Demand for cold-chain logistics heats up with online grocery boom

Demand for cold-chain logistics heats up with online grocery boom

Staff Writer
Staff Writer
Pinduoduo Content Team
April 13, 2021

The growing popularity of ordering fresh food online is driving a boom in demand for cold-chain logistics in China.

A "cold chain" refers to the management of the temperature of perishable products in order to maintain quality and safety from the point of slaughter or harvest through the distribution chain to the final consumer. Fresh agricultural products require a safe, efficient and robust cold-chain system with uninterrupted temperature control and quick delivery in order to minimize spoilage.

Cold-chain technology has come a long way since the late 18th century when British fishermen packed their catches with ice to try to prolong their freshness. Today, the cold chain consists of links from pre-cooling treatment at the point of origin, transport in refrigerated trucks and insulated boxes, to refrigerated displays and storage at the destination.

In China, the rapid development of the economy and rising living standards in recent years have led to increased demand among consumers for better quality agricultural products. This is driving investment in cold-chain logistics as companies sought to provide a wider selection of fresh foods to consumers without being constrained by seasonality or geography. Refrigerated warehouse capacity increased from 54 million square meters in 2010 to 105 million square meters in 2018.

Despite the speedy growth in recent years, the cold-chain logistics industry in China is still trying to keep up with demand.

According to the Cold Chain Logistics Committee of the China Federation of Logistics & Purchasing, in 2015, the rates of whole cold-chain transportation and storage for fruit and vegetables, meat, and aquatic foods were 22%, 34% and 41%, respectively. By comparison, over 95% of perishables in Europe and North America are circulated under cold-chain conditions.

As a result, the rates of loss in China are also higher, at as much as 15% for fruit and vegetables, 8% for meat, and 10% for aquatic foods. This compares with loss rates in the US of 2%.

Among the key reasons for the higher loss rates for fresh agricultural products in China are the dispersed and small size of farms, inadequate refrigeration facilities, a lack of professional logistics services and poor organization. For example, one critical process in cold chain - pre-cooling - requires substantial investments into dedicated facilities that most small farms cannot afford.

In China, fresh food accounted for 90 percent of the total tonnage of cold-chain logistics, with pharmaceuticals making up most of the rest. The market for buying fresh food online is expected to surpass 800 billion yuan ($122 billion) in 2023, and top 1 trillion yuan in 2024, according to several market research firms.

Pinduoduo, China’s largest agricultural and grocery platform, is investing in cold-chain logistics to maintain the quality of perishables, especially in the summer months when heat and humidity can lead to higher-than-average spoilage. Its Duo Duo Grocery service allows consumers to order and pick up their groceries within 24 hours. By matching local demand with local farm supply, the company shortens the time for the produce to get from farm to fork.

The company applied late last year to patent a proprietary cold-chain logistics network system with the aim of minimizing loss and quality degradation. It is working with partners to expand cold-chain logistics so that consumers can buy a wider range of perishables.

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