Unlocking the cold chain potential
Published in Jul-Aug 2018
AYESHA SHAIKH: What is the concept of cold chain and what are the elements that constitute it?
MANSOOR ARIFEEN: Cold chain is an integrated system of storage, transportation and distribution of perishable and temperature-sensitive commodities. Pakistan produces seven types of agricultural products within its agricultural economy and which account for almost 60 to 65% of our agricultural output. They include dairy, poultry, livestock, fruit, vegetables, fisheries and flowers. Pakistan produces all these in such abundance that prices are very low. The problem is that almost 50% of it goes to waste because it is not stored and processed properly. Cold chain is a way to resolve issues of wastage in perishable agricultural products so that farmers do not suffer losses and consumers do not have to pay excessive prices for seasonal fruit, vegetables and other commodities. Cold chain can achieve this by preserving agri products and extending their shelf life. Think about what life was like without refrigerators at home. Milk and meat were purchased in small quantities and consumed daily to prevent them from going bad; the concept of buying perishables weekly was non-existent. Having an integrated cold chain system throughout Pakistan will ensure that none of the agricultural produce goes to waste, people have access to it throughout the year at reasonable prices and farmers have steady and higher revenue streams.
AS: What prompted you to set up a cold chain business in Pakistan at a time when the concept was little known or understood?
MA: When I returned from the US after completing my education, I joined Citibank. However, I never gave up my vision of setting up a venture that would benefit Pakistan and be profitable for me. The idea of a cold chain business came up because I was interested in trading fruit and vegetables as these are abundantly grown in Pakistan. I had observed that basic fruit, such as tomatoes, were extremely expensive despite the fact that they are widely grown and that is how the idea of establishing Icepac came about in 1989. The business model was simple – fresh vegetables and fruit would be procured from farms, cleaned, cut and processed into a ready-to-cook form and then frozen, packed and distributed, with the idea of ensuring a steady supply throughout the year. However, the major focus of the business was to provide third party cold chain distribution and warehousing services to agricultural food businesses. Recently, Icepac has introduced packaged peas, cherries, berries and corn due to the growing market demand. While Icepac has grown over the years, the agricultural industry and governments have failed to realise that no agricultural economy can thrive unless farm output is processed, stored and distributed without the quality diminishing. In Pakistan’s case, this mandates systems for freezing fresh produce as well as refrigerated distribution systems. This has started to take off only recently with several cold chain logistics providers entering the market serving the dairy, meat, ice-cream, frozen foods and other industries where temperature control is mandatory to maintain product integrity. This is the reason why the processed food industry has grown so exponentially in the last few years.
Despite being among the top five milk producers in the world, packaged milk is priced between Rs 125 and 130 per litre, which is more than twice as expensive compared to average international prices. This is because only five to six percent of the total milk produced is preserved, processed and brought to market, while the remaining 94% of the fresh milk, with a shelf life of a few hours, never reaches the consumers.
AS: How has the lack of a cold chain infrastructure impacted the agricultural and agribusiness sector?
MA: Look at the local ice-cream industry. There are only two main providers. The question is if the ingredients are available in abundance and there is demand, why are more players not entering the category? The answer is because of the lack of an organised cold chain system that links ice-cream factories to a temperature-controlled distribution network that will transport it across the country to retail outlets from where consumers can purchase it. An ‘integrated’ cold chain system implies that from the raw material to the final customer purchase stage, temperatures are monitored and regulated so that product quality is not compromised. The problem is that investment in cold chain is only done by the private sector in its limited capacity. Businesses dealing in frozen foods and perishable agri-products have created their own cold chains in the form of long-haul, refrigerated trawlers and warehouses, but this is limited in scope. Until the public sector becomes involved, there is no possibility for cold chain logistics to extend beyond road to include rail and air as well. Only the government can allocate resources and make provisions for cold stores to be built within airports, planes, railway stations and trains so that we can move beyond the archaic method of transporting commodities (fish for instance) in containers placed in crushed, dry ice. If transporting cold chain-dependent perishables in airplanes becomes a reality, as it is in the Middle East and other countries, this will drastically reduce shipment time. It takes two days for goods to be shipped from Lahore (where most agricultural products are sourced from) to Karachi (where consumption is the highest) through trucks and trawlers; air shipment will take only two to three hours. The absence of cold chain has inflated the prices of commodities that are available in abundance in Pakistan. Despite being among the top five milk producers in the world, packaged milk is priced between Rs 125 and 130 per litre, which is more than twice as expensive compared to average international prices. This is because only five to six percent of the total milk produced is preserved, processed and brought to market, while the remaining 94% of the fresh milk, with a shelf life of a few hours, never reaches the consumers. For context, consider that we pay less for petrol (our largest import) than milk (a home-grown commodity).
AS: To what extent can cold chain boost the export potential of our agricultural products?
MA: The possibilities are limitless. Despite global demand and popularity of Pakistani mangoes and kinnows, their exports are well below the mark. The same holds true for the floriculture sector. There is no reason why flowers of excellent quality cannot be grown locally and exported. The reason why this is not happening is due to the fact that farmers are not willing to invest in the inputs required to cultivate and grow different varieties since the absence of cold chain transportation severely limits access to major local and international markets. With limited margins, growing flowers is not seen as a viable source of income and this is why we see bouquets of imported flowers selling for as much as five to 10, 000 rupees. With cold chain, exports can be increased by two and a half billion dollars annually, daily consumption household commodities will become affordable in the local market and producers will be incentivised to invest in making their operations more efficient and extensive.
AS: What kind of investment is required to upgrade Pakistan’s cold chain?
MA: To equip our airports, railways and ports with cold chain warehouses and integrate the cold chain across public sector enterprises and private sector facilities requires an investment of approximately $500 million. This figure may appear to be very high, but at a time when CPEC has put Pakistan on the investment radar internationally, this is the most opportune time to channel foreign investment and interest in further developing our industrial infrastructure, of which a cold chain supply network is an integral part. The greatest advantage of the government’s active involvement in deploying a connected cold chain is that smaller producers of dairy, fruit, vegetables and fisheries will have the opportunity to transport their temperature-sensitive cargo in a timely and cost-effective manner. At present, mostly bulk cargo of perishables is shipped through massive refrigerated trucks and trawlers and this is an expensive proposition. An improved cold chain will allow a larger volume of perishables to reach the market, increase the number of suppliers, ensure that consumers in remote markets have access to quality food products and enable Pakistan to realise its agrarian potential.
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