Beat the heat with Tessol's 360-degree storage solutions
With the end-to-end cold chain solution provider, Tessol’s latest offering – IndiWrap – fast becoming the preferred cold chain solution for quick commerce deliveries, Manjula Nair had a chat with the firm’s founder and director Rajat Gupta to learn more about Tessol’s journey over the years, lessons from the pandemic and what lies in store for the company.
In 2015, the National Centre for Cold Chain Development (NCCD) compiled a report – All India Cold-chain Infrastructure Capacity Assessment of Status & Gap – which held that the existing infrastructure created in the country for cold storage (bulk) and cold storage (hub) was approximately 31.82 million tonnes. However, for this, there was a gap of -3.28 million tonnes. For cold storage (bulk) and cold storage (hub), there was an all India requirement of 34.16 million tonnes and around 1 million tonnes, respectively.
The NCCF was not alone in its findings. A year later, a professor from the Bengaluru-based International School of Management Excellence (ISME), Haritha S, cited the FAO in her article – A Study of the Cold Chain Industry in India: Challenges & Opportunities – "The Food & Agriculture Organisation of the UN has stated every year about 1.3 billion tonnes of food is lost which amounts to 1/3rd of the total food produced. This clearly indicates a significant gap in the Indian cold chain industry. This gap can be translated into a golden opportunity for the service providers as well as the farmers. The demand in cold chain industry is also due to the pharmaceutical industry, with the vaccine market in India growing at a rate of 25-30 per cent."
The academician also listed out how the cold chain industry was riddled with logistical black holes: "Another major challenge the Indian cold chain industry faces is the shortage of consistent power supply, the cold chain companies have to invest separately in the power backup as well. Fuel costs in India constitute around 30% of the operating expenses of cold storage in India compared to the 10% in the west. One of the most important reasons for the cold chain industry not booming is the high real estate costs, which have risen by 280%. Apart from the real estate costs, cold storage would require a minimum investment of INR 50 million. The average capacity utilisation in the industry is just around 30%."
While all these studies were being conducted, a nascent end-to-end cold chain solution provider named Tessol was entering the fray. Over the years, Tessol has metamorphosed into a market leader. With founder-director Rajat Gupta helming the now nine-year-old Tessol, the cold chain firm offers a range of customised cold storage solutions, all released into the market after a meticulous and transparent testing phase. ITLN spoke to Gupta on business challenges, future plans and testing times during the pandemic.
Let's start with the Tessol journey. You've come a long way since the company's inception in 2013. How has Tessol's journey evolved over the years?
When we started Tessol in 2013, we realised that energy storage was an underexploited area. We spoke to different customers when we were struck by how the cold chain was a relatively smaller market that held immense potential. It was a fast-growing segment where people were searching high and low for solutions. Coupled with the fact that there was a lot of product loss on the field, resulting in high wastage, this led to criticality in food security, health, etc.
At the time, the market was not as evolved, and e-commerce in the grocery space was almost non-existent. There were very few brands in the market in 2013-14. We started looking at refrigerated trucks using the Phase Change Material (PCM) technology. For about four years, trucks were our primary focus. In those times, diesel prices hovered around the 60s. So, the value proposition was slightly limited for cost-savings. Around 2017, grocery e-commerce entered the scene in a big way. They couldn't deliver the products without a solid cold chain technology. We worked on solutions for their warehouses to maintain temperatures for 24 hours and the logistics around it. For quick commerce, we created an entirely new set of products. The entire category has grown extensively. Covid-19 also helped increase the penetration of e-commerce.
To sum it up, starting from a cost-saving value proposition with trucks, we evolved into a complete solution provider. Ultimately, we are an end-to-end solution provider giving our customers the most optimised solution for the leg where they face a challenge.
Where are these challenges mostly noticed?
It depends on the customer and where he faces a. pain point. For instance, if you look at quick commerce, the pain point is how to deliver highly perishable items like an ice cream within a 30-minute window. If melted ice cream is delivered, nobody accepts it. Another hurdle is how they have about one to three dark stores, and each dark store gets only a specific amount of food or quantity of material because these are limited footprints to feed. The next set of problems that we are working on is how to deliver these without using a refrigerated truck. Here, we have to provide the flexibility of putting only the exact amount of product required.
You mentioned that Covid-19 helped increase the penetration of e-commerce. How was the pandemic's impact felt on the cold chain industry?
The pandemic's overall impact was felt at several levels. Firstly, people started experimenting and using more processed foods that they could store for an extended period. Secondly, they got more familiar with e-commerce, and brands began seeing e-commerce as a dominant channel. Earlier, everybody grappled with reaching the neighbourhood store. Many brands also opted for the B2C movement to directly reach their customers. Seeing the opportunity, the smaller brands use this as a channel to start flooding the market, which paves the way for prominent brands to start setting the standard. This shift toward e-commerce and B2C businesses which would not be possible without a robust cold chain. This has led to more focus on building a sustainable cold chain, which ultimately enabled the setting up of many dark stores. In turn, each dark store has refrigeration infrastructure, and cold chain infrastructure and these services lead to the formalisation of the last mile of your local retail infrastructure.
What kind of temperature-regulating innovations or energy storing devices were used to store the vaccines around Covid-19?
Our thermal battery technology is essentially a way of storing energy in a liquid that converts into a solid and then back into a liquid and then releases energy. So, this is the core of our solutions. The only difference is that depending upon the application; target temperatures could be different. Like chocolate could be between 15 and 25 degrees Celsius, we would need -18 degrees Celsius for ice cream; however, for a vaccine temperatures need to be at about 2-6 degrees Celsius. So, all these different chemicals that we use have formulations with different encapsulations. Each of those can maintain the temperature in the desired range for a certain period. Though the form and shape of the invention may be different, the core technology is the same.
How much of your funding and investment goes into R&D?
Most of our work is centred around application engineering and development. Customers often approach us with specific requirements, as per their route and delivery needs. Most of our designs demand application engineering. So, about 30% of our team is involved in application engineering and design development.
For customisation, we group similar modules together as per need. Solutions come at a modular level, and customers can pick and choose different modules and put them together. Sometimes, we need to build new modules, and that's where the difference between development and application engineering comes in.
Let's talk about one of your latest offerings – the Indiwrap. Can you tell me a little about the journey around designing the product?
It came about after conversations with some of our hyperlocal customers. They had delivery boys who would go to a place but wouldn't necessarily return to the same site again. These hyperlocal customers did not want to send any assets which may not come back. Secondly, this became an exciting requirement when people said they deliver food along with dessert. If you put piping hot food together with dessert, it tends to melt. Similar problems came in from ice cream customers performing home deliveries. When we started building the product, the primary challenge was meeting the price point. Nobody was willing to pay a hefty amount for this even though it could perform well. So, we innovated on the chemicals and built specific cost-effective formulations.
How was the product received in the market?
Once built, we started with around 40 brands in April 2021. We sent out all the samples, but before we could get any response, the second Covid wave stuck. Then, a well-known e-commerce brand validated it and started using it for home deliveries. We had limited capacity when we started with only about 1.5 lakh pieces a month. The birth order was about 2 lakh pieces a month. After that, the next customer placed an order for about 5 lakh pieces. Back then, we didn't have the capacity even to produce it. We started adding the manufacturing infrastructure, which was a big challenge as delivery times were vague and no set parameters were in place. Long story short, we now have a capacity of around 2.5 million pieces a month.
What are some of the challenges while designing a PCM product?
I think the primary objective lies in defining the customer's requirement. The biggest challenge for us is to rationalise their requirement and bring it to a point where we consider budget and product suitability. Then we start building a product or a budget and circle back to them with the logistics method they need to use to make the supply chain viable. It's essentially a close development you need to have with the customer to see the logistics aspect. We then have to play with different temperatures and different installations, packaging, products or materials and then repeat testing. We work closely with the customers and give them different options at different temperatures to choose what is best. It's a highly inclusive development process.
What is the Tessol blueprint for the future?
This is the time for us to make a mark because the market looks ripe. Our simple mantra for whatever we make is based on three primary principles – viability, reliability, and sustainability. Given the phase we are in, I think this is the right time for us to invest on all fronts. We are looking to invest in infrastructure and boost manufacturing capacity, and we also want to invest in sales and marketing and the international market.
Do you have any plans to go international?
We've already started a few exports and carried out work in Nigeria and Saudi Arabia. Currently, we're exploring options with some customers in the US and Singapore markets. There has been initial outreach from our side to evaluate how the market receives our products and explore customer requirements. Feedback has been positive, and we've already made some sales. Now, we'll have to build both sales and marketing capability dedicatedly and production certification capability to address these markets. That's something that we plan to do this year.