Economy

Cold-chain giants seek lucrative China market

By Lian Mo (China Daily)
Updated: 2010-11-17 15:35

BEIJING - United States cold-chain logistics giants are stepping up their operations in China to cash in on a fledgling but rosy market that generates $14 billion in revenue a year.

Cold-chain logistics is a temperature-controlled storage and distribution network, used primarily for perishables.

Americold, the world's largest cold-chain operator, is building its cold-chain services in China and will increase its investment over the next few years, said Mo Chengying, project manager of China Merchants International Cold Chain (Shenzhen) Co Ltd.

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The company is a holding company of China Merchants Americold Logistics Co Ltd, a joint venture which Americold, from Atlanta, has a controlling 49 percent stake.

"We have already built temperature-controlled warehouses in more than a dozen cities and plan to establish an integrated cold-chain logistics network," Mo said.

CR England, the largest refrigerated trucking company in the US, also values China's cold-chain market.

Charles Myers, its international business development director, said it mainly provides international freight forwarding services in China and plans to invest in the cold-chain trucking business through a joint venture with a local firm.

"It takes about $5 million to $10 million to start a transportation business in China, so we believe a joint venture will work better," he said.

Preferred Freezer Services, another US logistics giant, is building a 26,000-square-meter temperature-controlled warehouse in Shanghai, one of the largest single-story cold storage facilities in China.

About 440 million tons of goods need cold-chain services a year in China, more than the 80 million tons available now, Roland Berger Strategy Consultants, one of world's largest consultants, said. It means only about 18 percent of the demand can be met in China; the rate in the US is 85 percent.

"The potential market of cold-chain logistics in China is as much as $14 billion, which will increase with the development of China's food and some other industries," said Jin Yuxiang, project manager of Roland Berger.

Research by the China National Food Industry Association said the shortage of cold-chain services causes more than $10 billion waste just on fruits and vegetables every year.

"China's annual food supply is about $170 billion and will reach $800 billion in 2020," said Zhang Qianming, vice-president of the association's food logistics committee.

"The development of cold-chain logistics will greatly reduce the farmer's post-harvest loss and assure food quality and consumer safety."

A plan by National Development and Reform Commission said the government will complete regulations and standards for the industry and help develop 30 to 50 large-scale cold-chain logistics groups by 2015.

Jin said China's cold-chain logistics industry needs to be consolidated.

"The market share for the top 10 cold-chain logistics firms in China is no more than 5 percent," he said. "The entry of foreign giants will help quicken the consolidation".

Fan Duanwei, president of China Cold Chain Logistics Alliance, advised foreign companies to partner with locals because "China's land and transportation policies are complicated".