Unlocking Brazil's Cold Chain Potential: Exploring Market Growth Propelled by Rapidly Increasing Trade

With increasing exports and imports, Brazil's Cold Chain Market is poised for significant growth. However, challenges such as dependence on the road sector, certification requirements, and technology lag hinder its progress. Robust certifications and advancements in logistics and storage solutions are needed to ensure product quality and safety. As Brazil aims to strengthen its position in global trade, it becomes crucial to analyze market dynamics and drivers for growth. So, will the market achieve double-digit CAGR growth? Let's find out

1. Cold Chain Industry in Brazil has been constantly evolving due to demand of such facilities driven by export and import of certain products

Particulars		Description
Market Introduction and Genesis		Introduction: The Cold Chain Industry in Brazil has been significantly growing due to high demand for cold chain facilities for storage and transportation by meat and seafood companies, grocery retail stores and various fast food restaurants. Moreover, Brazil is a major exporter of perishable products. Such products are temperature sensitive and have low shelf life. This makes cold chain facilities imminent for transport and storage of such goods.
		Historical Evolution: The evolution of the Brazil Cold Chain Market began in the 1960s with the import of industrial freezing equipment by meat and fish industries and Brazil became one of the largest exporters of concentrated orange juice, chicken and beef by the end of decade. The industry further improved in 1980s with a massive increase in consumption and sale of frozen foods such as ready-to-eat meals, frozen meat and seafood among others. The country’s storage capacity was 100,000 cubic meters in 1970s and now according to the Global Cold Chain Alliance, the average warehouse size of a cold storage in Brazil now is over 100,000 cubic meters.
		High Demand in the Market: Cold Chain Industry is a capital intensive business with seasonality involved due to dependence on perishable processed food industry. The industry witness 4 months of the peak season from August to November for many tropical fruits and vegetables like Grapes, Mangoes and others as these fruits are exported to other countries and have to be stored in refrigerated warehouses to prevent spoilage.
		Expansion in the Market: There is constant expansion in the business in the country. There are new companies coming up every year viewing certain opportunity in the industry. There are new companies in the industry which are still small and growing in the market and capturing market share. Every company wants to achieve diversification in storage to be able to work with frozen, chilled and dry temperatures across various products.

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2. However, there still remain some road blocks like Lack of infrastructure, transport security, and increasing operational costs that restrain the growth in the Brazil Cold Chain Market

Lack of Infrastructure

• There is difficulty related to infrastructure of the distribution centers and transport routes, both on the railroads and on the highways hindering speed and quality of travel. Majority of the roads are unpaved and seaways are underutilized posing several challenges for the transporters.

Rising Cost of Operations

• It is very difficult for the companies to keep their accounts scaled considering the operational costs of operating the business.
• Increasing taxes, high investments required in cold storages and reefer trucks, lack of infrastructure causing severe damage among other things make it difficult for companies to maintain profitability.

Transport Security

• A company would expect its load to arrive complete and on time.
• The number of accidents on the country’s highways is increasing and many of these incidents involve trucks.
• Thus, one of the major logistic challenges is to find solutions so that occurrence of accidents can be reduced.
• There are other problems like health of employees driving the vehicle, goods can be damaged or lost causing losses to investors.

Source: Interviews conducted with Industry Experts, Industry Articles & Ken Research Analysis

2.1 Dependence on road sector, certifications and technology lag are some of the other challenges faced in the Brazil Cold Chain Market

Dependence on the Road Sector

• Seaways in the country are underutilized, airways are not widely used due to high costs involved whereas railway lines are not extensively connected.
• This leads to companies being dependent on roadways leading to increased spending, longer delivery times and greater risk of accidents.

Technology Lag

• Another issue is lag in the technology designated for transport logistics.
• Technology can be used for improving processes, optimize working times but when it is not exploited properly, it creates problem in efficiency. Technological developments are necessary for improving the situation in cold chain

Certification Requirements

• The companies operating in Brazil Cold Chain Industry are burdened with obtaining licenses from different bodies.
• They have to get enrolled with ANVISA for frozen food, MAPA for animal origin products etc. Port operator certification is also required for export of products of several classes.
• Registration with SIF, National Seed and Seed Registry is also required to ensure safety for consumers. These certifications require considerable time and money negatively impacting the cold chain market.

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3. Still, Increasing exports of perishable products and growing demand from chemical sector coupled with an increase in per capita income is driving the cold chain market in Brazil

Rising Exports and Demand for Perishable Products

• Brazil exports only 3% of what it produced. A Majority of beef produced (76%) is consumed domestically. Exports are steadily increasing to destinations including China, Hong Kong, Egypt, United States and EU.
• Agribusiness is also on the rise in the country including products like meat, seafood, agriculture etc. which presents huge opportunities for cold chain companies. Efforts are being made to improve the infrastructural situation in the country, Companies are coming up with innovative packaging to increase the shelf life further escalating the exports.

Demand from Pharma and Chemical Sector

• Considering the cold chain market, chemical and pharmaceuticals industries are the significant contributors to market growth in Brazil.
• Brazil imported USD 41.4 billion in chemical products in 2020 for acquisition of more than 51.5 million tons which is a record ncrease in volume of chemicals imported from 2019. There was a reduction in monetary value but an increase in physical quantities especially considering the serious global and national economic conditions due to COVID-19 pandemic.

Increasing Per Capita income

• With the increasing per capita income of the country, people are gradually improving their standard of living as well as updating their food habits experiencing shifts to packaged, refrigerated and readymade items, It is also fueling the overall grocery retail spending in the country. All these factors would contribute to an increase in demand for refrigerated and packaged products.

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4. Moreover, increasing government initiatives, rising per capita income, and growing exports of certain products will enable the Brazil cold chain market to grow with double-digit CAGR

Strengths

• Increasing Export of Meat and Seafood products and Increasing imports of Pharmaceuticals will require more cold storage and transport facilities in the country and hence, driving growth.
• Geographical location of Brazil provides good accessibility through all modes of transport such as air, land , sea and has played a significant role in development of cold chain industry.
• The growth in Agriculture and its contribution to GDP is increasing which would further demand more cold chain logistics facilities in the country.
• Increasing demand for Meat and Seafood in the country would further help the industry.

Weaknesses

• There is difficulty related to infrastructure of the transport routes, both on the railroads and on the highways hindering speed and quality of travel. Majority of the roads are unpaved and seaways are underutilized posing several challenges for the transporters.
• Technological developments are necessary for improving the situation in cold chain.
• The number of accidents and theft incidents is increasing in the country which leads to damage of goods, affects the health of employees and causes huge losses to investors.

Opportunities

• With the increasing per capita income of the country, people are gradually improving their standard of living as well as updating their food habits experiencing shifts to packaged, refrigerated and readymade items
• Many small companies are coming up in the market and competing for capturing market share. This would increase competition in the market inducing existing players to improve.
• Companies are given contracts to establish distribution centers. Also, large players are acquiring small companies for distribution.

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