China’s cold chain is developing, but there are miles to go. Not only is China one of the biggest agricultural countries in the world, the rise of an affluent middle class, open trade policies and the advancement of cold treatment technology is resulting in a rapid increase in imported perishable food items.
Today consumers, especially those in the provincial capitals, enjoy meats, fruits and vegetables from around the world. Nevertheless, cold chain distribution and warehousing in China is highly imbalanced due to an unwillingness to pay higher prices for these services. Societal changes are placing growing pressure on cold chain demands.
“Restaurants are booming, so there’s need for more cold chain support,” says George Zhao, vice president for Shanghai-based consulting firm 4flow. “Internal cold chain requirements by fast food establishments like McDonalds, Burger King, KFC and Starbucks are driving higher cold chain standards.”
Meanwhile, China’s supermarkets focus on cost and are more resistant to paying higher prices for cold chain services, despite the high shrink levels of fruits and vegetables – especially pears and apples. Demand is even less at traditional food retail establishments.
“The wholesale market is the weakest link,” says Mabel Zhuang of MC Marketing, which works with China’s arm of the Produce Marketing Association (PMA).
“There’s a lot of resistance to using refrigerated trucks because of cost,” says Eric Chan, business development director, Swire Cold Chain Logistics China. “This is the biggest problem that we face. We see a lot of people buying expensive meats from Brazil, Europe, Canada and the United States that traders move to Chinese customers by low-cost transport. There’s a lot of spoilage in the system.”
“It’s very strange,” Zhao says. “Some Chinese people do consider cold chain important [but] consumers are not aware of its value. If they don’t get sick from the food, they don’t care. People will buy because it is cheap.”
In many cases, traders stack boxes of perishables inside a regular truck and maintain cool temperatures with dry ice. Others will transport produce in a standard truck along with non-perishable goods and products. End-to-end transport is often provided in trucks that are generally covered by a quilt for temperature insulation to stop the heat. While multinational transportation companies will utilize temperature-monitoring devices inside the truck to monitor the shipment during the entire trip then download the data at journey’s end, other companies do not. “It’s dodgy,” Zhao says.
Some companies use refrigerated trucks but turn refrigeration units off while in transit to save money then turn them back on shortly before making deliveries to customers. Once these shipments reach the wholesale market, the cold chain is broken. “Everything is at room temperature,” Zhuang says.
The biggest issue is the first and last mile in transport. Given that farms are generally small in China, there are not the daily industrialized outputs to warrant preparation facilities. Local companies provide the transport for seasonal goods. “Consequently, there is a lot of spoilage,” says Zhuang.
Eight to 20-ton pallet trailers are used for long-haul shipments between provincial capitals and second-tier cities. “Those going to third-tier cities might utilize long-haul transport to the warehouse, but the last mile is done with small vehicles that may not have refrigeration,” Chan explains.
Trucks placed into service for population centres utilize refrigeration units made by reputable companies like Carrier. “Many are equipped with GPS and temperature-tracing systems,” Chan adds.
Trucking in China also benefits from the fact that the nation’s highway system is well developed. “The country has spent a lot of money on infrastructure in the last 20-some years,” he says. “Inland cold chain transport is done primarily by truck.”
Cold chain warehouses are being constructed near high production areas such as potato farms in Mongolia and northern China and fruit-producing areas in the central provinces. Nevertheless, there demand is uneven throughout China due to the expense. But companies, including those from the US, have partnered with Chinese firms to build logistics centres such as those for Yum! around major coastal seaports and airports.
“Major cold chain facilities in Shanghai, for example, are used for importing and exporting anything from fruit and meat,” Zhao says.
Modern facilities have also been built for domestic distribution that can cover territory from Shanghai to Yongzhou, Chengdu, and Beijing, Shanghai, and Guangzhou.
E-commerce is particularly putting pressure on cold chain demands due to growing popularity of online food shopping, particularly in first-tier cities like Beijing and Shanghai. Companies such as Yiguo, T-Mall and JD help deliver temperature-sensitive products such as fresh fruits, seafood, and beef, to the consumer’s home.
“Every ‘Amazon’ of the world is in China,” says China.
Even companies that sell imported fruit online and source from wholesale markets are paying more attention to the cold chain. The reason: “They do not have a store front and need to deliver quality product and good service to consumers and clients,” Zhuang says.
Strategically located distribution centres help solve some of the problems. Once the distribution centre receives the order, selected items are combined and individually packed. Trucks then take the orders to smaller warehouses from which small delivery trucks, bicycles or tricycles fan out carrying insulated cases filled with ice bags to deliver the orders to cold boxes at housing complexes.
“I pick up my order at home using a pass code that allows me to unlock my box,” Zhao says.
Maintaining temperature quality during the last mile still remains a big challenge, however. “Not many consumers are willing to pay for the needed cold chain packaging,” says Chan. “It’s a challenge for the 3PLs who question which platforms they are willing to subsidize. That’s because 99% of the e-commerce, 3PL cold chain sector are losing money.”
By Karen E. Thuermer
Correspondent | Washington
