Billions needed to keep market fresh

PUBLISHED : Thursday, 14 June, 2012, 12:00am
UPDATED : Thursday, 14 June, 2012, 12:00am


Billions of dollars will have to be invested if the mainland is to bring its cold and chilled logistics facilities up to international standards and cut food wastage, experts say.

The National Development and Reform Commission, which formulates policies for economic and social development, has targeted this specialist logistics sector for improvement in an effort to slash the huge amount of food that goes rotten or is wasted before it reaches consumers.

Michael McCool, partner and general manager of consultancy AT Kearney (Hong Kong), said more than 30 per cent of fruit and vegetables spoils before it reaches the market, while about 13 per cent of meat is also unfit for human consumption. 'The only reason the figure is not higher is because so much meat is slaughtered close to consumption,' he said. McCool said 86 per cent of the mainland's cold chain logistics market was focused on the food industry, of which 80 per cent was fruit and vegetables. Of the 14 per cent that was non-food, pharmaceuticals made up 8 per cent and electronics and chemicals 6 per cent, he said.

McCool said the reform commission planned to cut the amount of food wasted by around half during the current five-year plan. This meant the volume of fruit and vegetables that went to waste would fall to about 15 per cent by 2015, while the volume of meat that was spoilt would drop to 6 per cent to 7 per cent.

He said the improvement would require billions of dollars worth of investment, but 'the reduction in wastage should provide the return on investment'. McCool added that the focus on reducing food wastage 'was driven by the need to feed people'.

The per capita food lost and wasted in industrialised Asia, including China, was about 240kg a year, according to a report last year by the United Nations Food and Agriculture Organisation. The China Federation of Logistics & Purchasing estimated the mainland's agricultural logistics market was worth 2.6 billion yuan (HK$3.18 billion) annually, equivalent to just 1.8 per cent of its total logistics market of 158.4 trillion yuan.

A lack of temperature-controlled storage and the higher capital investment in setting up cold chain facilities are among the challenges facing an industry operating on low margins. The average profit margin for logistics operators was 5.4 per cent in 2010, the Li & Fung Research Centre said in a report this month.

The cost of building cold chain storage and buying refrigerated trucks can be three to five times higher than normal warehouses and trucks, the NDRC's cold chain logistics development plan said. The blueprint outlined seven areas of improvement including investment in cold chain logistics networks and systems for major types of agricultural products. This included eight projects such as building 10 million tonnes of total cold storage capacity and almost doubling the nation's refrigerated vehicle fleet by 40,000 trucks to around 95,000 vehicles.

'China is coming from a long way back, but it is catching up very quickly,' said Daniel Deschodt, commercial director of France's Dunkirk port, at a seminar organised by Supply Chain Asia in Shanghai last week.

But Mark Millar, managing partner at specialist logistics consultant M Power Associates, said the mainland's logistics sector was 'brutally competitive and massively fragmented' with around 16,000 cold chain logistics operators.


More than this proportion of fruit and vegetables spoils before it reaches the market

- For meat, it's 13 per cent