Cold storage is more attractive during the pandemic

There has been a sharp rise in demand for cold storage in the Asia-Pacific region which has pushed foreign investment into Vietnam, strengthening the value of the local supply chain.

AJ Total Viet Nam starts operating the largest cold storage service with the capacity of 30,000 pallets storage capacity, Long Hau Ward, Can Giuoc District, Long An Province in July. — Photo courtesy of the firm

Supply is relatively scarce in most of the Asia-Pacific region, said experts, adding developed markets like Japan or Australia have relatively few cold storage facilities, with a lower total supply than markets like the US or Western European countries.

Factory-scale cold storage is a service that can provide freezers and refrigeration equipment to preserve frozen or fresh goods. Most food items are stored in cold storage, but cold storage can also be used to store pharmaceuticals, chemicals or wine. Tenants can be third parties, such as logistics companies, cold storage logistics units or supermarket chains.

According to Michael Fenton, Industrial and Logistics Director at Savills Australia, the investment cost of cold storage is of many times higher than the construction of conventional buildings, adding cold storage service providers will often have to lease the construction area from ten to 20 years.

Fenton said that cold storage is intrinsically related to the current issues of food security and essential retail spending because, no matter the state of the economy, consumers will still spend money on food. Essentially, cold storage facilities are at the heart of the food supply chain.

Fenton said due to an explosion in food delivery services during the pandemic, demand for cold storage continues to increase.

According to Savills, with online food delivery on the rise, some cold storage centres in China are seeing rent increases. The rapid development of fresh food distribution has also increased the demand for warehousing real estate, especially frozen storage.

The realty research firm also said that cold storage assets in Seoul, Korea, are becoming more valuable as demand for fresh food has increased. However, getting permits for new cold storage centres is not easy according to the provisions of the law in the country.

Savills also recognises the potential of cold storage investment in Viet Nam. Troy Griffiths, Vice General Director of Savills Viet Nam, said, “The pandemic has strengthened the value of the supply chain, adding further viability to the segment.”

Savills Viet Nam recognises a lot of interest from foreign investors in developing cold storage facilities in Viet Nam. With major infrastructure investment and development, such as Long Thanh International Airport, supply routes will be reshaped in the future allowing cold storage facilities to continue to grow in the future, forecasted Troy Griffiths.

Large demand for cold storage in Viet Nam

According to the Ministry of Agriculture and Rural Development, in the first nine months of the year, the export turnover of agricultural, forestry and fishery products was estimated at US$35.5 billion, up 17.7 per cent over the same period last year, despite the pandemic.

 

Agriculture experts said while the export of agricultural products and seafood has increased, the supply of cold storage can not currently meet demand. During the peak of the COVID-19 pandemic in the last three months, about 50 per cent of seafood export orders were cancelled, leading to escalating inventories and cold storage having to operate at maximum capacity.

Truong Dinh Hoe, General Secretary of the Viet Nam Association of Seafood Exporters and Producers (VASEP), told Viet Nam News, “To deal with the increased inventory, seafood enterprises have to rent cold storage, but there is a serious shortage of them.”

Seafood is not the only strain on cold storage facilities. Major demand also comes from meat, vegetables and retail. In particular, seafood and retail exports are the main driving force behind cold storage space demands in Viet Nam. This demand is the main influence over a number of free trade agreements (FTAs) that Viet Nam has signed during the past years.

According to data, cold storage facilities are mainly concentrated in the southern provinces, of which about 60 per cent are held by foreign investors.

Trang Bui, Senior Director of JLL Viet Nam, told Viet Nam News: “Cold storage markets are mainly distributed in the south with major service providers of Emergent Cold, Minh Phu Gemadept, ABA, Hoang Phi Quan, Lotte, An Viet Cold Storage, Phan Duy, Satra, Meto, Alpha, Transimex, etc.”

In July, AJ Total Viet Nam started operating the largest cold storage service with the capacity of 30,000 pallets storage capacity, Long Hau Ward, Can Giuoc District, Long An Province.

However, Trang said that most providers only serve a small part of the market, and have not yet integrated multi-services in cold storage.

The director said not many big names in the field of cold storage investment yet entered the local market, therefore cold storage demand could continue to grow strongly for at least the next five years.

Trang said with the great potential of the market, cold storage is an attractive investment at the moment. She forecast that investors will consider cold storage in Viet Nam. 

The Ministry of Agriculture and Rural Development (MARD) said the country currently has 48 cold storage facilities that provide preservation services for agricultural and aquatic products. They have a capacity of about 700,000 pallets and two million tons of products. MARD also acknowledged that the current facilities do not yet meet the needs of preserving agricultural and aquatic products from the Mekong Delta, let alone the whole country.

Recently, VASEP asked MARD for policies to support companies to build their own cold storage facilities, with a minimum capacity of 5,000 pallets. This plan includes long-term loans without interest for the first two years, a 50 per cent rate cut for the next four, and a 50 per cent cut in corporate income tax for the first two years, for cold storage businesses.

Ken Research, a global publisher of market intelligence, said that Viet Nam’s cold chain industry achieved an estimated CAGR of 10.4 per cent in 2016-21, thanks to a growing number of supermarkets and seafood exporters. The market is estimated to grow to $1.8 billion this year.

 Source: VNS

 
 

Other News

.
Proper mechanism needed to export farm produce by sea to China
Proper mechanism needed to export farm produce by sea to China
BUSINESSicon  15/01/2022 

The Ministry of Agriculture and Rural Development and the Ministry of Transport recently co-hosted a conference on promoting the export of agricultural products through maritime transport as a way of devising a proper mechanism for farm exports.

Hanoi to establish 2-5 new industrial parks by 2025
Hanoi to establish 2-5 new industrial parks by 2025
BUSINESSicon  15/01/2022 

The Hanoi government has approved a plan to establish an additional two to five new industrial parks (IPs) in the 2021-2025 period.

What’s behind Tan Hoang Minh’s sky-high bidding price?
What’s behind Tan Hoang Minh’s sky-high bidding price?
BUSINESSicon  15/01/2022 

Tan Hoang Minh won the bid in a ‘duel’ to buy the 3-12 land plot in Thu Thiem new urban area in HCM City, but finally gave up.

Vietnamese FDI attraction likely to hit US$40 billion this year
Vietnamese FDI attraction likely to hit US$40 billion this year
BUSINESSicon  15/01/2022 

Amid rapid economic recovery following the COVID-19 pandemic, Vietnam’s foreign direct investment (FDI) attraction this year is anticipated to record positive signs and hit US$40 billion, according to insiders.

Agriculture Ministry denies that cross-border exports are low-quality products
Agriculture Ministry denies that cross-border exports are low-quality products
BUSINESSicon  15/01/2022 

Vietnam exported $3.52 billion worth of vegetables and fruits in 2021, an increase of 8.6 percent over the year before. China remains the biggest client consuming 54.5 percent of the exports.

Online shoppers warned of cunning tricks
Online shoppers warned of cunning tricks
BUSINESSicon  15/01/2022 

Along with the popularity of online shopping in Vietnam come several cunning tricks of criminals to steal money from consumers. 

Vietnam to be Asia's next startup hub
Vietnam to be Asia's next startup hub
BUSINESSicon  14/01/2022 

In an interview with Bloomberg recently, Binh Tran - co-founder of Ascend Vietnam Ventures - said that Vietnam's nascent start-up sector is developing and Vietnam is becoming the next technology hub of Southeast Asia.

Police ask for documents of 11 Hanoi-based projects of Tan Hoang Minh Group
Police ask for documents of 11 Hanoi-based projects of Tan Hoang Minh Group
BUSINESSicon  14/01/2022 

The Police Agency for Investigation of Crimes on Corruption, Economy and Smuggling (C03) of the Ministry of Public Security has asked the Hanoi People's Committee to provide documents related to projects based in Hanoi of the Tan Hoang Minh Group.

US$15 billion bailout package a stimulus to economic recovery
US$15 billion bailout package a stimulus to economic recovery
BUSINESSicon  15/01/2022 

Given the severe impact of COVID-19, the National Assembly’s recent approval of a VND350 trillion (US$15 billion) economic recovery package is considered by businesses and experts as an extremely important leverage and motivation moving forward.

HAGL sells over 48 million shares to pay debts
HAGL sells over 48 million shares to pay debts
BUSINESSicon  14/01/2022 

Hoang Anh Gia Lai Joint Stock Company will sell more than 48.1 million shares of its subsidiary HAGL Agrico (HNG) from January 17 to February 15 to pay debt.

Lang Son to stop receiving fresh fruit vehicles from Jan 17 to Tet
Lang Son to stop receiving fresh fruit vehicles from Jan 17 to Tet
BUSINESSicon  14/01/2022 

The northern province of Lang Son has announced that it would stop allowing vehicles transporting fresh fruits to its border gates for export to China from January 17 until the lunar New Year holiday or Tet.

VIETNAM BUSINESS NEWS JANUARY 14
VIETNAM BUSINESS NEWS JANUARY 14
BUSINESSicon  14/01/2022 

Cashless payments account for over 70 percent of retail transactions in 2021

Stock market sets new record on billion dollars of capital inflow
Stock market sets new record on billion dollars of capital inflow
BUSINESSicon  14/01/2022 

The Vietnamese stock market continued to reach another historic record, with the largest number of new accounts opened in December after 21 years of operation.

WB forecasts Vietnam’s growth at 5.5 percent in 2022
WB forecasts Vietnam’s growth at 5.5 percent in 2022
BUSINESSicon  14/01/2022 

The World Bank (WB) has forecast that Vietnam’s economic recovery is likely to accelerate in 2022 as GDP growth is expected to rise to 5.5 percent from 2.6 percent in the year just ended.

Vietnam reconsiders electricity sources after making international energy commitments
Vietnam reconsiders electricity sources after making international energy commitments
FEATUREicon  14/01/2022 

Vietnam’s commitments at 26th United Nations Climate Change Conference of the Parties (COP 26) will have a big impact on the country’s energy system. 

Vietnam’s economic growth forecast to rebound strongly in 2022
Vietnam’s economic growth forecast to rebound strongly in 2022
BUSINESSicon  13/01/2022 

Some foreign financial organisations have issued relatively positive predictions for Vietnam’s economy this year, with growth expected at 6.5 - 6.7 percent.

Three factors behind FDI attraction in Vietnam
Three factors behind FDI attraction in Vietnam
BUSINESSicon  13/01/2022 

Low labour costs, a geographical location close to Asian supply chains, and Japan and the Republic of Korea (RoK)'s efforts to promote greater overseas investment are considered as three factors in boosting Vietnamese foreign direct investment (FDI).

Live streaming attracts young people to earn money
Live streaming attracts young people to earn money
BUSINESSicon  13/01/2022 

Making money on online platforms and social networks is increasingly popular in the labor market, streamer jobs have become popular keywords for many young people.

Ample room for Vietnam's aviation investment
Ample room for Vietnam's aviation investment
BUSINESSicon  16/01/2022 

Private investors will have more options to invest in aviation infrastructure, which has been dominated by state-owned enterprises. 

Power Development Plan VIII under revision again
Power Development Plan VIII under revision again
BUSINESSicon  13/01/2022 

The draft Power Development Plan VIII is being revised again and expected to be submitted to the Prime Minister for approval in the first quarter of 2022.

 
 
 
Leave your comment on an article

OR QUICK LOGIN