Global supply chains have been put under unprecedented pressure over the past few years, however cold chain logistics has always been different and characterised by good margins, particularly if compared to contract logistics or dry cargo.
Also known as “cold” or “refrigerated” logistics, this is the part of the business that deals with storing, transporting and/ or distributing temperature-controlled goods such as food, dairy products, medicine, as well as (semi-cold or chilled) tech parts. These margins come with a higher level of complexity given that this cargo can be perishable, and time-bounded, and it needs higher investments due to differences in real estate (cold storage). Nonetheless, this is a sector that can survive market crises and difficulties slightly better than others, due to the continuous demand and necessity of its products (e.g., food and pharmaceuticals). In the last couple of years, a continuous trend for cold supply chains has been consolidation. In markets like North America and Europe, quite a lot of acquisitions have been finalised with, for example, private equity companies jumping on the markets and acquiring cold storage companies. Now, looking ahead, what will be the trends that will characterise and influence cold chains next year?
What will be the upcoming cold chain trends in 2024?
- Market volumes: As reported by Grand View Research in their Market Analysis Report the global frozen food market (in this report covering fruits & vegetables, potatoes, meat, ready meals, fish/seafood) is “expected to expand at a compound annual growth rate (CAGR) of 5.2% from 2022 to 2030”. This will put pressure on the whole cold chain transportation flow, particularly for cold storage in urban overpopulated cities. Commodities used in storage, such as steel and lumber, currently expensive and hard to find due to supply chain issues, will continue to challenge the renewal of existing cold storage facilities that need to be updated, as well as the capacity of building new ones.
- Visibility: Higher quality insights are decisive for refrigerated products, therefore 2024 will see more investments in software that can improve visibility on the whole supply chain. Better tools will need to come in place to effectively monitor temperature-sensitive cargo and create an unbroken cold chain that has real-time visibility on the product conditions (before, during and after containerisation) using uninterrupted data. Real time monitoring will become even more precise, with GPS-enabled devices placed in the containers. Artificial intelligence will also be tested to adjust labour efficiencies, help with predictions, and support cold storage inventory management to ensure efficiency and safety. Finally, visibility will also augment food traceability, which is a feature highly requested by consumers worldwide.
- New pharma and the growing middle class: With globalisation ongoing, the increase of the ageing population, and related health issues linked with advanced age, will influence the growth of the pharmaceutical industry, giving it a boost in investments and innovation. “With the astronomical demand for innovative medicines and biopharma products, as well as a continued growth in sale for existing ones, this growth will be additionally impacted by the growing global middle class having higher disposable household income” says Ahmet Sayli, Head of Product Growth, Cold Chain Logistics Maersk. Even if next year a slowdown on economic growth is expected, in some growing markets the rise of the “healthy food trend” and increasing demand for probiotic supplements such as kombucha, premium protein, or caffeine-based products, is projected to grow and foster the logistics necessary to move these.
- Automation: Next year, automation will be a keyword for cold chain logistics. Companies will invest more in trying to optimise their processes and flows, optimising their data use and increasing the scalability of such solutions. This is partly due to the rapid ageing of the labour force, and the competitiveness of the market due to new technologies being created. Elements of automation and robotic solutions will help combat labour shortages particularly within cold storage, improving efficiency and reducing waste.
- Sustainability: The cold chain industry is energy heavy. The need for a strong transition is clear, particularly in using renewable for on-site generation (e.g., solar) and for additional processes. This movement started from FMCG companies using cold chain transportation, will have even more relevance in 2024 as companies dealing with cold chain will demand tangible actions stemming from their logistics providers. Another related issue we will see will be the challenge associated with aging infrastructure. The needed renewal of cold chain warehouses, facilities, etc. to meet efficiency requirements on the market will see the phasing out of energy-inefficient and incompliant infrastructure across the globe. From sustainable refrigerants, to newer infrastructure, as well as the demand for solid sustainability strategies, next year will be important for cold chain players to show their commitment and walk the talk on their energy transition.
- Cold investing in fresh: In the upcoming years, we will observe more cold chain businesses and providers investing in the packaging and storage of fresh food, developing facilities for this activity, to keep it close to its final mile.
- Stronger integration: Today, food-producing companies are partnering with fully integrated supply chain providers, that can help them across their supply chain. “This trend won’t stop soon. The cold chain market will keep looking for more integration for their logistics, to add value as well as minimise handovers and waste in their cold chains” says Hans Kroes, Global Business Product Owner of Cold Chain Logistics at Maersk. In the next year, more strategic alliances and partnerships between players will be formed to augment efficiency, gain better visibility and build a smart flow that can also improve sustainability along the way.
What is in sight for cold chain logistics?
High-interest rates, inflation, and lower consumer demand impact cold chain infrastructure investments. Despite these strong headwinds, certain areas in the world will experience growth in the next years. According to a recent report by Precedence Research, the cold chain logistics market “was valued at USD 304.8 billion in 2022 and is expected to surpass around USD 892.6 billion by 2030” and “expected to grow at a compound annual growth rate (CAGR) of 14.7% during the forecast period 2023 to 2030”. This improvement will also depend on the growth of the pharmaceutical industry and of online grocery services (supermarket chains upping their online offering and dark stores), as well as the increase of deliveries from farmers directly to consumers with no intermediate.
Overall, the market will see an increased focus on digitalisation to foster visibility and automation, stronger sustainability requirements, a growing middle class ready to change demands, investments in fresh produce, and all of this while navigating a challenging global economy. As a result, producers using cold chain logistics will need to gear up by preparing, testing, and planning their logistics accordingly with the help of good integrated logistics providers.
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