FROM MAGAZINE: Government needs to promote more multi-purpose cold storages: Snowman Logistics
India is one of the largest producers of food and medicinal products in the world. However, one of the biggest crises staring before us now is providing food and healthcare products to the right people at the right place and at the right time.
India is one of the largest producers of food and medicinal products in the world. However, one of the biggest crises staring before us now is providing food and healthcare products to the right people at the right place and at the right time. In this hour of a global pandemic, the wastage of food can prove to be another disaster we can't afford. The Covid-19 crisis spread in India at a time when the crops were ready to be harvested. The farmers and labourers have been at the receiving end of this undesirable situation with perishables getting wasted due to issues in the supply chain.
The wastage and loss of food could be minimised with a better prevalence of cold chain market and infrastructure in the country, which keep the perishables safe, delay degradation, and improves shelf life. Sunil Nair, CEO of Snowman Logistics, in an exclusive interview discusses the gaps and opportunities that the country can leverage from providing the right cold chain facilities. Snowman Logistics is one of the largest temperature controlled logistics services providers in the country servicing customers on a pan-India basis. In March 2020, Snowman Logistics partnered with global e-commerce giant Amazon for the delivery of FMCG perishables including vegetables, fruits, eggs, frozen food and groceries.
Can you give us a realistic assessment of the food wastage in the country due the current crisis?
There is no doubt about the fact that most of the perishables in the country have gone waste due to lack of transportation and also because of shortage of consumption. The government had itself said that one-third of the milk was being thrown out because of lack of consumption. Furthermore, middle men were not operating the APMC markets and most of the users in the country, particularly the restaurant and hotel chains, were closed. There is a major shortage of goods at the consumption centre because of logistics, and perishables get spoilt because of the delay.
How have you dealt/are dealing with the current crisis? Was there a siginificant impact on business?
When it comes to food, there are two types - one is processed food and the other is fresh and perishables. We primarily deal in processed ones - which is frozen or chilled with a little longer shelf life. We have been doing fine because when there was/is no consumption, the stock has been lying in our warehouse. Our business model is that of selling warehouse space hence our utilization has actually increased in the current crisis. However, we did suffer in the initial days of the lockdown in terms of the transportation since trucks were not allowed to move. Even after the government’s clarification that trucks can move, there were restrictions in many states. Also, the availability of drivers has been an issue, even today, we have only 60-65 percentage of drivers on board. But the warehousing part of the business has been doing much better than the normal course. There are products with shorter shelf life in our business also. We have been supporting customers in seeing how we can have them delivered at consumption centres by taking necessary permissions from the police and other government authorities, and I think we have done farely well there.
In case of our pharma business, it has been very active – there hasn’t been a single day's stoppage of work. In case of online delivery customers also, we continued to work. We faced operational issues only on the first three days of the lockdown but then we resumed taking the necessary permissions to ensure that online delivery and pharma customers were served continuously.
As a country, do we have sufficient technology and infrastructure to preserve and export good quality agricultural resources?
When it comes to exports, we need to start from the cultivation practices and the type of crop that we grow in the country, particularly for fruits and vegetables. A lot of things have to change - it is not just about distribution and infrastructure. We need to start from the type of produce that we are producing and the way we are producing them. Most of the vegetables and fruits that we produce now are not cold chain-worthy produce - they don't last longer in cold chain or their shelf life is not extended using cold chain. So we need to start from there and there is a huge opportunity. I'm sure the government is doing many things, there are some large private organisations who are also working on this. The cold chain infrastructrure, as of now, in the country primarily is focussed on very limited part of the cold chain produce like apple, grapes etc. and the rest of the capacity is primarily for processed food. But when it comes to fruits and vegetables, there is a huge scope. India has done very well in sea food where we are contributing around 25 percent of the global volume and this has picked up over the last 8-10 years. So a similar exercise has to be done with fruits and vegetables.
Do you feel the availability of cold chains at a decentralised level to tackle the food loss and wastage should be pushed at the policy level?
Policies are in place. The government is giving subsidies for new set-ups. If someone wants to set up a cold storage for agri-business, he can claim subsidy upto Rs 10 crore for a facility and a lot of people have availed those facilities. However, I feel this should be dealt with differently - because of the subsidy, cold storages are being built but only for one particular product. For example, in Nasik alone, there are more than 500 cold storages but they are used only for three months of the grapes season, which is from December to March, after that, they are completely idle. Cold storage requires heavy capex infrastructure - it cannot be idle; if it is, then it is commercially not viable. So the government should look at building multi-purpose cold storages, which are not dependent on one produce. So when the season for a particular produce is over, some other produce should be stored or processed there. That is something that is missing in the strategy. The government's focus currently is more towards the interiors where there are farmers where a lot of capacity is created but is fairly under-utilised. What we also need are facilities at the consumption centres; like Snowman Logistics is a consumption centre-focussed organisation. All our facilities are located at places where there is consumption. What happens when you build a facility in a consumption centre? You store almost all products. So around 12-15 percent of our storage is agri-produce, around 9-10 percent is pharma and around 20 percent is seafood. This way, we support all the categories of food and pharma.
Secondly, the government has to come out with some grant or subsidy in terms of the operating expenses. What's happening is people are building cold storages but not using it because there is no incentive for using it. Hence, there is no produce flowing through the cold chain network. But if the government gives subsidy in the form of power cost or tax relief for the usage of the infrastructure, it will ensure that there is product going through cold chain, and you have better quality, extended shelf life and fresher produce coming to the consumer.
How are you managing the perishables supply chain for e-commerce companies?
We work on perishables primarily for ecommerce companies where we manage the complete backend where we collect from farmers, we bring it to the city where we do the sorting, grading and packing for home delivery purpose, it is then taken to their various hubs within the city. From there, our customer would make the home delivery. So we are continuously working on it and we have only witnessed an increase in volume.
We believe that the future is in online delivery system as there is convenience and comfort. Particularly during the lockdown and any such situation, that's the way to go. So we are creating a complete model around this on how we are going to serve this kind of clientele and we will be building similar solutions for other e-commerce clients.
What are some of the important perishable cargo commodities coming to your facility that have been badly hit because of Covid-19?
We don't see any category primarily hit. However, our customers like the QSR restaurant chains have seen a considerable drop in sales volume because they were not operational. However, for our business, where we are storing their products, it is lying in our warehouse. So while it is not a big impact for us, for our customers, there may be a hit but it is resuming very fast. From the last 30 days, it has almost jumped double than what it was. It is getting corrected quite fast.
What are the biggest lessons learnt from this crisis?
As far as our business is concerned, a lot of practices that are required for the Covid-requirement in terms of sanitation and hygiene, we have been taking care already in our facility since we are into food and pharma. Therefore, for us, to adopt some more directives such as social distancing and others was not that difficult. Secondly, with this, the demand for frozen products will go up because what we need now are products that can be stored for a longer time. You cannot continue to depend only on perishables. So, we believe that is an opportunity. Being in the industry for the last 25 years, I would always choose frozen over fresh as long as the cold chain is maintained properly because I know it is processed in a facility that is approved by the Food Safety and Standards Authority; it is processed with all the norms of food processing. Also, the online delivery business will change completely with the increase in such food consumption.
How has the disruption of migrant work disrupted operations for you?
As I told you, we were closed only for initial three days of the lockdown in almost all the locations. Most of our labour are local. Even the migrants were also at work. So they didn't feel any risk of losing jobs and they were all paid their salaries. Maybe 4-5 percent of the labour may have gone but we don't know about that because we are ourselves not calling all of them to work; we are operating at 50-60 percent because we have to maintain social distancing. So we haven't really felt any hit because of the migrant worker exodus.
Can you throw some light on your expansion plans.
We are planning to expand to three locations now - Siliguri, Krishnapatnam and Coimbatore. We will be building multi-purpose cold storage facilities in these places and we will start the construction in the next 2-3 months time once things normalise.
This interview was originally published in Indian Transport & Logistics News' May - June 2020 issue.