Featured Story

The Cold Chain Market Heats Up

By William DiBenedetto, CBN Feature Editor

An efficient global cold chain is more crucial than ever, because despite sluggish freight market conditions, the chill part of the equation is experiencing explosive growth. As the world population continues to increase, more and more people depend on access to temperature-controlled food and pharmaceutical products.

A recent Zion Research report, "Cold Chain Market for Fruits & Vegetables, Bakery & Confectionery, Dairy & Frozen Desserts, Meat, Fish & Seafood, and Other End-users: Global Industry Perspective, Comprehensive Analysis, Size, Share, Growth, Segment, Trends and Forecast, 2014–2020" estimates that the global cold chain market was worth $110.2 billion in 2014 and forecast it will post a compound annual growth rate (CAGR) of 13.9 percent between 2015 and 2020. This will bring the market value to about $271.9 billion in 2020. 

In terms of volume, the report said the global cold chain market stood at 552.09 million cubic meters in 2014.

The cold chain, a temperature-controlled supply chain that involves the storage and transportation of temperature-sensitive perishable goods, offers a series of storage and distribution options to maintain cargo at desired temperatures as it makes its way to market. The cold chain helps to preserve and extend the shelf life of various products, including sea food, agricultural produce, frozen food, pharmaceuticals, and related products.

Food and pharmaceuticals are the major end-user industries of cold chain services, and rapid growth in the frozen food market is also expected to drive demand. This market is faced with the increasing need for efficient storage systems for perishable goods in order to avoid wastage of food and pharma products.

Meat, fish and seafood dominated the global cold chain market, claiming a 45 percent share of the total market in 2014. Meat, fish and seafood needs cold chain storage to avoid wastage as these products are extremely perishable. Growing import-export of meat, fish and seafood is expected to fuel growth of cold chains. Dairy and frozen desserts and fruits and vegetables are other important end-user segments of the cold chain industry having significant market share.

North America dominated the cold chain with approximately a 40 percent share of the global market in 2014, followed by Europe and Asia Pacific. The Asia Pacific region is expected to witness fastest CAGR, due to rising disposable income, growth in food retail market, and rapidly growing demand for frozen food in the region.

According to a Food Processing Technology and Processing online report, with a properly functioning cold chain, perishable food loss could be brought down to about 2 percent. The International Institute of Refrigeration has estimated that 23 percent of food loss and waste in developing countries is due to the lack of a cold chain.

Prevention of waste is a continuing challenge for the global cold chain market. This issue was explored in December at the Carrier/United Technologies World Cold Chain Summit to Reduce Food Waste.

"Only 10 percent of worldwide perishable foods are refrigerated today, so there is immense opportunity to cut food waste and the resulting greenhouse gas emissions by implementing or improving the cold chain," said David Appel, president, Carrier Transicold and Refrigeration Systems.

"One-third or more of the food we produce each year is never eaten, yet more than 50 percent of the wasted food can have its shelf life extended by the cold chain," he noted.

Meanwhile carriers are continuing to invest in the refrigerated sector. Maersk Line, which has the largest containerized reefer fleet and 20 percent of the global market, purchased 30,000 reefers in 2015. Meanwhile reefer rates — along with the rest of the container industry — are challenged by historically low levels.

The rise in refrigerated cargo shipments is good news for major container ports, including the Port of Charleston. Jim Newsome, president and CEO of South Carolina Ports Authority said in a recent Journal of Commerce interview that the transition from specialized carriers to containers "has been ongoing for several years. The major container carriers have invested heavily in refrigerated container infrastructure and shipboard plugs to accommodate regularly scheduled refrigerated cargo trade, and it is hard to ignore the benefit of weekly sailings in the refrigerated cold chain."

Meanwhile, the expanded Panama Canal could be a boon to reefer shippers, because more carriers envision using the Canal/Caribbean region as a regional transshipment and logistics hub. Research last year by CH Robinson and Boston Consulting Group on the trade impacts of the canal expansion found that as much as 10 percent of container traffic to the U.S. from East Asia could shift from West Coast to East Coast ports by 2020. According to Drewry, Panama transshipment activity could jump by double digits following the Canal expansion, with annual growth of 5 percent after the expansion.

One of the top trends impacting the cold chain starts with the obvious — cold chains are becoming more global. "Food is traveling around the world as more manufacturers manage their supply chains globally," said Doug Harrison, president and CEO of VersaCold, in a recent Inbound Logistics report.

"Demand for fresh food is growing, and that requires increased innovation to overcome capacity and infrastructure constraints, and mitigate disruption risks to ensure quality delivery," said Tim Smith, executive vice president, sales and business development for Lineage Logistics, a cold chain 3PL based in Colton, CA.

Other trends dominating the cold chain scene include:

  • An increasing focus on quality and product sensitivity as more premium products come into the market with a shorter shelf life and greater sensitivity to temperature

  • Increasing regulation due to government mandates covering safety and quality issue for both food and pharma supply chains

The cold chain is also experiencing mode-shifting as fuel price fluctuations and globalization encourage some cold chain operators to change modes from truckload to intermodal, or from air to ocean. While air remains the main choice for pharma transport (it’s fast but expensive), some shippers have shifted to container carriers as the ability to manage and track locations and temperatures in containers has improved.

Next: Sustainability and technology investment remain critical for the cold chain.