Covid-19 vaccine to help cold chain market jump 17% to Rs 1.7 trn in CY21

Growth next year comes on the back of robust 16% estimated annual growth over past five years with volume growth in the period pegged at 4.4%

An increase in demand for cold storage solutions from pharma and other segments is expected to help the Indian cold chain market to post a 17 per cent growth in 2021 to Rs 1.7 trillion, according to market research firm IMARC Services. In addition to the demand for cold storage to house Covid-19 vaccines, cold chain service providers and logistics players are witnessing a surge in demand from pharma and allied industries. 

Growth next year comes on the back of robust 16 per cent estimated annual growth over the last five years (2015-2020) with volume growth in the period pegged at 4.4 per cent. By the end of 2020, the cold chain market is expected to have a volume capacity of about 41 million tonnes. 

While the growth this year is expected to come from the rolling out of the Covid-19 vaccines (advance orders), the wider reach of the government immunisation programme and the increasing requirement from online grocery platforms aided the growth of the sector over the last few years.

Currently, healthcare products account for a share of 3.6 per cent in the overall Indian cold chain market, which is expected to grow by two thirds to around 6 per cent by the end of next year, estimates IMARC Services.

Ratings and research advisory firm Crisil said the cold chain industry is expected to see a growth of 9-11 per cent in FY22 in value. This growth will be led by an optical recovery in segments such as meat and seafood. Moreover, pharma segment will continue its growth trajectory aided by Covid-19 vaccine deliveries. 

India will require about two billion doses to vaccinate a billion people going by the 2-dose regime that is to be followed. 

Companies have said that India has created a very good infrastructure to handle vaccines, which need temperatures between 2-8 degrees and -20 degrees. Since June this year many of the state governments and some in the private sector have started placing orders with cold chain equipment developers.

According to industry sources, India has 225 Walk-In Coolers, 57 Walk-In Freezer, 44,000 Icelined Refrigerators, 38,000 Deep Freezers, 79,000 Cold Boxes, 1.4 million vaccine carriers and 700 vans. Around 520 million Universal Immunisation Programmes (UIP) and 1.32 billion non-UIP vaccinations are done annually.

Blue Star Managing Director B Thiagarajan said states have been adding capacity since July to fill the gaps as required.

During the past three months, the company, which claims 70 per cent market share in pharma and pharmacy segments, has got orders for 320 cold rooms, 470 medical refrigerators and 1,200 deep freezers and expects few more tenders to come.

Thiagarajan expects incremental revenue of Rs 100-150 crore if the vaccination is stored between 2°C and 8°C, and if it is going to be -20 degree, he expects incremental revenue of about Rs 500 crore in the next 18-24 months.

The other segment which sees good opportunity is logistics solution providers, who have begun ramping up capacity to distribute Covid-19 vaccines. According to a Credit Suisse report, the largest private player – SnowmanLogistics – has a capacity to store 650 million doses. But this assumes that all of the capacity will be used only for vaccine storage. Capacity available for vaccine distribution will be only 10-15 per cent of this or about 100 million doses for Snowman. TCI Express management said it has entered the cold chain segment recently and is in talks with agencies and government for the distribution of Covid vaccines. The company has said it has won contracts from the state governments, without naming the states and said its network will give the company an edge. 

The company has 900 branches, 50,000 pick-up and drop points and caters to 720 districts. "Even if we establish one cold box in each of these networks, it is a great network addition that we can give the government", said the management in an interview.

For the organised private cold chain storage sector, total vaccine storage capacity would be 250-300 million doses. 

Demand for refrigerated vans has also started picking up.

V Seethapathi, vice president, Product Line, I&LCV, Tata Motors, country's largest CV maker, said during the pandemic, the overall last-mile delivery segment saw considerable growth on the back of high demand in the e-commerce sector, which was triggered by the pandemic and the lockdown. Demand for intermediate and light commercial vehicle reefer trucks is yet to reach its true potential post the lockdown, he says. 

The reefer truck segment has seen de-growth in H1 FY21 compared to the same period last year. But the interest levels in the segment have seen an uptick of about 15 per cent during the past two months. As the nation awaits a concrete plan from the Centre on vaccine distribution, the demand for reefer trucks is expected to increase in Q4.

Reefer trucks will play a huge part in dispatching the vaccine. Transportation of vaccines will require a high level of expertise and reefer trucks will have to follow set protocols by the pharma industry, to ensure safe delivery across the country. Demand for ultra-cold storage vehicles is expected to rise as hundreds of thousands of vaccine doses at sub-zero temperatures will have to be transported at a spoke-to-spoke level as well as last-mile delivery.

The organised sector does not have reach extending to the hinterlands in the country and for those regions, it is likely that the government may utilise existing fruit and vegetable cold storage to achieve the purpose.

Rampraveen Swaminathan, MD & CEO, Mahindra Logistics added, they are in talks with the company's business partners for scaling up cold-chain requirements. "We are also in the process of talking to multiple pharma companies to evolve a support mechanism. Additionally, a strong chain of right technology infrastructure to support the vaccine data is being mapped across the supply chain. We are working with technology partners (within the Mahindra Group) to evolve a strong platform to support the programme," he said.

There has been a steady rise of cold-chain solutions with our consumer clients over the years. With more and more clients going the e-commerce way, we have created bespoke temperature-controlled facilities for their customers in the last few quarters.