In conversation with Mr. Niti Manraksa, we tried to understand the Cold Chain Market in Thailand. We discussed about what are the major trends and factors affecting the growth of market.
“Huge investment and technological cost coupled with rising fuel prices is hampering the capacity expansions plans of companies”
Q1 What are the demand and supply patterns of cold storage services in Thailand?
Actually, in recent years, the demand for cold storage space has increased quite rapidly due to increase in seafood, fruits vegetable consumption and export volume but the supply or availability of cold storage space did not increase in the same proportion which has led to the creation of a major gap in demand requirement and supply of cold storage space, as a result, the existing cold storage warehouse operates at 90-100% occupancy rate
Q2. What is the reason for the shortage of cold storage warehouses in Thailand?
Actually, the cost of establishing and running a warehouse is very high. It requires a huge investment in land, building and technology to establish a temperature-controlled warehousing unit. Moreover, the operation cost is also high due to increasing labour and electricity costs.
As a result, existing supply of cold storage is less than the demand.
Q3.What are the major growth driver of the cold chain industry in the country?
Some of the major demand drivers are the increasing demand for frozen food items and online and fast deliveries of food and medicines. There has been a rise in the consumption of frozen foods and ready-to-eat meals largely due to the explosion of hypermarts and convenience stores across Thailand. The rise of e-commerce has also led to the growth of cold transportation and storage in Thailand due to the need for quicker deliveries.
Q4. What are the major challenges being faced by Thailand’s cold chain industry?
Lack of automation, shortage of qualified warehousing staff and drivers along with high energy costs are the major challenges being faced by the industry. The automation rate in cold storage warehousing is very low in Thailand and services are more dependent on manpower rather than technology. Only few big firms such as JWD Logistics are using advanced technologies such as ASRS in their warehouses.
Q5. Can you give more insights on the captive and 3PL logistics scenario in Thailand?
Most of the food manufacturers and importers in Thailand demand cold storage logistics solutions owing to cost concerns, consumer preferences and avoiding the complexities involved in product handling, management and storage. It is only after the company has stabilised itself in the market and increased the scale of its operations, it may decide to establish its own warehouse for captive use considering it is a heavy investment decision.
Q6. What are the major cities which contribute a major portion of the demand for cold chain solutions?
The major demand for cold storage services is generated in the Bangkok metropolitan area, contributing approximately 50-60% of the revenue, which includes 5 adjoining provinces namely, Nakhon Pathom, Pathum Thani, Nonthaburi, Samut Prakan, and Samut Sakhon. Apart from it, other hubs are Chonburi province in the east and Chaing Mai in the North.
Q7 Currently what is the extent of technology being adopted in warehouses for process automation?
The level of automation employed in cold storage warehouses is quite low in Thailand, roughly around 10-20%. But it is expected to increase at a very fast pace in the future due to high manpower cost and customer demand for automated warehouse services.
Q8 What do you think is the future outlook of the Thailand Cold Chain Industry?
Due to the gap in demand and supply of cold storage space, there is a very high scope for future growth to meet the unfulfilled demand. Apart from it, supporting factors like the expansion of international trade in fruits, vegetables and meat-sea food industries, increasing adoption of packaged foods and infrastructural developments would drive the further expansion the of cold chain market in Thailand.
Q9. Who are the main end users in the cold chain market in Thailand?
The cold storage market is driven by the increasing consumption of more perishable goods in the country. In terms of volume, the biggest segments that are catered by the cold chain industry include meat, seafood, fruits and vegetables which take up about 60% of the market followed by dairy products, drugs and vaccines.
Q10. What are the government initiatives or policies in supporting the growth of the cold chain industry?
There has been increased focus from the government to increase the logistics infrastructure of the country to establish it as the logistics hub of ASEAN leveraging the strategic geographical location of the country. The government’s vision of making Thailand the “Kitchen of the World” has led to significant investment in the development of a complete supply chain for food logistics. The government is investing heavily in the development of road infrastructure to increase land connectivity, further boosting the logistics industry.
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