Recent research has highlighted the rising demand for fresh imported perishables in China, as well as the country's cold chain logistics sector's struggle to keep up.
A joint study conducted by Rabobank, an agricultural bank, and Wageningen UR, an agricultural university, noted that recent demand for "fresh, safe and high-quality food" has increased faster than China's capacity to provide such goods, according to The Poultry Site. If supply chains in Asia's largest country are able to deliver on this urge for perishables, though, the likelihood is that demand will only rise more. For this reason, there is a fast-growing need for temperature-controlled storage and transportation in China.
Investment in relatively small cold chain market increasing
The expanding demand for fresh and safe food in China has already spurred some investment in the cold chain sector. These goods end up in supermarkets, hypermarkets and online stores via these temperature-controlled supply chains. From 2007 to 2015, storage capacity increased from 12 million cubic meters to around 100 million cubic meters. However, more is needed if cold chain suppliers are to keep up with the demand in China.
A Goldman Sachs report noted that the top 100 cold chain logistics firms in China account for a mere 0.4 percent of the market, and that the supply chain there is "highly fragmented," making it difficult to keep up with increasing demand, according to the Journal of Commerce (JOC). In 2014, the temperature-controlled market saw $3.407 billion in total revenue, compared with $15 billion for the top 100 cold chain players.
While between 85 percent and 100 percent of fruit and vegetables sold in the U.S. are transported in refrigerated conditions, in China, only 20 percent of those perishables are shipped in such a manner, resulting in a high spoilage rate of up to 40 percent. In the U.S., that rate is closer to 5 percent.
Cold chain sector growth could have far-reaching benefits
Despite the small size and fragmented nature of the cold chain sector in China, Goldman Sachs noted that it sees plenty of room for growth as it continues to develop in response to demand for fresh and safe perishables.
"We see significant growth potential, 28 percent year-over-year 2015-2017, in cold chain logistics revenues as China continues to improve its perishable and pharmaceutical supply chains with help from third-party logistics players," the report stated, according to the JOC.
Further investment in China's cold chain logistics could result in significant savings, the Rabobank and Wageningen UR research concluded. A high-level cold chain sector could, for example, cut spoiled perishables by 14 percent – an improvement that could bring as much as $7.5 billion in savings. It would also see rural incomes rise with farmers' abilities to transport their products in refrigerated trucks, rather than see their goods go to waste. This could bring a 10 percent reduction in food prices and also cut hunger in China. Savings would even extend to the Chinese health care sector, as well as drive a reduction of emissions.