Cold chain logistics are being given more attention in Vietnam as new trade channels take off.

Carrier Transicold & Refrigeration Systems, a subsidiary of world-leading high-tech heating, air conditioning and refrigeration solutions provider Carrier, last month signed a memorandum of understanding (MoU) with the Vietnam Institute of Agriculture Engineering and Post-Harvest Technology under the Ministry of Agriculture and Rural Development (MARD) at the World Cold Chain Summit 2018 in Ho Chi Minh City, to cooperate in bolstering cold chain development in Vietnam.

Vietnam’s cold chain market has yet to fully develop and exhibits a raft of shortcomings, but as such presents enormous opportunities for cold chain service suppliers, according to Mr. Jonathan Shaw, Director, Sustainability & Communications, at Carrier Transicold & Refrigeration Systems.

Soaring demand

Cold chain logistics have long been fragmented in Vietnam, with small- and medium-sized service providers offering only localized services and not for the entire food supply chain. Fragmented logistics is a common feature in the food retail market, especially general trade channels, which comprise traditional markets and corner stores and which account for 86 per cent of total retail value.

Modern trade channels, however, have rapidly appeared over recent years and are expected to have a market share of around 20 per cent by 2025. “Convenience stores and mini-marts have become more popular among Vietnamese,” said Mr. Luong Quang Thi, General Director of ABA Cooltrans. “As at last June there were 1,500 convenience stores around the country and the number is expected to boom in the next three years, with 1,300 new supermarkets and around 350 shopping malls by 2020.” 

He explained that the increasing number of minimarts and convenience stores have triggered demand for cold storage and transport systems to keep products fresh and maintain quality. In addition, restaurants, shopping malls, and supermarkets have supported demand for refrigerated logistics services in recent years.

Cold storage demand in Vietnam is high, according to a recent StoxPlus survey, which showed a 90 per cent occupancy rate at nearly all logistics facilities. Capacity has quadrupled over the past ten years, but most facilities are still used by the seafood export industry rather than for domestic consumption. “Demand for servicing the retail segment is also growing and this requires a different approach that shifts away from storage alone and into the larger domain of the supply chain,” Mr. Thi added.

Meanwhile, according to Mr. Ngo Quang Trung, General Director of Swire Cold Storage (SCS) Vietnam, a wholly-owned subsidiary of Emergent Cold LLC, the substantial development of fruit and vegetable exports to China has created surging growth for the storage, refrigeration and transport of those products nationwide. “The participation of multi-national corporations and large private Vietnamese enterprises in the retail market has brought an amazing level of development to the local cold chain system,” he told VET.

ABA Cooltrans, a temperature-controlled transport provider for large modern retailers, has developed a fleet of 200 temperature-controlled trucks and a 22,000 pallet-capacity cold storage facility to satisfy the escalating needs for chilled and frozen food. The company’s 200 trucks handled 54,000 tons of goods in 2016, and a newly-acquired 15,000 pallet-capacity cold storage facility in Hanoi saw throughput of 100,000 tons. The company plans to add 200 more trucks and two cold storage facilities by 2020.

Meanwhile, SCS Vietnam, after being acquired by Emergent Cold from John Swire & Sons at the end of last year, is operating a network of temperature-controlled facilities around Vietnam, with sites totaling in excess of 65 million cubic feet, or 275,000-pallet spaces of refrigerated storage, utilizing advanced integrated warehouse and transport technologies. The premium provider, which operates Vietnam’s first cold storage warehouse, recently opened a second facility, a LEED Gold-standard 8,200-pallet warehouse, to serve Hanoi and plans to expand to northern Bac Ninh province and certain central provinces in the next few years. 

The domestic cold logistics market’s potential has attracted increasing numbers of multinational logistics companies to Vietnam, setting up bases as part of their strategies to expand geographical coverage to support customer growth. Just six months ago, France’s FM Logistic established a subsidiary in Hanoi to supply cold services to its Auchan Retail group.

In order to support customers’ ambitious development plans in Vietnam, the company launched a 5,000 sq m tri-temperature logistics site in Bac Ninh, which supplies all Auchan stores in the north. “We are also planning to open another site in Ho Chi Minh City this year,” Mr. Hamza Harti, Project Director at FM Supply Chain Vietnam, told VET. “The first FM-standard multi-client platform is planned for 2019 in Hanoi, with up to 50,000 sq m of warehousing space.”

Furthermore, Carrier, part of UTC Climate, Controls & Security, a unit of the global United Technologies Corp., recently committed to supporting southern Tay Ninh province to access financial resources through the Green Climate Fund in order to develop cold supply chains in accordance with advanced standards, to cut post-harvest losses. “We see a lot of opportunities and many individuals and the government are committed to improving the cold chain,” said Mr. Shaw. “Carrier Transicold is also looking to boost commercial refrigeration system and equipment supply for supermarkets, restaurants, and convenience stores in Vietnam.”

Major weaknesses

Most goods in Vietnam have been transported by rudimentary means for many years and cold chain technology is still to be widely used. 

Earlier this year, CEL Consulting developed a pioneering survey to measure food losses and cold chain usage in Vietnam. The scope of the research covered production, post-harvest handling, storage, and transportation up to the distribution point for fruit, vegetables, meat, and seafood. The data revealed that, on average, 25.4 per cent of what is produced is lost before it actually reaches processing plants or distribution centers. Food waste in Vietnam’s agriculture chain is 5.3 per cent higher than the United Nations Food and Agriculture Organization (FAO)’s benchmarks for South and Southeast Asia. 

CEL’s research also revealed that only 14 per cent of Vietnamese producers are linked with cold chain solutions, with the seafood sector having the most thorough links (42.1 per cent of producers). In addition, while cold chain usage is 66.7 per cent among exporters, it’s only adopted by 8.2 per cent of producers supplying the domestic market. “This disparity reflects the higher quality and cold chain standards set by export markets that Vietnamese exporters must comply with,” said Mr. Julien Brun, General Director of CEL Consulting Vietnam. 

As there are no such requirements for the domestic market, domestic food chain actors tend to not use cold chain practices extensively, particularly as it generates extra direct costs. “In Vietnam, keeping fresh goods fresh is mostly addressed by speed to market, for instance, fresh products brought from farms to sales points in a very short period of time, allowing for losses to be kept at relatively acceptable levels,” he added.

Identifying solutions

Vietnam’s domestic agriculture production is lagging behind neighbors Laos and Cambodia in terms of supply chain development, with regular losses of 25-30 per cent of fruit and vegetable yields due to a lack of refrigerated transport and storage, according to a World Bank report.

Cold chain service providers, Mr. Brun said, will need to foster integration along the supply chain so they can align their business goals and initiatives through harmonized processes and standards. This will also help the removal of unnecessary go-betweens, which bring no value to the chain. “Companies, in addition, will also need to design their supply chains to minimize waste and increase their ability to meet demand,” he said. In terms of risk management, emerging technologies such as blockchain solutions may allow companies to develop supply chain transparency and traceability, making it easier to them to find where things went wrong along the chain.

Mr. Thi added that a key challenge is perceptions among stakeholders that the cold chain is a cost rather than an asset. This mindset is, however, quickly changing, he believes. In the next few years, the logistics market will be upgraded as everyone begins to put pay due regard to cold chains, and their concerns will no longer be purely on the immediate cost but on quality and the overall value chain.

Carrier also hopes to bring in new technologies and expertise to improve the country’s cold chain. “There is a huge opportunity to cut food waste and improve food distribution by implementing cold chain technology,” said Mr. David Appel, President of Carrier Transicold & Refrigeration Systems.

VN Economic Times