gujarat via Pipavav port, Andhra Pradesh via Vishakhapatnam port, Kerala via Kochi port, and Maharashtra via JNPT port. Consequently, demand for multi-purpose cold storages, too, is expected to emanate from these states.

On its part, the bio-pharmaceuticals segment is heavily dependent on cold chains. This is particularly so because stringent US FDA regulations necessitate that products such as vaccines, serums, and blood plasma be monitored critically. Biopharma exports are expected to log a compound annual growth rate (CAGR) of 18-20% in value terms between fiscals 2017 and 2022. That would lift the share of exports in the segment to ~55%, from 45% as of fiscal 2017.

Significant demand is also seen coming from fruits and vegetables -- particularly the exotic varieties, which fetch higher margins.

As per the Agricultural and Processed Food Products Export Development Authority (APEDA), the share of fruits and vegetables in exports, among principal commodities, increased to 22% in fiscal 2017 from 14% in fiscal 2016. Also, between fiscal 2013 and 2017, exports of fruits and vegetables increased at a CAGR of 11-12% in volume terms.

Still, wastage in fruits and vegetables is high – at 15-16% as per the Central Institute of Post-Harvest Engineering and Technology – and mainly because cold storages are located near consumption centres rather than farm gates.

Says Prasad Koparkar, Senior Director, CRISIL Research, “This calls for investment in cold storages 50-150 km from the farm gates – as well as meat production centres – so that an efficient cold chain grid is built across India. Investments in temperature controlled vehicles, or reefers, would also be necessary.”

Our interactions with market participants indicate there is intense pressure on reefer rentals especially in sea food, meat, and ice cream, as a large number of unorganised players cater to the segment. While most players operate in multiple segments for better margins and diversification, a few target only the pharmaceutical and biopharmaceutical segments where margins are higher due to the sensitivity and quality to be maintained.

The fragmented nature of the industry also contributes to lower rentals, while unavailability of return load leads to inefficient utilisation of reefer vehicles.

Says Binaifer Jehani, Director, CRISIL Research, “Investment in cold chains and reefers suffers due to lack of first and last mile connectivity. Besides, stiff competition and low preference of end-user industries to transport via reefers (as it increases costs) restricts private players from investing in the segment. We therefore believe greater adoption of the integrated cold chain model will help improve utilisation, and thereby draw investments.”