Abhishek Ajay Shah

Is the region seeing an uptake in cold storage facilities in view of rapid population growth and the consequential increase in demand for food?
Definitely, there has been global interest. When I talk of the region I mean Middle East, Africa and India. I’ll start on the wider picture. It’s no new fact that the whole global investor base sees Africa as the next growth opportunity, an untapped population for whatever service – it may be cold storage, as a general enabler for food to get to that population. It’s not that the infrastructure never existed, but that there has been renewed investment to make infrastructure more structured. This is mainly because mature markets are saturated. Many companies want to move their food products out to these hungrier markets, which are growing. There are different marketing strategies and consumer spending capabilities, but they continue to grow rapidly overall.
We have also seen a lot of cold storage facilities being developed, especially India, because of government-driven initiatives on logistics and cold stores. For Saudi Arabia, there is a requirement for high-quality food. It’s a simple economic situation, where now women are allowed to drive and work. Many of the houses have double income, when usually previously there was only one. Now there is a larger expendable income, including for food. This is driving demand and quality.
In Egypt, which has a very large population, the country is going through a rebirth. There are a lot of logistics plans being drawn up by the likes of DP World, [leading to] the opening of large industrial zones. Cold storage is a key component of that, as well.

Is it more the case in the UAE?
From a regional perspective, UAE probably has the most mature market. They have had good quality [cold chain facilities], acceptable up to international standards, for the last 10-15 years. There was a large surge of cold storage facilities in 2014 and 2015, and now it is probably going to stagnate until demand catches up. [There is] a little bit of an excess supply in the UAE market. But if you look at how it is positioned today, United Arab Emirates is going to be a logistics and trade hub. Not all facilities are for local demand – many are for export.
UAE will be a mature market, given the population targets with expatriates and organic population growth. Also, events like the Expo 2020 will drive demand. Organisations will look to be in countries where the population is denser. When the supply chain is more volatile, you want to be as close to the consumer as possible, so you can react as fast as you can to consumer needs.

What cost optimisation can cold storage facilities offer their customers?
We try to be a solutions provider that drives value to customers. Our vision has always been that a building alone is not going to add value to our customer. It’s about having an integrated solution that provides visibility, accuracy and fewer touch points in the cargo that allows them to generate cost saving. More importantly, it’s leveraging technology for visibility of the cold chain, so you know what is happening to the product from start to end – where the temperature is up or down. We educate customers on how to make their cold chain leaner and smarter to reduce food waste and overall cost.
Our ambition as RSA is to add our latest capability in air solutions for the perishables sector as well as to provide a complete multi-modal service set up. You can bring a product by air, clear it at our own terminal, store it in a cold storage facility and redistribute it to the retail and hospitality industry via temperature-controlled trucks. It is an integrated platform with technology throughout to ensure there are no breaks in the cold chain. It provides visibility of where there is a problem in the cold chain. Historically, when the end-user saw a product and it was melted or refrozen and there’s a problem in quality – they wouldn’t know where it occurred. We aim to provide the power of information across the supply chain. We will have control over elements and know where to attack the issue.

What is the level in terms of quality being delivered in the design, construction, testing, commissioning and O&M stages of cold storage facilities in the region?
This dramatically varies across the region. We have seen this throughout, with the partners and customers we have spoken to. United Arab Emirates is by far very mature; facilities are driven by guidelines and regulation. When you go to Kuwait, cold storage facilities are operated very differently. In India, it is still in its infancy, without firefighting, without temperature-control panels.
Each market has its own challenges, because cold storages are high capital expenditures. It’s very expensive – traditionally, people that used to do business were cargo owners themselves that had to build, out of necessity. But there has been a wave of outsourced cold chain being more prevalent in the region as opportunities become more attractive.

You mentioned high capital expenditure. Of course, the quality of services is dependent upon investment. Could you comment on the payback of investing in better quality and more integrated cold chain solution?
Commercial and pricing are large factors in decision-making. There are different tiers and segments of customers. When you look at the fully quality-driven organisations, their quality department puts a lot of weight and emphasis on the choice of logistic provider. This is based on the quality control mechanism for facilities, and they have auditors and their own in-house metrics and checklists, which we would have to comply with. In addition, the
company can take on customer-specific certifications.
In using technology, you find that over a one- or two-year period, the loss an organisation can incur as a cargo owner due to food going bad, handling errors or high quality facilities without a proper backup system in the event of power outages, can be tremendous. These high capital expenditures all save on hidden cost. Or else they just look at the logistics cost, they don’t see the inefficiencies that may happen.
We do a supply chain redesign. We look at the product flow: how it’s coming to the designation market, what needs to be held where, when, and how it is distributed, in order to add value. Keeping information flow consistent throughout the chain. Giving information to the customer at every milestone to take [the proper] decision on what to hold and for how long. We understand inventory equals cash, the faster they are able to rotate [the products]
– the better, for their business and for our business, too. So, we always try to see what is the strategic intent of our customer to see how we can design the best supply chain for them. Technology plays a big role in giving us indicators for attacking big problems, which can be a win in terms of optimising the supply chain. Education is part of the role we play.

Hannah Jo Uy is Assistant Editor at Climate Control Middle East magazine. She may be contacted at hannah@cpi-industry.com