Cold Chain Storage for Agricultural Products
Cold Chain Storage for Agricultural Products
Business Model Description
Invest in or provide project financing to develop and operate cold storage facilities and refrigerated transportation systems for perishable foods. Companies active in this IOA space:
Tess Cold Chain Facilities: Established in 1992 being Sri Lanka’s first cold chain operator - engages in hiring out short- and long-term cold storage to exporters and importers who need storage facilities. As at 2018 the company has 45000 cubic ft of cold rooms of 500 tons capacity, and operates over 20 reefer containers.
Finlays Colombo Limited: Has been operating in Sri Lanka since 1893 and is the largest of its kind in Sri Lanka, with nationwide service capabilities that offer a cold storage capacity of 14,000 pallet positions.
Cargo Hub: Offers freeze Blast freezing facility up to -40 celcius level and caters into specialized products. This facility is linked to cold storage logistics services that caters to both local and international markets. The company is set up based on the experience of the mother company Taprobane Seafood Private Limited which is a leading fisheries sector exporter in Sri Lanka founded in 2011.
Expected Impact
Reduce post-harvest loss and increase value added agricultural exports
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Sri Lanka: Southern Province
- Sri Lanka: Eastern Province
- Sri Lanka: Northern Province
- Sri Lanka: North Central Province
- Sri Lanka: North Western Province
Sector Classification
Food and Beverage
Development need
In 2021, Agriculture was 7.3% of GDP(1), comprised 21.8% of Goods Exports (2) and employed 27% of the Labor Force (3). With the economic crisis, livelihoods have been under threat and as a result caused a food security crisis leading to malnutrition concerns that could reverse gains seen in development indicators (4).
Policy Priority
National Nutrition Policy (2010); focuses on ensuring food and nutrition security for all citizens. Food Production National Program 2016–2018; focus on crop production and productivity. National Export Strategy 2018-22; listing out objectives of efficient trade and logistic hub. All these policies were designed to achieve national and SDG targets.
Gender inequalities and marginalization issues
Low-income households have food security concerns with high food prices and drop in agricultural production. UNICEF’s report in April 2022 showed that 70% of households have reduced food consumption. Those relying on unskilled labor, fishing and those with no home gardens or livestock are more at risk while estate and urban poor, including migrants, are also affected.
Investment opportunities introduction
The changing economic status of the country with expanding urbanization process has given opportunity to increase number of food manufacturing units especially in and around major agricultural areas. Cold chain infrastructure development is vital as it involves a complex supply chain with storing and movement of time and temperature sensitive products.
Key bottlenecks introduction
Key challenges include limited supply chains, access to capital and inputs, lack of cold storage facilities with multi-user facilities. There is low productivity in the sector with a majority of land ownership by government. The decision to change overnight to organic fertilizer (which was subsequently changed) has also disrupted food production and output of farmers.
Food and Agriculture
Development need
In 2020, Sri Lanka was ranked 77th (from 113 countries) on the Global Food Security Index, 73rd at affordability and 86th at quality and safety (5). It is estimated that post-harvest food losses reach upto 40% in Sri Lanka and add to wastage and food security concerns (6).
Policy priority
National Agriculture policy aims to create a socially-acceptable and sustainable food system in Sri Lanka through a globally competitive agricultural production, processing and marketing mechanism (7).
Gender inequalities and marginalization issues
Even with the National Supplementary Food Program- Thriposha, growth monitoring of children, micronutrient supplementation implemented for several years, the country has failed to achieve the desired progress to overcome hidden hunger and malnourishment. Farmers or SMEs in this space fail to get a good price for their crops and are also burdened by post-harvest losses.
Investment opportunities introduction
Solar powered cold stores at farm level and collection centers, cold stores for locally produced vegetables during the off season and seed storage, cold storage for export packing centers, frozen storage capacity for fruits and seed potato cold stores, cold stores for processing second quality or surplus fresh fruits and vegetables into value added products.
Key bottlenecks introduction
Delay in adapting to climate sensitive practices, lacks technology adoption based farming and food processing techniques to improve productivity, difficulty in accessing affordable raw materials such as seeds, lack of consistent policy on fertilizer leading to fertilizer shortages that affects productivity and lacks resilience against global and local economic factors
Agricultural Products
Pipeline Opportunity
Cold Chain Storage for Agricultural Products
Invest in or provide project financing to develop and operate cold storage facilities and refrigerated transportation systems for perishable foods. Companies active in this IOA space:
Tess Cold Chain Facilities: Established in 1992 being Sri Lanka’s first cold chain operator - engages in hiring out short- and long-term cold storage to exporters and importers who need storage facilities. As at 2018 the company has 45000 cubic ft of cold rooms of 500 tons capacity, and operates over 20 reefer containers.
Finlays Colombo Limited: Has been operating in Sri Lanka since 1893 and is the largest of its kind in Sri Lanka, with nationwide service capabilities that offer a cold storage capacity of 14,000 pallet positions.
Cargo Hub: Offers freeze Blast freezing facility up to -40 celcius level and caters into specialized products. This facility is linked to cold storage logistics services that caters to both local and international markets. The company is set up based on the experience of the mother company Taprobane Seafood Private Limited which is a leading fisheries sector exporter in Sri Lanka founded in 2011.
Business Case
Market Size and Environment
> USD 1 billion
> 25%
Reducing the post-harvest loss which ranges from 30-40% depending on the crop
Sri Lanka aims to reduce its significant reliance on imports to support and narrow down the trade deficit through export promotion and import substitution. Sri Lanka has imported 400 - 600 US$ Mn worth of fruits and vegetables during 2015-2018, mainly consisting of bulk crops of onions and potatoes (8).
The Public Investment Programme (PIP) 2021-2024 recognizes that the agriculture value chains face a multitude of problems including the fragmented nature of the value chains, low economic scale of production and lack of quality assurance. Amongst major issues, high post-harvest loses due to poor handling and lack of proper facilities, including cold storage, is highlighted as a concern (6).
The National Export Strategy for Sri Lanka (2018-2022) highlights in its logistics strategy that lack of proper cold storage facilities or infrastructure hinder export opportunities. Allocating land and forming the ecosystem to attract more foreign direct investment will create the conditions for the private sector to lead the development of cold storage solutions and multi-user facilities (9).
Indicative Return
Solar-powered cold container: For fruits 56% and vegetables between 8-11%
Financial analysis based on a detailed study undertaken for an EU-funded project “Technical Assistance to the Modernisation of Agriculture Programme in Sri Lanka" finalised in 2019. The key finding from the study established the feasibility of cold chain investments that was assessed to be positive.
Investment Timeframe
Medium Term (5–10 years)
The medium term is calculated based on different investment opportunities. Payback period: For fruits, it would be less than 2 years but for vegetables between 5-7 years.
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Market - Volatile
Capital - Limited Investor Interest
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
Development of cold-storage can help improve productivity of supply chain and increase food security while reducing post-harvest damages which result from a lack of facilities.
Access to efficient cold food storage is vital to maintaining a sustainable socio economic system. Food losses on one hand result in loss of income for farmers while contributing food scarcity, malnourishment and price volatilities due to supply failure to meet demand.
Climate change is creating unreliable harvests affecting food security and safety, requiring countries to invest in cold storage to make the agriculture supply chain more resilient.
Gender & Marginalisation
Development of cold storage provides more employment opportunities, particularly for women and marginalized communities, minimizing post-harvest losses and through potential value addition of agri products.
Expected Development Outcome
The National Agriculture Policy (NAP) recognizes sustainable transformation of agriculture to a modernized sector to protects the stakeholders across the value chain including poor and marginal farmers (7).
To Increase the capacity of agri sector according to the market demand and increase quality of the supply chain. This ensures better economic gains by engaging in value added agri-products and promoting healthy and sustainable living.
Gender & Marginalisation
Expand market access of agri-products and increase export opportunities for SMEs through integration into global value chain.
To increase supply chain integration and support expansion of regional businesses.
To increase income and economic opportunities from women led households, female employees and women owned/led businesses that are dependent on agri sector value chain activities.
Primary SDGs addressed
2.a.2 Total official flows (official development assistance plus other official flows) to the agriculture sector
Not Available
Not Available
12.3.1 (a) Food loss index and (b) food waste index
Not Available
Not Available
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Outcome Risks
The outcome would be affected with obtaining necessary approvals with public sector stakeholders and initiate proposed business model, which can be a cumbersome process
More locally produced food may be exported, which can reduce the amount of food in local markets.
Gender inequality and/or marginalization risk: no specific gender and marginsalisation risk
Impact Risks
If targets are not achieved, high import dependency and post harvest losses will continue. Will make it challenging to meet sustainability goals
Affects affordability level of cold chain storage services for farmers, and environment degradation that arises from post harvest losses and increases the losses borne.
Gender inequality and/or marginalization risk: Lack of cold storage would lead to many economic and business losses further aggravating particularly for women and MSMEs
Impact Classification
What
Cold storage reduces post-harvest losses, improves food security, quality of agri products, food, enhances economic productivity, and reduces the impact of climate change.
Who
Households and consumers will have access to quality food at affordable prices, corporates and exporters will have better market opportunities and economic gains.
Risk
Sri Lanka faces risk of unconsistent and adhoc policy changes (eg: the organic fertiliser policy). Therefore, potential policy changes may affect the scalability and commercialization
Contribution
Increases fruit and vegetable exports and improved domestic food security through reduced wastage.It is estimated that supermarket sales will increase by 30% per year with cold chain
How Much
According to estimates, investments could reduce post-harvest losses from current 30% to an average of 15%.
Impact Thesis
Reduce post-harvest loss and increase value added agricultural exports
Enabling Environment
Policy Environment
National Agriculture Policy is a sectoral policy that works towards a vision for achieving a sustainable food security to achieve national prosperity. The vision for creating a socially-acceptable and sustainable food system in Sri Lanka is set to be achieved via 10 goals (7).
The National Export strategy (NES) consists of priority sector strategies and trade support functions where Processed Foods and Beverages and logistics are given key considerations for achieving the mission of an export hub driven by innovation and investment (9).
The Public Investment Programme (2021-2024) is prepared with a medium-term perspective for estimating the amounts of investible resources that become available to the government during a given period and indicating how these will be allocated to different sectors and agencies (6).
Financial Environment
Gains and Profits from Agro processing is subjected to a lower Income tax rate of 14% (11).
The Board of Investment (BOI) in 2022 launched the five-year residence visa program dedicated to investors, stakeholders and BOI enterprises.
Regulatory Environment
Customs Ordinance (1869); Border (trade) Measures: Regulation of food and agricultural imports and exports (including tariffs). Imports and Exports (Control) Act (1969); covers import control measures on Agri products
Land (Restrictions on Alienation) 2014 (and Amendments thereof in 2017 and 2018) provides exemptions, regulations pertaining to land ownership thresholds and regulations pertaining to foreign investors and tlimitations of foreign ownership (8)
The Agrarian Development Act (2000) and the Amendment Act (2011) constitute the legal environment on matters relating to landlords and tenant cultivators of paddy lands and the utilization of agricultural lands in accordance with agricultural policies.
Regulation related to natural resources: The Fauna and Flora Protection Ordinance (1964). Approximately 2.3 million ha, equivalent to 35% of Sri Lanka, is administered as protected areas by the Department of Wildlife Conservation and Forest Department.
The Plant Protection Act No. 35 of 1999 that facilitate the international movement of healthy plants and plant products for the development of national agriculture and related industries
Marketplace Participants
Private Sector
Finlays Colombo, Cargo hub, Tess Cold Chain Facilities, Hayleys Agriculture Holdings Limited, CIC Agri Business (Pvt) Ltd, Ellawalla Export (Pvt) Ltd, Nidro supply (Pvt) Ltd
Government
The Ministry of Agriculture. The Ministry of Environment, The Ministry of Trade.
Multilaterals
The United Nations Industrial Development Organization (UNIDO), The World Bank, The European Union.
Non-Profit
The Ceylon Chamber of Commerce.
Target Locations
Sri Lanka: Southern Province
Sri Lanka: Eastern Province
Sri Lanka: Northern Province
Sri Lanka: North Central Province
Sri Lanka: North Western Province
References
- (1) Department of Census and Statistics (2022). National Account 2015 Base. http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/2015/Reports/Annual_A49/GDP_co_2010-2021
- (2) Central Bank of Sri Lanka (2022). Annual Report 2021.https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2021/en/9_Chapter_05.pdf
- (3) Department of Census and Statistics (2022). Quarterly Report of the Sri Lanka Labor Force Survey - Second Quarter 2021. http://www.statistics.gov.lk/LabourForce/StaticalInformation/QuarterlyReports/2ndQuarter2021
- (4) United Nations Office for the Coordination of Humanitarian Affairs (OCHAO and The UN Resident Coordinator's Office (RCO) (2022) Sri Lanka Food Security Crisis - Humanitarian Needs and Priorities: June – Sept 2022 https://srilanka.un.org/en/185471-sri-lanka-humanitarian-needs-and-priorities-plan
- (5) The Global Food Security Index (2020): https://impact.economist.com/sustainability/project/food-security-index/
- (6) The Public Investment Programme (2021-2024):https://www.npd.gov.lk/images/publications/PIP_2021_2024.pdf
- (7) The National Agriculture Policy (2021): https://www.agrimin.gov.lk/web/images/pdf/Policy/2021.03.27%20-%20NAP/NAP%20Web%20Version%20-%2026%20March%202021.pdf
- (8)Land (Restrictions on Alienation) Act no 38 of 2014 http://www.ird.gov.lk/en/publications/Acts_Land%20Tax/Land_Act_No._38(E).pdf
- (9) National Export Strategy - Logistics (2018 - 2022): https://www.srilankabusiness.com/pdf/nes/sri-lanka-logistics-4-3-web.pdf
- (10) Sustainable Development Council Website for SDG indicators: https://data.sdg.lk/access/2
- (11) Inland Revenue Department: Income Tax rate (2022): http://www.ird.gov.lk/en/publications/SitePages/Tax_Chart_2021.aspx?menuid=1404
- (12)Central Bank Annual Reports (2015-2019: https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports