India’s cold chain faces the heat

Good morning! A big hello to readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition. This weekend we talk about why India’s cold chains have miles to go before truly becoming robust. Also in today’s edition: we have curated the best weekend reads for you.

The year was 1833. Daniel Wilson, exasperated with the May balminess that drenched his cassock and got under his skin, vented to family back in England.

“The weather is perfectly suffocating,” the Bishop of Calcutta wrote. “None can pity us but those who know our sufferings.”

Wilson and goras like him would get a reprieve four months later. In September 1833, a ship docked at Calcutta with precious cargo: ice.

One-third of the ice had melted by the time the Tuscany completed its 26,000 km circumnavigation from America’s east coast to British Calcutta. But the 100 tonnes left aboard became the genesis of India’s cold storage industry. So lucrative was the journey that Frederic Tudor, the ‘Ice King’ of Boston who founded the Tudor Ice Company, got much of his wealth shipping ice to India. Under the aegis of the British, he built ice houses in Calcutta, Bombay, and Madras. Ice-making plants mushroomed, birthing cold chains that traded meat, dairy, fruits, and vegetables over short distances.

Fast forward to today, India has over 150 million cubic metres of refrigerated warehouse capacity, second only to the United States. Analysts project robust growth thanks to the boom in online grocery delivery, processed foods, and the pharmaceutical sector.

But things aren’t hunky dory.

Facilities are concentrated in Uttar Pradesh and West Bengal, and 68% of total storage is reserved for potatoes. The lack of multi-crop capabilities, pre-cooling solutions for the critical ‘first mile’ (before produce enters cold storage), and last mile inefficiencies account for the 40% of all produce that’s wasted even before it reaches your home.

Parts of India are a whisker away from the temperature at which human cells start to cook. Damaged harvests have exacerbated a global wheat crisis, miring the Modi government in food geopolitics. And this is just the beginning. The IPCC 2021 report projects a 5.3°C rise in Delhi’s temperature by the end of the 21st century under the worst emission scenario. In other words, maximum temperatures will reach 53.7°C if we go about business as usual. India’s food belts face a disconcerting future and can’t afford to produce yields that are wasted the way they are today.

Businesses won’t be immune either. Take 10-minute delivery; with fewer partners on the roads because of the blistering heat, the model has already plopped like a Parle-G in hot chai. Even with their cold warehouses, ante rooms, and hyperlocal dark stores, online grocery delivery companies are yet to crack last mile freshness. You may have noticed the difference with your last order: produce that isn’t onion, potato, or watermelon would’ve either wilted or looked like it suffered as much torment as the Indians suffering the 2022 heatwave.

Online-everything may have spurred a growth in cold storage, but surging ambient temperatures will increase the demand—and expenditure—for cooling technologies.

“Rising mean temperatures would mean increased requirement of cold chain infrastructure at each stage from farm to fork. Equipment designed for higher ambient temperatures would increase operational challenges,” says Vikas Taneja, Business Chief (Cold Chain) at Panasonic India. Panasonic’s cold chain division has clients across FMCG, e-commerce, offline retail, and horticulture.

“[You’d then] need constant innovation for improving energy efficiency, environment-friendly refrigeration, and logistics boxes that maintain product temperatures without active refrigeration,” he adds.

Bishop Daniel Wilson and his fellow colonisers had it very, very easy.

First mile

To understand where problems will be compounded and costs may rise, we must first identify the root of India’s cold chain woes. That root is policy. In The Saga of Cold-chain Development in India, Pawanexh Kohli—former CEO of the National Centre for Cold Chain Development—writes about India’s decades-old fixation with hubs (refrigerated warehouses) rather than spokes (pre-cooling packhouses in the first mile, integration with last mile services). The result is infrastructure-heavy, fragmented distribution.

“The lack of pack-houses, where pre-cooling is also done, means that climacteric fruits (like banana, papaya, mango) travel warm to markets. Therefore, modern ripening systems, to evenly warm up and ripen the cold fruit that arrives in a cold-chain, do not get used [sic],” Kohli writes.

That explains why today’s produce is so blotchy. Fruits and vegetables often go from blazing heat to blast chill temperatures that are typically suited to one commodity. There’s no in-between. Tropical and sub-tropical produce is susceptible to chilling injuries that cause discolouration, uneven ripening, and rapid decay. Reefer trucks, cold depots, and ripening solutions are of little use if we don’t address issues in the first mile.

The pre-cooling pack houses India does have are mainly used for export orders. There are negligible returns on investment for domestic distribution. Cold chain specialists this reporter spoke to said that people will consider pack houses only if they’re required to follow compliance (as with exports) or are assured of good margins. Right now, there’s little price differentiation between produce that does and doesn’t come from a pack house.

But we can’t afford to neglect the first mile, because it’s this very stage that will be most affected by rising temperatures. Even in an optimistic scenario where pre-cooling solutions ramp up, costs may eventually be borne by the end user. At what level are we, the consumer, willing to pay more for better quality produce that’s less likely to get binned?

Then there’s the issue of portability and carriage, best exemplified by milk. While Operation Flood in 1970 revolutionised fresh milk distribution with local collection centres, first mile aggregation isn’t entirely hiccup-free. Consider the milkmen who board trains from Gurugram to Delhi; they still transport milk in aluminium or steel cans that heat up in a heartbeat, because these are preferable to portable micro chillers that hold smaller quantities.

“Even if they can transport milk in big chillers, how will they carry it? There are no escalators at some of these stations. In such scenarios, you need someone who’ll consolidate chilling vans for transport to collection centres,” says Prajakt Raut. Raut is co-creator and managing partner at Supply Chain Labs.

“Mid mile and last mile issues can be solved because of the presence of organised players. It’s the first mile that requires capital investment.”

In the worst case scenario where temperatures in the National Capital Region breach 50°C, milkmen and other suppliers will be unable to travel the way they currently do. Innovations at this stage will be lifesavers, but also expensive until they are scaled up.

Last mile

The impact of rising temperatures on cold chain expenses are more obvious in the last mile.

Gel ice packs are go-tos for quick, temperature-assured delivery of chilled and frozen foods. You may have got one with your last ice cream or frozen meat delivery.

Depending on their size and what’s inside—sodium polyacrylate (refrigerant gel) or water with thickening agents—these packs maintain temperatures between 2°C-16°C. How long they maintain those temperatures depends on several variables (weight of the consignment, ratio of packs to consignment, whether they’re being used for frozen, chilled, or ambient products, etc). That said, they’re a handy coolant for delivery in under an hour.

But their form factor makes ice packs occupy valuable real estate in delivery bags. Partners fulfil several deliveries in one trip; bring in the complexity of a depleting workforce, and each partner will be saddled with fulfilling more deliveries per trip. How do you optimise space in their bags?

Enter Indiwrap, Tessol’s innovation for chilled and frozen foods. Tessol is a Mumbai-based cold chain logistics company with clients across pharma, retail, and food delivery.

As its name suggests, Indiwrap is malleable and encases 50ml-200ml/gm packages much like bubble wrap. Tessol’s founder-director Rajat Gupta claims that since its launch last year, Indiwrap has sold about 1.5 million units every month. And that’s just in Mumbai and Pune.

Why are we talking about Indiwrap? One, because Swiggy is a Tessol client. And two, because Indiwrap costs 25%-30% more than a regular ice pack.

“We have a -11°C wrap, a -3°C wrap, and a 0°C one. Which means it can be used for ice creams, chocolates, meat, fruits, and even pharma products,” Gupta tells The Intersection. “We’ll hopefully expand it to Delhi in a month or so.”

But coolant prices are a minuscule headache compared to real estate. As delivery platforms establish more dark stores to optimise delivery times, they’ll find themselves running out of feasible options. Panasonic India’s Vikas Taneja points out that the current priority of speedy delivery and managing capital expenditure will shift to reducing operational expenses.

That’s because Indian cities have only so many properties that aren’t just located on traffic-free two way streets, but also come with power backup and ample parking for two-wheelers. Once platforms exhaust neighbourhood options and make peace with delivering over longer distances, low-cost ice packs and coolers that maintain temperatures for a few hours will no longer cut it. 

“For example, you can transport cheese from Noida to Manesar in ice boxes if the weather outside is in the 30s [degrees Celsius]. But you’d need a refrigerated van for extreme temperatures of 45°C and above. That cost would be a minimum of ₹3,000 one way, for every consignment worth ₹10,000,” Supply Chain Labs' Prajakt Raut explains.

Cooling innovations and real estate pressures aside, operational efficiencies may also (ironically) drive up expenses. How, you ask? Allow Sumantra Sen to explain.

Sen is a second-generation owner of DS Enterprises, a Bengaluru-based cold chain service provider. Through his 20 years in the business, he’s seen distributors use everything from frozen water bottles to validated cold boxes. Almost all his clients are from healthcare and pharma because, as he says, “those sectors are a step ahead”. The few FMCG clients he has employ procurement teams whose KRAs prioritise cost optimisation over compliance: they go for the cheapest quote and care little whether an ice pack stabilises temperatures for one hour or six hours.

“A client once called me to say that my polar pack was watery inside and ‘not working’. I went to the site with a digital thermometer, checked out their freezer, and found that its top shelf was -23°C, but the bottom one was -5°C. Their equipment was faulty. This was a dark store by the way,” he shares.

Sen concludes that knowledge sharing and coordination between packaging, procurement, and warehouse managers will go miles in minimising potential wastage. But companies are disinclined to spend resources on bare-bones efficiencies…

…until the heat becomes perfectly suffocating.

ICYMI

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