Pandemic has created a new normal for all of us and changed our lives for good. Some trends that kickstarted as a necessity during this period, have now become integral to our lifestyles. People have discovered alternate routes of reaching consumers and making supply chains more agile and resilient.
One of the beneficiaries of both alternative channel creation and the ever-increasing demands of the Indian customer has been the cold supply chain. Considered a good to have in the past, the cold chain is now playing an integral part in every supply chain – be it food or pharmaceutical.
In this article I would like to share a few trends that, in our view, will drive the cold chain in 2022-23.
Growth in grocery e-commerce and quick commerce
Some recent studies indicated that the share of e-commerce in FMCG business has in many categories overtaken modern retail indicating an unprecedented increase in its adoption in India. E-commerce companies like Amazon have increased their presence to 10 plus cities from four cities in 2018. Jio has launched its home delivery service from its retail outlets and plans to grow multi-X within next 12-18 months.
In the quick commerce space, Grofers has transformed into a quick commerce business with Blinkit and setting up dark stores to enable 10-minute deliveries. The investor confidence seems to be getting higher, with Swiggy Instamart is investing $700m in this business vertical and new entrants like Zepto are getting additionally funded.
This scale up will drive cold chain adoption across the retail format on both storage and logistics front.
Direct to consumer movements
What started as a desperate sales channel for several brands, has now become one of the most sought-after models for them. Such a D2C model for food, not only helps in preserving margins, but also building a much better control on customer experience. It is important to realize that the direct to consumer channel is not cannibalizing other channels, but is a pathway to increase the overall demand and reach of products in unfulfilled markets.
These models have also enabled hundreds of niche brands across various categories to come up – new categories being hydroponics, plant based meats amongst the more traditional ones like ice creams, gourmet chocolates, premium milk and batters. Their challenge of building a fulfillment system is leading to large investment in distributed cold storage assets and fulfillment infrastructure. Although smaller in size, large numbers will make this an interesting market to pursue.
Aggregation and advancement of FPOs in Agri commodities – Horticulture, Fish, Poultry etc. for the domestic market
In the past, there has been a sparse cold chain penetration on agri products and that too focused on export markets since they demand a certain quality. With the Indian consumption of good quality food picking up and customers becoming more discerning, there has been an increase in the investment on the backend for cold chain Infra. Be it the hubs or the warehouses for animal husbandry business or packhouses for horticulture, these are all coming up at a fairly fast pace. Front end B2B and B2C brands like Gourmet Garden, Waycool, Ninjacart, Frazzoetc amongst the more traditional modern trade players like Star and Big basket, will require such infra to be built. Moreover, as there is visibility to the forward market linkage, farmers and FPO groups are also more open to making such investments.
Pharma exports and domestic movements coupled with stricter regulations and compliance
Post pandemic, India has further strengthened its position as a global pharma supply hub. The vaccine business has also led to further investments in the healthcare cold chain infrastructure and awareness in India. The rapid growth of consolidated distribution houses and online retailers like Pharmeasy, Netmeds and 1mg have also improved the quality of last mile connectivity in India. Similar story is with diagnostics and more advanced streams like Genome and DNA research.
Therefore, Pharma logistics movement domestic as well as international will be a huge opportunity to track in FY 22-23. There will be a demand for both single and multiple use road, rail and air movement solutions to ensure cost and compliance. Once regulation on 15-25 deg C for regular medicine comes to force, that market will also expand rapidly.
In all, in our view FY 22-23 could be an unprecedented year of growth for the cold chain players in India. They need to work collaboratively and bank on each other’s expertise to help build the best cold chain backbone in the country.
Unfortunately, it took us a pandemic to wake up to the realities of our poor supply chains which are now all set to transform. These trends will lead the way to building infra across all channels in the front and backend over the next 5 years.
(The writer is Founder & CEO of TESSOL)
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The logistics and supply chain industry have been at the forefront of the disruption caused by the global Covid-19 pandemic.