Cold chain, the new hot sector

Published September 17, 2021, 12:05 AM

by Bernie Cahiles-Magkilat

EDITORS DESK

BERNIE CAHILES-MAGKILAT

The pandemic has caught everyone offguard and sent most governments, even the most advanced of economies, scrambling for solutions.

But while the world literally stood still, there must be a way to ensure that life goes on. This is what we call preservation.

One of the most talked about issues last year was the need to ensure there is a functional cold chain industry in the country for food preservation and storage for the delicate COVID-19 vaccines.

There is not enough cold chain facilities in the country. Some players, including Royal Cargo, expanded their capacities to suit the different temperature requirements of the various vaccine brands. The unbelievers may dismiss this, but the vaccines are the only way out of this black hole.

This situation has pushed the Board of Investments (BOI) to craft the Philippine Cold Chain Roadmap in a jiffy. BOI Managing Head Ceferino S. Rodolfo emphasized the need to prep the industry before the vaccines’ arrival in the country.

“This pandemic has heightened the need for a more developed cold chain logistics system to ensure the stable supply of essential food products by prolonging shelf-life, preventing food wastage, building raw materials inventory, and likewise paving the way for higher value-added processing. Additionally, once the vaccines are approved and scheduled for distribution here, the industry will have to be ready,” Rodolfo said.

With that the Philippine Cold Chain Roadmap was launched in December, 2020, barely three months before the first batch of COVID-19 vaccines’ arrival in the country.

The Philippine Cold Chain Industry Roadmap seeks to increase the capacity of cold storage from 10 percent to 15 percent, or 50,000 pallets more every year since there has been a steady increase in demand from different industries. The current capacity is only 400,000 tons or 500,000 pallets.

Under the roadmap, the government will also set up five cold storage facilities across the country for the short term or until 2022 – two facilities in Luzon, one facility in the Visayas, and two facilities in Mindanao.

By 2023, the domestic cold chain industry is expected to generate ₱20 billion in revenue, but this is expected to be higher due to massive vaccine importation in 2021 and 2022. Growth is also driven by integrated end to end supply chain logistics, oversupply of some cash crops, and the country’s food imports.

Market estimates of the global cold chain market are placed at $168 billion in 2018 and are projected to expand at an annual growth rate of 15 percent until 2025.

Indeed, the pandemic has brought opportunities for the cold chain industry. In fact, cold storage is billed as the new hot sector in real estate. Various cold storage facilities are sprouting in Metro Manila and nearby provinces to meet growing demand.

But Sheila Lobien, president and CEO of the fast growing local property management and consultancy firm Lobien Realty Group, Inc., said there are real challenges the industry is facing.

For instance, cold chain facilities are power intensive. Power accounts for 25-35 percent of total cost. Aside from the high capital requirement, other issues include weak internet connectivity, lack of cooperation, insufficient information on food safety, seasonality of supply, low demand in some areas, lack of support from local government units, few trained works, traffic, and limited road network support.

“These are mainly because the country’s existing infrastructure and technology are not up to the latest standards. These are also due to shortage of storage facilities, frequent power outages which put a strain on the operations of businesses, food production centers are situated in remote locations, and the country is exposed to typhoons and droughts, which can destroy crop production and cause delays in logistics,” said Lobien.

The Philippines is still lagging behind its neighbors. Region-wise, Singapore and Vietnam are the major players in the competitive landscape of the cold chain industry.

The roadmap is an attempt to address the Philippines cold chain challenges. To attract investors in the cold chain industry and hopefully connect the chains to a more efficient industry, the roadmap highlights the Go-5 Synergy strategy that will be applicable for the next five years.

This will focus on the synergistic partnership among all stakeholders, strong logistics providers during the transit and handling of items, training and fair compensation for the labor force, support from the government and public to boost investments in the industry, and awareness of food safety.

Investors can also avail of government’s fiscal and non-fiscal incentives under the law. This includes the exemption on corporate income tax from four to six years and the adoption of greener technologies.

Under the roadmap, a National Cold Chain Committee will implement and monitor programs on the five focus industries of the roadmap, namely: meat/processed meat, fisheries and aquaculture, dairy, fruits and vegetables, and non-food such as pharmaceuticals and electronics. These would include the promotion of investments in the cold chain in key geographic areas to increase food security and safety in times of supply-disrupting events such as the COVID-19 pandemic.

There are still areas that the government needs to intervene. However, with the help of BOI’s roadmap, the country’s cold chain sector is expected to improve and grow.

If the roadmap gets implemented, the cold chain industry is well-positioned for post-COVID-19 recovery.

(The author is the assistant business editor of Manila Bulletin.)

 
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