Market Dynamics
Market Drivers
Growth in International Food Trade due to Trade Liberalization
In the past three decades, the worldwide commerce of goods has expanded significantly. The food sector is no exception, as evidenced by the over USD 1.1 trillion in agricultural trade each year and the enormous complexity and interdependencies of the global food system. Every nation in the world depends, to a greater or lesser extent, on trade to fulfill its food needs. Countries rely on each other to secure an adequate and varied food supply through the import and export of food products; thus, the international trade of food is growing.
Furthermore, the improved access to export markets will be accompanied by greater competition and the need to ensure confidence in the safety of the food supply. The safety of the food supply is challenging, particularly in developing countries, where quality assurance systems in the food control systems and food industry should be strengthened. The demand for cold chain logistics in these countries is rising so that the comparative advantages in each country can be exploited to produce a variety of food products cost-effectively with attention to improved food quality and safety.
Rapid Growth in the Healthcare Sector
The global pharmaceutical chain logistics industry is enormous and complex. The cold chain logistics sector needs synchronized handling procedures, precise transport equipment, and a high degree of regulatory compliance. Moreover, there is a rising demand for all kinds of drugs that help combat an increasing number of chronic and lifestyle-related diseases. The need for temperature control and monitoring through the entire supply chain process has increased as pharmaceutical drugs have developed to enclose more high-value active ingredients with a shorter shelf life and stringent temperature necessities. In addition, pharmaceutical companies have COVID-19 vaccines to distribute, boosting the demand for pharmaceutical cold-chain solutions. The increased market for medicines due to COVID-19 is anticipated to increase the demand for cold chain logistics in the forecasted period.
Market Restraint
Higher Cost associated with Cold Chain Systems
The challenges inherent to the cold chain transport of food and drugs are cost optimizations, risk management, and regulation compliance. In addition, there are technical and operational constraints specific to each organization. The most reliable solutions out there aren't readily available despite the technological advances in cold chain technology because they're too expensive. The investment for cold chain systems includes acquiring the land, building construction, obtaining permissions and licensing, and arranging utilities like water, electricity, etc.
Additionally, the manufacturer must invest significant startup capital in procuring the cooling machinery. Apart from the above-mentioned fixed costs, the manufacturer must consider the working capital expenses. The cold storage used for storing frozen products needs a high price and then the maintenance of the temperatures of the cold storage, thereby hampering the market's growth.
Market Opportunities
Rising Consumer Demand for Perishable Goods
Cold chain logistics are mainly used for transporting fruits and vegetables, dairy products, ice creams and confectionery, meat, and marine products that are perishable. The factors such as growing consumer demand for perishable food products, convenience foods, and high consumption of non-seasonal fruits and vegetables are driving the market growth. In addition, the increased use of freeze-dried fruits and vegetables and the application of individual quick-freezing in other food products are two key factors presenting growth opportunities to various market players.
Furthermore, the agriculture sector is on the threshold of a significant shift from traditional farming to horticulture, meat and poultry, and dairy products, all of which fall under perishables. The rising demand for fresh and processed fruits and vegetables in the urban population and changing consumption habits fuel market growth. The dominant force in agriculture today is diversification and value addition, which emerged from this rise in demand. These changes, together with the emergence of a structured retail food sector and changes in FDI laws, create new opportunities in the domestic food industry and perishables, including the cold chain sector.
Regional Analysis
Based on region, the global cold chain logistics market is bifurcated into North America, Europe, Asia-Pacific, and LAMEA.
North America's cold chain logistics market is expected to grow at a CAGR of 15.56% over the forecast period. North American region is expected to grow at the fastest rate over the forecast period, particularly in countries such as Canada and the United States, owing to the growing demand for organic food due to rapid urbanization and an increase in adopting a healthy dietary lifestyle. Canada has significant fishing zones in the North American region, which anticipates the growth of the cold chain logistics market over the projected period. The United States is expected to have the highest contribution in the North American market owing to the stringent government regulatory environment and growing demand for packaged food. In addition, e-commerce is growing rapidly in the U.S. market, mainly used for grocery sales, fresh food, and packaged food delivery. This has resulted in the surge of outsourcing cold warehousing and transportation to third-party services providers, likely enhancing e-commerce for perishable consumer packaged goods. Moreover, the presence of large beverage companies in the United States, given their immense dependence on cold storage transportation facilities to deliver goods, is also one of the significant factors expected to fuel the demand for cold chain vehicles.
Europe is anticipated to grow at a CAGR of 15.11% over the forecast period. The Europe cold chain logistics market is accounted for a significant revenue share owing to changing consumer behavior and the growth in e-commerce with technological advancement. Europe is one of the largest markets for cold chain logistics. In terms of storage capacity, Europe's total storage capacity was approximately 112 cubic meters in 2016. Moreover, Turkey and Great Britain showed highly positive growth in terms of storage space. The European pharmaceutical industry is one of the largest in the world, thereby driving the development of the regional market. On the other hand, European Commission's Emission Standards and Regulations play a significant role in the growth of the Europe cold chain logistics market. The Europe region is expected to grow at a significant CAGR, owing to an increase in demand for temperature-sensitive goods and an extension of shelf life, which led to the rise in demand for cold storage transport. Furthermore, the growing demand for processed and convenience food has increased, driving the food industry's cold chain market in the European region.
Asia-Pacific is expected to grow significantly over the forecast period. The cold chain logistics market in the Asia-Pacific region is expected to grow at the fastest rate owing to higher demand for frozen food, processed food, and pharmaceuticals. Rising disposable income in developing countries, such as China and India, is also one of the foremost reasons for the increase in the cold chain logistics market in the Asia-Pacific region. In addition, China has witnessed a transition in the consumption of food which primarily includes meat, aquatic products, quick-frozen food, fruits and vegetables, and dairy products. Furthermore, with the outbreak of the novel coronavirus, there has been increasing in the popularity of purchasing fresh produce online by Chinese consumers, with higher demand for standards for safety, health, and quality of life, thereby increasing the demand for cold chain storage and transportation facilities. On the other hand, the government of India, to support the development of the cold chain, has launched many schemes. For example, Pradhan Mantri KisanSampada Yojana (PMKSY) aims to create modern infrastructure with efficient supply chain management, from farm gates to retail outlets.
The Rest of the World segment in the market includes sub-regions such as the Middle East and Africa and South America. Brazil and Argentina are the frontrunners in the cold chain logistics market in the South American region. The major drivers of the market are the increased demand for cold chain logistics from the prolonged storage of frozen food products, increasing consumer health awareness, and rising disposable income levels. South American countries are witnessing growing urbanization and changing lifestyles owing to globalization. In addition, consumers are ready to pay for premium food products, driving the growth of the cold chain logistics market. Moreover, the increased purchase power reached by the middle class in recent years is triggering South America's cold chain logistics market growth. The growing international trade increased processed and frozen food consumption, and advanced e-commerce awareness drives the growth of cold chain logistics in the Middle East and Africa.
Segmental Analysis
The global cold chain logistics market is bifurcated into products and applications.
Based on product, the global market is divided into mechanical and cryogenic refrigeration systems, reefers (reefer vans and trucks), cold chain transport monitoring equipment, and packaging materials.
The reefers segment is the highest contributor to the market share and is expected to grow at a CAGR of 16.20% over the forecast period. Reefers are large fridges or refrigerated trailers carried by containerships to transport perishables and other temperature-sensitive goods such as ice cream, meat, or vegetables. Reefer containers can maintain cargo temperatures between -35°C and +35°C regardless of the external environmental conditions. Many reefers come with real-time monitoring and temperature controls via IoT sensors with active intervention in case of temperature deviations. Especially within the cold supply chain, Vessel Sharing Agreements have significantly reduced shipment time and costs for shippers, which has impacted this industry positively and helped to improve the growth of reefer containers in the cold supply chain. Furthermore, the segment is growing at the highest rate in the forecast period due to the increasing global consumption of frozen and fresh food.
Cold chain transport monitoring equipment provides essential features such as real-time temperature data, real-time condition and location monitoring, monitoring at the package level, constant connectivity, analytics, easy device reverse logistics to enhance ROI, incident response, and so on during production, storage, distribution, and logistics. Cold chain transport monitoring equipment increases productivity and supply chain efficiency, improves inventory accuracy, and reduces cycle time and operational costs, thereby boosting the growth of the cold chain logistics market.
Packaging Materials are designed to provide insulation, temperature control, and protection against external elements, ensuring that products such as pharmaceuticals, perishable foods, and chemicals are kept at the required temperatures. Cold chain packaging materials include expanded polystyrene (EPS), polyurethane (PUR), paper and paperboard, insulated boxes, thermal wraps, gel packs, and dry ice. Innovations in this area focus on enhancing the efficiency of temperature control while reducing the environmental impact of packaging waste. Additionally, the rise in e-commerce and global trade has driven demand for advanced packaging solutions that offer greater reliability and compliance.
Based on application, the global market is divided into food and beverages, medical goods, temperature-sensitive chemicals, and others.
The food and beverages segment owns the highest market share and is estimated to grow at a CAGR of 15.96% over the forecast period. The common food products that require cold storage are high-end foodstuffs, fruits and vegetables, meat and seafood, poultry and dairy, and processed and ready-to-eat food. The cold chain is a mixture of temperature-controlled surface transport and supply chains applied to the food and beverages industry. As food consumption increases, the demand for perishable food, including dairy products, fruits and vegetables, and high-protein animal-based products (such as meat, eggs, fish, and seafood) is also increasing. On the other hand, with changing consumer preferences, the demand for frozen foods such as ice cream, meat, and seafood, along with products that require careful temperature control to maintain quality and shelf life, is also increasing.
Mechanical refrigeration systems are conventional methods in which cooling is attained through compressors, evaporators, and condensers They are widely used due to their reliability, efficiency, and ability to provide precise temperature control. On the other hand, cryogenic refrigeration systems use cryogenic fluids like liquid nitrogen or carbon dioxide to achieve ultralow temperatures. As a result, such systems are quite useful for products that require ultra-low temperatures and can realize faster cooling with more constant temperature control than the mechanical refrigeration system. Both types of refrigeration systems are, therefore, key to the safe, efficient transportation of perishable goods such as pharmaceuticals, food, and chemicals, contributing to growth and efficiency for cold chain logistics.
Vaccines, pharmaceuticals and healthcare products, and Biologics are medical goods that require cold storage. The healthcare and pharmaceutical industry has grown tremendously as the import and export of pharmaceutical products worldwide occur on a massive scale. Further, looking at the current outbreak of novel coronavirus, the increased demand for medicine is also a significant factor supporting the growth of cold chain logistics in the pharma sector. Additionally, the growing number of clinical trials that employ temperature-sensitive materials such as tissue samples, blood samples, and certain drugs is propelling the demand for healthcare cold chain logistics. With the rising demand for chronic and lifestyle-related diseases, there is a constant need for over-the-counter medicines requiring temperature-controlled transportation under proper cold chain management.
The fruits and vegetables segment forms an integral part of the cold chain logistics market, as these are goods that are very sensitive to temperature changes. These become highly specialized logistical solutions, aimed at conserving the produce from the point of harvesting at a given temperature until it reaches consumers. This includes refrigerated transport, cold storage facilities, and real-time temperature monitoring systems. Advanced technologies nowadays, like IoT sensors and automated control systems, are used to obtain optimum conditions in order to be at low risks of spoilage. Such innovations enable not only preservation of quality and nutritional value of fruit and vegetables but also bring operational efficiency through the reduction of losses and extending shelf life. Moreover, investments have been driven by the growth in global trade and an increasing consumer preference for fresh produce, which has boosted the imperative of improving cold chain infrastructure.
Dairy products such as milk, cheese, and yogurt, along with frozen desserts like ice cream and sorbets, are stored and transported at precise temperatures to maintain their quality, safety, and shelf life. This is one segment that most certainly requires strong refrigeration and freezing technologies to ensure that the product does not spoil and to address health and safety regulations. With the growing demand from the dairy and frozen-desserts market, advanced cold-chain solutions ensure reliable temperature control and real-time monitoring from production to further handling, distribution, and retail.
Meat, Fish, and Seafood plays a critical role due to the perishability and stringent temperature requirements of these products. Efficient cold chain logistics are essential to maintain the quality and safety of meat, fish, and seafood from the point of harvest or catch to the end consumer. This segment demands advanced refrigeration technologies, robust transportation systems, and effective monitoring solutions to ensure products remain at optimal temperatures throughout the supply chain. The growing global demand for fresh and high-quality meat and seafood products has driven the expansion and innovation in this segment, with a particular emphasis on reducing spoilage and extending shelf life.
Based on business type, the global market is divided into Warehousing, Transportation.
Warehousing in cold chain logistics involves specialized storage facilities that maintain products at precise temperatures to preserve their quality and extend shelf life. These warehouses are used for perishable goods such as pharmaceuticals, fresh produce, dairy products, and frozen foods. Besides these, advanced technologies like real-time monitoring of temperature, AS/RS, and energy-efficient refrigeration systems are integrated respectively within the cold chain warehouses to ensure the conditions remain optimal and meet the regulatory standards. The e-commerce and globalization market is increasing the demand for efficient cold chain warehousing solutions as companies require the fast and reliable delivery of perishable goods over long distances benefiting both locally and internationally.
The market can be segmented by business type into railways, roadways, airways, and waterways. Railways offer a cost-effective and environmentally friendly option for transporting large volumes of goods over long distances, with specialized refrigerated containers maintaining the required temperature. Roadways dominate the cold chain logistics sector due to their flexibility and extensive network, enabling door-to-door delivery through refrigerated trucks. Airways provide the fastest mode of transport, crucial for high-value or perishable items requiring rapid delivery, although it comes at a higher cost. Waterways, while slower, are essential for international trade, handling bulk shipments through refrigerated containers on cargo ships, offering a cost-effective solution for long-distance, large-volume transportation. Each mode of transportation in cold chain logistics is integral, catering to different needs based on speed, cost, and volume requirements.
