International Flows Coordinator of STEF Portugal talks about Portugal Cold Chain industry is growing rapidly due to higher demand from food and pharma sector, especially in the recent years: Ken Research

In conversation with Ms Liliana Andrade, International Flows Coordinator, STEF Portugal, we tried to understand the Cold Chain Industry in Portugal. We also discussed the effect of pandemic and the future going forward.

"The Portugal Cold Chain industry is growing rapidly due to higher demand from food and pharma sector, especially in the recent years. The high number of captive storages are expected to reduce in the near future as the prices of maintaining personal storages will rise and shared storages provided by cold chain players will be preferred."

What are the current cold-chain industry trends in Portugal? How do you think will the industry grow in future?

The industry is currently growing very rapidly due to higher demand from food and pharma sector, especially in recent years. The rise of ecommerce has also led to the growth of cold transportation and storage in Portugal due to the need of quicker deliveries, safety standards and laws. During the pandemic, the growth rate rose up to 20% and currently it is approximately 15%. This is surprising because I reckoned that the demand will fall after the pandemic due to cash crunch but it is still high.

It is difficult to predict how the future will look like due to the impact of Inflation on the industry. As prices rise, consumer demand might fall. However, the decline will not be significant since the cold-chain industry is directly tied to the necessary products such as food and medicines. From what I understand, the growth rate might fall to 5-10% due to the impact of inflation.

What is the distribution between cold storage and cold chain transportation?

Okay, in Portugal, it's about 20% storage, and transport is 80%. The main reason is that a lot of companies in Portugal have their own warehouses. In Spain, they don't spend money to have their own warehouse, but in Portugal, they spend it due to lower costs of maintaining their own facilities. Therefore, it's very common for small industries to have their own warehouse. That's why it's only 20%-30% at max. In the next few years, more and more companies will outsource storage and not use their own warehouses. The prices of self-owned facilities will rise and businesses would prefer using shared storage facilities provided by the logistics providers, cold chain suppliers etc. As such, it will be more profitable to use cold storage warehouses than own facilities. Therefore, the share of cold storage might go up to 35%. The demand for cold transport might also increase due to the rising fuel costs and increased dependency on shared transport delivery systems.

What do you think is the split between domestic and global demand for Portuguese cold chain transportation?

It's about 70-80% domestic and 20% international. That is because the cold chain companies in Portugal haven't been able to market themselves very well or compete with the competition from Italy/Spain. However, in recent years, we have been able to get global partners and cold-chain export has grown by 10% in the last 5 years. This is mainly driven by tourism and good quality services available at lower cost in Portugal than other countries.

What are the major modes used in the cold transportation segment in Portugal?

Air transport is the least used mode constituting only around 5-10% due to the very high costs incurred in air cold transport. For sending some products to Spain from Portugal by air, it would take around €2000 whereas through land, it would take just €100 or €40 by sea. Land and Sea have an almost equal share of around 45% in terms of international trade. Cold transport through sea is highly important due to the export of a variety of products like fish, meat etc, especially to countries like Angola and Mozambique and import from countries in South America etc. Sea transport is also used for transport to the different Portugal islands. In terms of domestic transportation, land constitutes 60%, followed by sea having 30% share and lastly air.

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What is the usual capacity utilization rate of cold warehouses in Portugal?

Oh it's 100%. The storage capacity is never wasted and it is highly utilized throughout the year which is indeed surprising. This is due to the demand for cold storage being very high in all seasons either due to tourism, schools and colleges, festivals like Christmas etc. If a new cold warehouse is set up, it most likely will fill up completely within 3 weeks or a month. And this is the case in the entire industry.

What are the temperature ranges followed in Portugal's cold chain industry?

You have 3 kinds of temperature ranges: Frozen, Chilled and Ambient but we mostly use the first two. The cold goes between two degrees and four degrees Celsius. And the frozen goes till -15 or -18 degrees. But then you have some special products that must go at some special ambient temperatures for example, at 15 degrees or 18 degrees. Ambient range starts from around 12 - 18 degrees. An example would be of wine that must be transported at that temperature. Chocolate must be stored and transported at 14 degrees. So there are some enterprises that specialize in that but mostly it's the cold and the frozen.

If we talk about the share, frozen takes up about 70% of the market and it has grown a lot in the last few years due to high demand for storage and transportation of products like fruits, vegetables, cheese, bakery items etc. Because if an item is frozen, the shelf life increases which is suitable for both producers and consumers. In the next few years, the share might even rise to 80%. Cold/chilled temperature takes up about 25% and lastly 5% for the ambient environment.

Cold chain caters to different industries like fruits and vegetables, meat and poultry, pharmaceuticals etc. Where, according to you, is the highest demand for cold chains?

This highly depends on the time of the year or the season. At times, there is a high demand for fruits and vegetables, in some seasons, the demand for fish is high and during Christmas time, the demand for meat increases.

If we talk about the yearly volume, the food sector is the biggest customer of the cold-chain industry in Portugal having 50% share with second being pharma at 30%. Within the food sector, highest demand is from sea food (around 30-35%), followed by fruits and vegetables (25-30%) and bakery/desserts (15-20%) and lastly meat products (10-15%).

What is the usual capacity utilization rate of cold transport in Portugal? Could you tell me about the different types of trucks used?

That depends, on an average the utilization rate is around 70-80%. The normal medium trucks have a capacity of 33 pallets or 66 pallets for a double decker. These trucks are the most used in Portugal having around 70% share. The large trucks have about 55 pallets or 110 pallets for a double decker. The small ones are also quite popular at around 25% share and have capacity of around 8 or 12 or 20 pallets. The big trucks are not very popular as they cannot be used for transportation to smaller areas and villages and also due to stricter road regulations. These large trucks only came to Portugal around last year due to very strict road rules.

For any queries or feedback, reach out at namit@kenresearch.com
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