“China’s demand for fresh, safe and high-quality food is outstripping its capacity to produce and deliver domestically. Europe is able to address this need,” says Paul Bosch, F&A Supply Chains Analyst at Rabobank. “However, the growth in consumption of perishable food in China will only continue if supply chains deliver on quality and safety. To a large extent this depends on the proper cooling of products during storage handling and transport.”
Increasing consumption in China is being driven by continued economic growth and urbanisation. China’s economy is expected to grow by 6-7% annually in the coming years, pushing a further 38 million households into the upper middle class. Fresh or perishable food is increasingly reaching Chinese consumers through modern distribution channels, including supermarkets, hypermarkets and online. Food safety is one of the driving forces pushing shoppers away from traditional wet markets and it is expected to remain one of the biggest concerns for the Chinese population.
The demand for fresh safe food, bought through convenient modern channels is driving the country’s investment in cold chain infrastructure. Over the past five years, storage capacity has grown from 12 million cubic meters in 2007 to roughly 100 million cubic meters in 2015.
However, China’s cold chain sector is still lagging and needs to improve in terms of both quality and capacity. The associated investments are huge: an estimated USD 85 billion is needed in the next ten years. The country’s cold chain sector will be able to improve once cold chain companies start adapting their business models into higher-value strategies in response to the higher service needs of their clients.
The benefits to China of an improved cold chain sector can hardly be overestimated. The presence of a high-level cold chain sector would:
- Reduce the waste of perishables by 14%: a worth of USD 7.5 billion
- Create a 10% reduction in food prices and hunger: Rural income would also increase as farmers transport their crops in refrigerated trucks.
- Reduce healthcare costs: improved cold chains would reduce the 90 million annually recorded cases of food-borne diseases
- 10-20% reduction of emissions: modern, energy efficient technologies and new refrigerants can reduce emissions of both vehicles and warehouses by 10-20%.
The ‘New Silk Road’ can be a strong driver of improvements to the cold chain industry, as it brings Chinese cold chain providers in contact with high-standard products. The reduced transportation time has several advantages for exporters with respect to product quality, pricing, and distribution options. Once matured, the ‘New Silk Road’ has the capability to stabilise China’s food system by enhancing international trade and reducing the vulnerability to regional events, such as crop disease and extreme weather. In time, it also has the potential to enhance competition, changing the competitive positions of current trading partners like the US, Brazil and Australia, as well as improving the price stability of the food system.
For information please
Rabobank
Paul Bosch, F&A Supply Chains Analyst
T: +31 (0) 30 71 23182