Importance of Cold Chain For China

Monday, January 28, 2008 22:25
Posted in category Uncategorized

One of the major concerns that has been ongoing is food, and more specifically food safety. Living in central Shanghai, one would think that produce would be delivered to the market buy a 53 foot refrigerated trailer, or at a minimum be boxed.

But something that I have seen more often in China than not is that a truck no more than 5 meters long will pull up to the corner, and 4-5 people will unload a half ton of produce onto the sidewalk.

Produce buyers will then ride up, inspect the goods, and the transaction occurs. Sellers go how with the sidewalk is once again void of produce.

At other times it is trucks full of cabbage going down the highway uncovered….

Previously, I got into this issue from a more supply chain stand, but for the purposes of this post, I will look at the impact of China’s food chain has from a sustainability standpoint because essentially what it boils down to is that this system of supply chain management creates a huge amount of waste, and possesses a huge amount of risk to health.

Recently the Cargonews Article Mainland needs cold chain standards discussed the need for cold chain in China, and just how important it is for significant capacity be brought online. Throught his article though, what I really gained was another angle on just how the inefficiencies in China’s Supply Chain have a tangible impact on China’s economy. Typically measured at 20% of GDP (U.S. is under 10%), where this article’s important lies in it focus on the fact that within the food chain there is much higher waste.

according to the article:

China accounts for 13 percent of global fruit production and 40 percent of the vegetable output. But because of inefficiency in the distribution and transport of farm products there is a loss of US$10 billion annually. Around 30 percent of the total production of fruit and vegetables are wasted because of a lack of temperature control.

and that

that 60 percent of the meat and 80 percent of the milk and soyabean products in China do not use cold chain systems

Before tackling the warm meat and milk, let’s look at how the 30% produce waste occurs, and what this really means:

Through a project a few years ago, I learned that the basic cycle of produce coming to market is that with the average farmer in China farming less than a single MU (660m2) of land, they will often consolidate their loads with neighbors through a simple program of dumping their produce on the street in front of their farms. A consolidator will make their way through the area and will pick up the loads and then dump them into a warehouse within the city/ district (depends on size) whereby the first sort will occur.

During the first sort, old or damage produce is separated from those that are sellable into the markets (local, regional, and export), and at that time anything that was lying on the ground or on the bottom of the truck will be essentially waste.

At this point, the goods will be consolidated once again and more than likely taken to another consolidator or delivered to market. Often times this transportation occurs without even boxing the produce, and it is highly unlikely that refrigeration is being used.. so what you have is a lot of produce that has been squashed at the bottom and exposed to the elements of the highway on the sides and top of the load… and will all end up waste.

The second to last step of this equation occurs at the grocery where the last sort is made by customers, and anyone who has ever bought bananas will know that stores never fully sell everything they stock. Well, in china the problem is larger as produce goes bad much faster from the lack of proper handling and refrigeration.

and without getting too graphic, you can only imagine what the process for meat and milk must be….

To fix just the problems descrbed above , AT Kearney estimated it would take 150 billion USD to fix the problems. 150 billion USD. However, that is really just the tip of the iceberg. After all, at the core, this is really a long term sustainability issue, and if you compound the 30% waste rate, it is pretty easy to see that with diminishing arable land and the diminishing returns of the land in general, this 30% waste is something that is much bigger and goes to the heart of China’s sustainability.

To learn more, take a look at the report The Vegetable Supply Chain of Supermarkets in Sichuan, China. It is quite interesting and will provide a much more detailed picture of the issues

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3 Responses to “Importance of Cold Chain For China”

  1. David A says:

    January 29th, 2008 at 12:32 am

    Richard –

    Have you been waiting for the China ice storm to publish this? See you next time in Shanghai.

    DA

  2. Rich says:

    January 29th, 2008 at 12:40 am

    David,

    Interesting timing for sure, but this was a scheduled post that I put together before the storm. Was supposed to follow the food inflation post a couple weeks ago, but got log jammed with a couple of reports.

    R

  3. Evan Jerkunica says:

    January 29th, 2008 at 6:01 am

    Sweet post. The interesting thing about analyses about the cycles of resources is that people like myself (American), are completely ignorant of how food or processed food gets to our grocery store from the farm.

    Really interesting and will get increased focus in the coming years as we move (however slowly) towards a more sustainable pattern of consumption.

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