Frozen in China
Asahi’s sale of farm, dairy businesses shows problems in country’s rapidly growing cold- chain logistics industry
Japanese beverage maker Asahi Group Holdings reportedly sold its farm and dairy businesses in China due to the country’s underdeveloped cold supply chain. Experts said that China’s cold- chain logistics network in first- and second- tier cities has developed quickly in recent years, but still lags behind that in more developed countries and regions. Still, the industry has great growth potential, and any of its problems can be addressed through improvements in transportation equipment and technology, as well as the creation of industry standards.
After about a decade of expansion in China, Japan- based beverage maker Asahi Group Holdings has decided to sell off its farm and dairy business in the country.
Asahi launched its farm business in 2006 in East China’s Shandong Province, using Japanese agricultural technology and experience in vegetable production, according to a report by ribenxinwen.com on Tuesday.
In 2008, Asahi created a dairy business in the province, bringing in cows from Australia to make high- quality dairy products. But the company found it’s difficult to scale up the business while maintaining its farming methods, so both its dairy and farm businesses ran at a loss, the report noted.
Asahi originally planned to sell high- quality fresh dairy products to expand targeted markets primarily in Beijing and Shanghai, the cities where most of the country’s Japanese population live, but because China’s logistics for fresh milk cannot guarantee delivery channels like Japanese logistics can, the company failed to make much headway in those markets, the report said, citing an Asahi employee familiar with the matter.
Thus, Asahi decided to sell off its dairy and farm businesses in China, and will shift its focus to strategic growth fields, like beer, according to the employee.
Experts said that the Japanese beverage maker’s example shows weak- nesses in China’s cold- chain logistics.
As a series of storage and distribution activities maintaining a given temperature range, the cold chain exists to ensure the quality of products such as fresh produce, seafood, frozen food, chemicals and pharmaceuticals.
China’s cold- chain logistics industry lags behind that of developed countries and regions, but such transportation services in first- tier and second- tier cities across the country have grown quickly in recent years, according to experts.
For example, nowadays it is not a problem to deliver fresh milk via cold- chain transportation from Inner Mongolia to Beijing within a proper period of time, said Xu Yong, chief analyst at industry portal cecss. com. “But some personalized needs are still hard to realize given the current level of domestic cold- chain logistics,” Xu told the Global Times on Wednesday.
Remaining challenges
China’s cold- chain logistics industry has developed quickly with the expansion of industrial infrastructure. As of the end of 2015, total freezer capacity reached roughly 93.5 million cubic meters, up 12.6 percent from 2014, industrial news portal lenglian.org.cn reported on November 30, 2016.
In 2015, the revenue generated by the top 100 domestic cold- chain companies increased 17.3 percent yearon- year to 17.39 billion yuan ($ 2.52 billion), the report said, noting that the sector is inclined to grow with features including more subdivision of services, cross- border competition as well as global deployment.
However, structural problems remain. In China, freezer capacity per individual stands at 0.07 cubic meters, lower than 0.36 cubic meters in the US and 0.33 in the Japan, lenglian.org.cn report said.
Also, China’s cold- chain flow rates for fruits and vegetables, meat and seafood approached 30 percent, 50 percent and 65 percent, respectively, in 2015, while the rate of perishable items in developed countries and regions was more than 90 percent over the same period, according to the latest revision to an industrial report issued in late November 2016 by the Shenzhenbased CIC Industry Research Center.
“Fruits and vegetables are seldom transported via the cold chain in China, though cold- chain delivery of meat is much more likely,” said Shao Zhonglin, former assistant secretarygeneral of the China Express Association.
Shao told the Global Times on Wednesday that most of cold- chain delivery services are regional and a national logistics network has yet to be established.
For instance, the Jing- Jin- Tang region – which refers to the urban cluster around Beijing – has its own cold- chain logistics network, but longdistance cold- chain delivery, such as from Shanghai to Beijing, is less common, Shao said.
“If a company wants to operate its own cold- chain delivery network, the cost is very high,” Shao said, noting that many Chinese consumers do not have strict requirements about highquality products because they care more about price.
Xu agreed, saying that upgrading the industry faces many challenges, with cost first among them.
The domestic cold- chain industry should expand what it delivers beyond mostly meat. It should also deliver fruit, vegetables, chemicals and other perishable products, he said.
Also, the improvement of cold-chain transportation equipment and technology should be focused on advancing the upgrading of the industry, Shao said.
Industry prospects
Due to the growing demand, the domestic cold- chain industry has large growth potential, experts said.
The market scale of China’s cold-chain logistics industry surpassed 180 billion yuan in 2015, the lenglian.org.cn report said, citing Geng Shuhai, an official from the National Development and Reform Commission ( NDRC), China’s top economic planner
At an annual industry meeting in Nanning, capital of South China’s Guangxi Zhuang Autonomous Region, Geng said that the Chinese government will give full policy support to the development of the sector, because promoting the sector’s development plays a key role in advancing supplyside reforms and facilitating the upgrading of the consumption structure.
The growth of domestic cold- chain logistics will enter a golden era. “Those first to enter the market will grab the opportunity to take a big slice of China’s cold- chain market pie,” Geng was quoted as saying in the report.
China’s leading express firm, SF Express Co, aims to create an improved cold- chain platform in the country.
In April 2016, the company announced plans to add 155 cold- chain vehicles for pharmaceutical transportation, which will provide services for 20 cold- chain main lines such as Beijing-Qingdao-Shanghai, Beijing- Taiyuan-Xi’an, and Wuhan- Chongqing-Chengdu, according to the company’s website.
“The government is expected to roll out a set of standards for cold- chain transportation because the lack of standards cannot guarantee the consistency of cost,” Shao said. “For instance, the storage temperature should be maintained below - 18 C.”
He said that the government should tighten regulations on product quality to pave the way for the growth of coldchain logistics.
The country is also beefing up efforts to employ advanced technology to promote sharing information among different regions and companies in the cold- chain logistics sector, Geng said.