The distribution and retailing business in this sector is bound to grow at a fast pace in the coming years. If we believe that the ongoing economic slowdown is only a blip, the future for the commercial refrigeration industry is definitely bright. As the retail, restaurant and food processing industry is still in its growth stage, the day is not far when there could be a chain of retail stores showcasing products such as bottle coolers, deep freezers, display cabinets and chest freezers. “Reach-in and walk-in coolers and freezers are expected to be the fastest growing product group, due to their widespread use in all the major markets,” says the Freedonia Group. These equipments are used by food processors, restaurants and food retailers, and the market research firm expects solid gains in developing regions.
| Cold Storage |
| India is the second largest producer of fruits and vegetables in the world. Despite the enormous increase in the amount of perishable goods to be stored, the availability of cold storage facilities in the country is not enough to meet the demand. A case in point is the plight of potato farmers, who, despite the bumper crop this year are facing a crash in the price of the commodity, as much of their crop has been devastated due to the lack of cold storage facilities. Cold storages are used to preserve food and other perishable items such as flowers so as to retain their original color, taste and flavor for a long time. These storages form the backbone of the food supply chain, and are used to store the produce. |
| According to government estimates, at the start of 2007, there were 5,101 cold storages in the country. The combined capacity of these facilities was 21.7 million metric tons. Approximately 66% of these facilities are in the states of Uttar Pradesh and West Bengal. Highlighting the shortage of cold storages, an expert committee set up by the Department of Agriculture has made a strong case for creation of additional cold storage capacity of 12 lakh tons. The committee has also sought removal of state control over cold storage tariffs. |
| Cold storages are required not only for food items, but also for chemicals, medicines and flowers amongst other things. Cold storages alone are not enough. You need an uninterrupted cold chain—an uninterrupted chain of temperature-controlled storage and transportation infrastructure that can take the goods from the point of production to the point of processing and on to the points of sale and finally to the retail points. |
Export opportunities also exist for players in this segment, but it is most likely to happen in less-developed countries in the Asia and Africa region. This is because quality norms and stringent export regulations make developed markets a tough nut to crack for Indian manufacturers.
| DARE/estimates | |
| Avg cost of a chest freezer | Rs 12,000 |
| Net profit margin | Rs 1,000 |
| Total Retail outlets (2014) | 5,50,000 |
| Total size of opportunity | Rs 55 Crore |
| Assumption: Each outlet purchases at least one chest freezer | |
| DISCLAIMER: This data and analysis are indicative and Cybermedia makes no warranties about its accuracy. You are advised to do your own analysis if you are evaluating a similar venture. | |
Another area that is gaining traction is that of renting and logistics. Take the case of Evergreen Foods, a company started by Gagan Seth, a first-generation entrepreneur. Seth owns 110 refrigeration trucks that are used to transport perishable food products such as chocolates, fruits, vegetables and ice cream. This is another area that has grown substantially with the growth of the retail sector. Some companies rent out refrigeration products to small businesses on a monthly basis. The security deposit could vary depending upon the cost of the equipment.
The market
The sheer number of products and their usage across a range of sectors makes the size of the opportunity enormous. Take the example of chest freezers. The prices vary depending upon the capacity. A 100 liter chest freezer costs Rs 11,000 plus taxes, while a 500 liter freezer costs Rs 20,000 plus taxes. Say the average price of a chest freezer is Rs 12,000, and profit margin on each is Rs 1,000. Presuming that the number of retail outlets across the country that have installed at least one chest freezer is 500,000 and in the next five years, the number of such stores grows by 10%, in 2014, the number of such stores would be 550,000. (see chart: DARE/estimates) Thus, the total size of the opportunity in freezers alone would be Rs 55 crore. Add to this the businesses that come from selling other products and that in itself is a long list.
How is the current economic slowdown affecting the commercial refrigeration equipment sector? There are many players in the unorganized sector. Are they able to meet the high quality norms of such equipments? Any threat from Chinese players? What opportunities exist for entrepreneurs in this sector? |
Even if we believe that the Rs 55 crore opportunity exists across ten other segments, the size of the opportunity becomes Rs 550 crore.
Besides this, the services business is huge. Installation, manufacturing, assembling and refrigerated cargo movements make the figure shoot higher. Presuming all this to be of equal size as the products market, the total size of the opportunity will be a whopping Rs 1,100 crore.
| DARE/world commercial refrigeration equipment demand | |||
| Geography | 2002 | 2007 | 2012 |
| North America | 5555 | 7000 | 8470 |
| Western America | 4860 | 5870 | 6960 |
| Asia/Pacific | 5605 | 7290 | 9680 |
| Other Regions | 2355 | 3240 | 4190 |
| Source: Freedonia Group All figures in Million Dollars | |||
The challenges
Till some time back, before the slowdown hit India and the rest of the world, high prices of raw materials, such as steel and copper, were increasing the input costs of commercial refrigeration equipment. On one side, the slowdown has led to a crash in commodity prices leading to cheaper raw materials, while on the other, the demand for new products has gone down. Many of the retail chains are now postponing new buys leading to the increase in unsold stocks at the manufacturers’ and distributors’ end.
Providing top-class after-sales services is a big challenge. Getting good quality manpower is also a challenge. As the market is price-sensitive, one may lose customers even if the price difference between one’s products and that of the rival is a few hundred rupees.
Subscribe to this comment's feed
written by gucci outlet online store, February 28, 2011
written by wholesale nfl jerseys, January 11, 2011
written by nfl football jerseys, October 11, 2010
Hope visiting this page will grab your trust, all anyone really wants is a trustworthy supplier who they can count on to deliver on quickly, correctly, and top quality every time!
written by finger skate, June 26, 2010
bakugan toys,
written by surabhi, May 25, 2010
written by Jon Godsall, June 11, 2009
written by Krishna G Setty, April 15, 2009
| < Prev | Next > |
|---|
