Role of Cold warehousing & distribution in modern food

retail and supply chain

By
Pradeep Dubey, GM-Snowman

Food Retail, Logistics & Packaging Summit & Awards - Mumbai, Dec 3, 2010
Overview
• Development of cold
chain in India vis-à-vis
the world
• Relevance of cold chain in
future
• Challenges in Cold Chain
• Example of US chicken
• Modern Retail & Fast food
Chains
• Snowman contribution
towards cold chain
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 India-A Great Country

 “So far as I am able to judge, nothing has

been left undone, either by man or Nature,
to make India the most extraordinary
country that the sun visits on his round.
Nothing seems to have been forgotten,
nothing over looked”.


Mark Twain


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Development of cold chain
in India vis-à-vis the world
Overview – India
• 52% of land is cultivable compared to 11% in the
world.
• 20 agro climatic region with 46 out of 60 soil type of
world exists here.
• The largest grower of fruits – 15% of world output.
• The second largest grower of vegetables – 11 % of
world output
• Second highest producer of milk
• Second largest cattle population
• Fifth largest producer of eggs
• Sixth largest producer of fish
• India’s current share in world trade of processed
foods – 1.60 %
• India has large & growing middle class(> 300
million), which provide strong base for
GOI/CII consumption.
Source: Task force Report on Development of cold chain in India –

– Food Retail , Logistics &

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–
 Cold Chain Comparison

 Cold Chain in the developed economy has the

following advantage :
 The operating cost is lower due to advanced technology.
 Infrastructure.
 Government Support.
 T C Transportation Network


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Cold Chain Comparison
World
• The operating cost in developed economy is USD 1 v/s
USD 2 ( per cubic foot per year) in India due to in
efficient technologies..
• Total cold storage capacity of 23.3 million MT (DMI) in
2008; against approx total production of 190 million MT
of F&V & 20 million MT of others (11%);
• 80% of existing storage capacity used only for Potato,
17% for multi-purpose and 2% others;
• More than 65% of existing cold stores located in two
states only, namely Uttar Pradesh (41%) & West Bengal
(24.5%);
• Average capacity utilization of cold stores in India is 48%
due mainly to technology compatible to single
commodity storage.
• TCL market is currently characterized by the presence of
over 200 operators operating less than 5-10 refrigerated
trucks. Food Retail , Logistics &
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Relevance of cold chain in future…
Relevance of Cold Chain
Future
• More than 30% of F &V is wasted in India. TCT will
enable the supply chain of farm to fork ( food to
consumer ).
• Quality of life Improves
– Time consumption, increase shelf life, freshness of
food materials
– Drive the GDP growth
• Reduction of Waste , meet increasing demand.

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Challenges in Cold Chain in
India
• Huge Investment on setting up stores &
Refrigerated vehicles.
• High Operating cost, erratic Power Supply
• Infrastructure for distribution.
• Net working of Storage, Transportation.
• Food Safety-Increased Incident of food borne
contamination.

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TCL-Market Over view
 Market for TCL is in the growth phase of the product life cycle
curve.
 Key Participants includes transporters-road, rail & air, cold
storage service providers (Warehousing) & few integrated
3PL service providers.
 As per DMI Total storage space was 23.3 million tonnes in
2008.
 Market share of TCL across geographic wise dominated by
North 35.1%


INR Million 5106

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Challenges in TCL
Challenges & Drivers..

 Challenges for F & V market

  C h a lle n g e s fo r C h o co la te
 Post harvest losses up to 30% of m a rk e t
produce –La ck o f sto ra g e a t th e re ta il
 Lack of access to market and le ve l to h o ld th e sto ck & la st
technology m ile d istrib u tio n


 D riv e rs fo r F & V m a rk e t  D riv e rs fo r Chocolate market

–In cre a se in irrig a tio n le ve ls
re su ltin g in h ig h e r yie ld &
m ig ra tio n fro m co n ve n tio n a l
cro p s to F &V
–C o n tra ct fa rm in g re su ltin g in
g u a ra n te e d re tu rn s to th e
 D riv e rs fo r fru
fa rm e rs. it & p u lp
co n ce n tra te s
–6 0 % o f th e p o p u la tio n Is o f th e
co n su m p tio n a g e
–Lo w p e r ca p ita co n su m p tio n
p ro vid e s H ig h h e a d ro o m s fo r
th e g ro w th
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–3 1 . 7 % o f th e p o p u la tio n is le ss
th a n 1 4 %
–C h o co la te b e co m e s a n a lte rn a te
fo r tra d itio n a lsw e e t
–Im p o rt o f n e w va rie ty o f
ch o co la te s in cre a sin g
 D riv e rs fo r mD eariry
cu sto b a seS e g m e n t
–U rb a n iza tio n o f In d ia cre a tin g
p o te n tia lto co n h su m e
–A va ila b ility o f n e w p ro d u cts
–G ro w th o f o rg a n ize d In d u stry.
13
Challenges & Drivers..

 Challenges for Ready-to-eat

  C h a lle n g e s fo r R e d M e a t
market –R e lig io u s b e lie f is a ffe ctin g th e
g ro w th o f In d u stry
 Continuing customers preference
& availability of fresh & home –E co n o m ic slo w d o w n a ffe cte d
cooked food. th e exp o rts


 D riv e rs fo r R e a d y - to - e a t  D riv e rs fo r R e d M e a t P o u ltry

m a rk e t & Mairine
–G ro w th in d o u b le in co m e g ro u p –Increase in meat exports
–C h a n g in g life style –Value Added products
–Strict regulation by meat
–M e n u d ive rsifica tio n importing countries
–In cre a se in p e r ca p ita lin co m e W.r.t. hygiene & sagfetywhich
boost TCL demand
 Drivers for Ready - to - eat  Drivers for Red Meat
market Poultry & Mairine
–Growth in double income group –Increase in meat exports
–Changing lifestyle –Value Added products
–Menu diversification –Strict regulation by meat
importing countries
–Increase in per capital income
W.r.t. hygiene & sagfetywhich
boost TCL demand
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Growth Drivers for TCL
Changing consumption pattern of consumer in India
on account of rising per capita income & growth
of nuclear family.
As per industry estimate nuclear families account

for 66.2% of all urban households a CAGR growth

of 19.5% in the last 5 years.
Eating out habits of urban consumers have

changed rapidly with 6 outings /m in 2008

compared to 2.3/m in 2003.
Increasing shopping malls from mere 3 in 2000 to

an estimated 230 by 2012.

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 Spend on TCL
services

Key End - User TCL cost as

T
C
Segments % of
L
Agriculture 11 .6
Revenue
co
st Chocolate & 5.2
as Confectionary
% Dairy 3.0
of
R Healthcare 4.8
ev
en Meat 3.9
ue
Processed Food 0.2

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Total TCL Market
v Market was estimated to be INR 42bn (US$
0.84bn) in 2007-08, out of which storage is
26.41bn & transportation is 16.25bn.


v Total market revenue estimated for TCL market

at INR 74.7bn(US$1.5bn) by 2012-13.


v Segment like processes food & quick food will

also grow at a healthy CAGR of 30%.

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 TCL Market India

Segment TCL TCL Growth

s Total Total Rate (%)
( INR ( INR
T Mn ) 07 - Mn )
C Agri . 31,874.30
08 51,377.7
2012 - 10
L 13
Gr Bakery 55 98.5 12
o
wt
h
Chocolate 780 1861 19
R
at Dairy 4,791.50 12,793 21.7
e
(% Health 261 914 28.5
) care
Meat 4443 6450.4 7.7

Ready - to - 75.4 248.9 27

eat
Fruit 67 181 22
Pulp
Quick 318 801.2 20.3
Food
Total 42665.2 74725.7 11.9

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 TCL Market India

Segments TCL TCL Growth

Tota Total Rate (%)
l ( INR
T ( INR Mn )
C Mn ) 2012 -
L 07 - 13
Gr 08
o Warehousin 16253.6 30723.8 89%
wt
h
g
R
at
e Ref . 26411.6 44001.9 67%
(% Transporta
) tion
organized 5106 15600.2 206%

unorganize 34598 54648.4 58%

d

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Example of US Chicken
we can replicate
Segment Coverage-Meat
Meat industry in India is highly unorganized with
little processing as consumption is typically fresh.
Meat Processing is high in export sectors.

Domestic market consumes more of poultry & sea

food. Domestic red meat consumption is

restricted to lamb.
Poultry is fastest moving category growing at a

CAGR of 13-15%.
Marine food exports is characterized by small

unorganized exporters.

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Challenges….
Meat industry in India is highly unorganized with
little processing as consumption is typically fresh.
Meat Processing is high in export sectors.

Domestic market consumes more of poultry & sea

food. Domestic red meat consumption is

restricted to lamb.
Poultry is fastest moving category growing at a

CAGR of 13-15%.
Marine food exports is characterized by small

unorganized exporters.

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Segment covered- Poultry
Meat
Poultry Meat : Supply Chain Structure
( India ), 2007 - 08
Breed er Farms • The requirement of TCL services
start from the processing plant
Hatchery
• Once the meat is processed
and packaged, it is stored in
the in-house cold storage in the
Broil er Farms processing plant
• The meat product is then
Processing Plant transported in reefer
vehicles to distribution
centres or directly to
Distribution Center / Distributor distributors for further
distribution to retailers
Retailer • The distribution sometimes are
outsourced
• The product is then distributed
Consumer
to retailers in smaller refer
vans
• At the retail shop, the products
Food Retail , Logisticsis&stored in small chillers or
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Poultry Sector Trends in India
• In the last decades the livestock sector accounts for about 25
percent of agricultural GDP as compared to less than 14 percent
in 1980 (GoI, 2006b).
• Within the livestock sector, poultry has been the fastest growing
sub-sector:
– Between 1985 and 2005 poultry meat and egg production grew by
about 12 and 5 percent per year, compared to an annual growth
rate of 1.5of
Per capita consumption to livestock
2.0 percent for beef, milk and mutton and lamb.
products
(%), India , 1985 - 2003
•

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Poultry Farming
• About 90 percent of the 107 million agricultural households in
India, keep about 85 percent of the poultry stock of the country.

Distribution of poultry birds among Indian

rural households , 2003 .

Source: GoI (2006a)

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Cold chain for Non-Veg.
Ambient Ready To Eat (RTE) has grown at a CAGR of 29% between


2003 and 2008 (on a smaller base) while Frozen Food has grown at
a CAGR 11% of in the same time. Projected CAGR for Frozen Foods
between 2008-13 is ~ 13%. CAGR


 CA 29 %
GR

13 %
11 %

2003 - 2008 2003 - 2008 2008 - 2013

Ready To Eat Frozen Food

( RTE )

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Cold Chain for Non-Veg.
 Potential business models:
– Chicken Based QSR (Quick Service Restaurant)
– A Value for Money offer, tapping into the growing
opportunity in Tier II and III cities, as well as
possible new areas including Highways, Hospitals,
Colleges among others
– Investment in innovation, brand building, consumer
experience and systems and processes
– Chicken based RTE / Frozen Range
– A Chicken based range of RTE/ Frozen foods range,
offering a mix of Indian and International meals
and snacks
– Competitively priced and packaged, innovation in
recipes and flavours, as close to fresh as possible
– Strong distribution in the top 200 Indian cities
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Comparison - U.S Chicken Value
Chain
Chicken consumption per capita has nearly doubled
in recent decades.
The reason is increased sophistication of processed

chicken as given rise to a set of firms known as

integrators which vertically integrate through
ownership a wide range of activities from
breeding to processing & distribution.
Two leading integrators Tyson Food & Pilgrim’s Pride

accounted for 48% of the US market in 2006,up

from 30% in 1996.

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 The U . S . Chicken Value Chain
Inputs Growing Processing Distribution Retail

Fresh chicken Supermarkets

Breeding (e.g., whole,,cut-up parts) (e.g. Wal-mart,
(e.g.nCobb-Vantress Kroger)
Packaging

Restaurants

Integrators
Hatchery (e.g. Tyson,
Pilgrim’s Pride)

Food retailers

Processing / Fast Food chains

Distribution
Feed Outgrowers Packaging (e.g. McDonal’s
KFC)
Processed chicken
(e.g., patties,, breaded strips,nuggets,etc.)

Hierarchy Captive Relational or Modular Lead firms

Ref: Journal of Hunger & Environmental Nutrition, 4:357- Food Retail, Logistics & Packaging Summit 29
374,2009
 Key Players - U . S Chicken Value
Chain
TABLE1GovernanceStructuresandKeycorporatePlayersintheUSchickenValueChain

ValueChainBox GovernanceStructure KeyCorporatePlayers(USMarket Share, %)

Input (breeding, Hierarchy Pilgrim’sPride(Pilgrim’sFeed), Tyson

Feed, H atchery) (withintegrator) Foods(Cobb -Vantress, breeding), Perdue

Out grower Captive(withintegrator) Nodominant firms

Integrator Hierarchy(with Pilgrim’sPride, TysonFoods ,

a
Processing/Packaging) Perdue, WayneFarms

Supermarket Relatio nal or modular Wal -mart , Kroger , Supervalu

(freshchicken) (withsupermarkets
b
&restaurants) , Safeway, Publix

Fast foodchain Relational or modular McDonald’s , Yum, Brand(KFC )

(processedchicken) (withfast foodchains Burger King, Wendy’s ,
c
andfoodretailers) DAI (Subway )

a 16
Basedonready -to-cook(RTC) output (2006).Source: Shane.
b 38
Groceryretailers(2007): Euromonitor International.
c
2007.Source:Euromonitor International . 39

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Key Take Away
 The growth in chicken production & consumption is due to
high productivity driven by R &D, economies of scale in
growing & processing, the development & marketing of the
diversified processed products.


 Three type of lead firms in the chicken value chain have been
responsible for making the processed chicken cheaper,
abundant & diverse are integrators, supermarkets & fast
food chains.


 All these 3 firms have significant brand power but it varies

from product; integrators retail their own brands in fresh &
processes formats, supermarkets use private-label store; &
fast food chains sell processed fast food items.

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 Impact of retail and multi-
national fast food chains on
cold chain segment
 The Quick Food industry
Quick Food : Market Share by Revenues Quick Food : Revenues and Volumes ( India ),
( India ), 2007 - 08 2007 - 08

Quick Food Revenues Volume

Companies Rs . ( Tonnes )
( Million )
McDonald’s Rs. 5,250 20,000

Pizza Hut Rs. 3,000 5,400

Domino’s Rs. 2,800 5,000

Nirula’s Rs. 2,500 6,300

KFC Rs. 1,000 3,444

Others* Rs. 3,000 7,960

Total Rs. 17,550 48,104

*Others include Haldiram’s, Papa Johns, Saravana Bhavan and other region-based
companies

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 The Quick Food industry
• Total TCL Spend in Quick Food market is ~1.8% of the Total
Revenues
Quick Food : Revenue and TCL Spend

IN Pe
R rc
(M en
il t
li
on
)

Changing life style boosts demand

Growth of shopping malls driving quick food industry.
Source: Frost & Sullivan Analysis

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The Quick Food industry
• Quick Food industry is expected to grow at a CAGR of 20.3%
over the period of next 5 years

Quick Food : Revenue Forecasts ( India ), 2007 - 08

to 2012 - 13
CAGR :
20 . 3 %

IN
R
(B
il
li
on
)

Increasing land prices & economic slow down

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Snowman’s contribution
towards Cold chain
About Us…
Snowman Frozen Foods Limited is the first company in
India to set up Cold Chain across India since 1995. It is
the only organised Pan - India Cold Chain Logistics
player in this growing business. It is the first Indian Cold
Chain Company to be awarded ISO 22000:2005
certification for a few of its cold stores by TÜV SÜD
Management Services GmbH.


Snowman is a Joint Venture between Gateway



Distriparks Limited, Mitsubishi Corporation of Japan,

Nichirei Corporation of Japan, and International Finance
Corporation.


 Food Retail , Logistics &

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Scale of Business
List of Branches Freezer Chilled Warehouse
Ø 16 Cold Storages. (10 of them Capacity Capacity build up area
In Pallets In in Sq . Feet
ISO 22000 Certified). BALLABGARH 1120
Pallets
30 10333.35
Ø DELHI – OKHLA 400 40 4305.56
LUDHIANA – PHILLAUR 560 60 5758.69
Ø 11,000+ pallet positions for
BANGALORE 560 20 5758.69
Frozen & Chilled products. CHENNAI 3020 900 40828.35
Ø COCHIN 816 20 7373.28
HYDERABAD 560 20 5758.69
Ø 2,000,000+ CFT of
VIZAG 560 20 5758.69
temperature controlled CALCUTTA 1120 60 10333.35
space. CALCUTTA – CITY STORE 300 NIL 1345.49
Ø MUMBAI 1120 20 11905.00
MUMBAI- CITY STORE 100 NIL 1506.95
Ø 150+ owned and leased reefer PUNE 560 20 8159.04
vehicles and transport GOA 70 NIL 1506.95
assets. NAGPUR 200 20 4930
AHMEDABAD 1008 192 14208.83
TOTAL 12074 1422 139770 . 91

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Our Network

Ludhiana
CFS
Delhi Gurgaon

Calcutta
Ahmedabad
Nagpur
Mumbai
CFS CFS
Hyderabad Vizag
Pune
Existing Warehouse
Goa Bangalore
Erection / Expansion of
CFS existing warehouses
Chennai Pharma Facilities

CFS Cochin Our Transport Network

CFS Container Freight

Station
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Snowman Network & Expansion
Plans

Pallets
Grand Total :- 34300 Pallets

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Distribution Network of
Snowman
Snowman Distribution network touches nearly 3,000 Outlets
across major cities.
 North East West South

Delhi Phillaur Kolkata Mumbai Nagpur Bangalore Chennai

Jallandhar Siliguri Sewri Raipur Coimbatore Salem
Chandigarh Guwahati Taloja Jabhalpur Mysore Madurai
Noida

Bhopal Trichy
Faridabad Ludhiana Patna Surat Mangalore
Gurgaon Amritsar Ranchi Baroda Hosur
Dehradun Ambala Bhubaneshwar Indore
Karnal Ahmedabad Cochin
Shimla
Manali Jammu
Mussorie Goa Rajkot Hyderabad Trivandrum
Kanpur Jamnagar Kannanur
Lucknow Kottayam
Panaji Vijayawada Calicut
Kanpur Ratnagiri Guntur
Katara Trichur
Madgaon Rajmundry
Varanasi
Ghaziabad
Allahabad
Agra Pune Vizag
Gorakhpur
Mathura Sholapur Vijayanagara
Kolhapur Kakinada

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Products...


 Ice- Cream
 Poultry, Sea-Food
 Dairy Products
 Meat ,Fruits &
Vegetables
 Retail Food Chain
 Healthcare &
Pharmaceutical
products
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 Frozen and Chill
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The Logistic Model

Nearest Cold Store

Custom Clearance Sea / Air Port
Suppliers
Site

Consolidati
on

Delhi Calcutta Chennai Bangalore Vizag Hyderabad Cochin

DEDICATED SMALL VEHICLE DEDICATED SMALL VEHICLE

DEDICATED SMALL VEHICLE

Outlet Outlet Outlet

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Our Growth Plan
ü Dry Warehousing for food and non-food products
ü 4PL extension to selected brands - on infrastructure
on our network
ü Value Added Services - Like processing activities,
Blast freezing, packaging, labelling ,kitting
ü Multi temperature warehousing - for food and non
food products
ü Increased network - adding up new locations
ü Capacity expansion - Increasing capacity at existing
prime location/activities.

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Advantage Snowman

Customiz Better
ed Mix of Control
Solution Owned &
s leased
Vehicle
Fleet

Best
Technolog
ies
Economie Greater
s Efficiency

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Reference - Index

1.TCL Market in India Report, Frost & Sullivan ,2009

2.Gary Gerreffi et al ,US-Based Food & Agricultural Value Chains
& their relevance to Healthy Diets, Journal  of Hunger &
Environmental Nutrition,4:357-374,2009.
3.U .Pica-Ciamarra & J.Otte, Poultry , Food Security in India :
Looking beyond the Farm –Gate, Research Report.
4.Rohit Joshi, Study of Select issues in Supply Chain Management
of Perishable in India, IIT Delhi (Dissertations), 2010.
5.WFO Report.
6.The Retail Food Sector, 2009,Global Agricultural Information
Network.
7.The benefits of Modern Trade to Transitional Economies ,Retail
& Consumer Industry , PWC.
8.Land of Opportunities, The Food Industry in India, Ministry of
Food processing Industries, Government of India

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Thank You