China: preserving the food chain

Perhaps China's agricultural industry could learn a thing or two from youngsters.

Chinese children are taught not to waste food in when they are in primary school. Despite this, the nation lost almost 70 billion yuan (US$8.63 billion) in discarded fruit and vegetables last year.

Experts say one of the main reasons the produce went rotten was because of a lack of "cold-chain" technology.

Cold-chain refers to a comprehensive refrigeration solution and application system to keep food frozen and fresh, from the fields all the way to the dinner tables. The mechanism has led to a more efficient utilization of resources, a reduction in waste and pollution, and higher food safety standards throughout the developed world.

China 's average annual food production is estimated at US$300 billion. However, more than 20 per cent of food is wasted while being transported because of poor refrigeration, says Jorgen Clausen, chief executive officer (CEO) at Danfoss, Denmark's largest manufacturing group, which provides cold-chain solutions throughout Europe.

"If fully introduced in China, this new technology solution could significantly reduce the loss of food and other resources. This could fundamentally solve the food safety problem in China," Clausen says.

China 's comparative advantage in the agricultural industry does not lie in the production of staple crops like rice or wheat. Rather, there is an emerging consensus that the country's strengths probably lie in the production and processing of fruit, vegetables, horticultural goods and select livestock-related products, says a research report by Cheng Guoqiang, an expert with the State Council Development Research Centre.

"It must be observed, however, that in addition to being labour intensive, many of these products are highly perishable. Therefore, a prerequisite for China to truly exploit its comparative advantage in these products is for it to have in place the necessary institutions, infrastructure, and human capital to facilitate it," Cheng says.

"Cold-chain storage, handling and transportation are a critical component of this. Warehousing and storage facilities are the key to an efficient marketing system."

China 's production and consumption of high-value frozen and perishable foods is growing. Experts say this is making cold warehousing and transport facilities an increasingly important link in the marketing chain. Yet, cold storage capacity is believed to account for only 20 to 30 per cent of the growing cargo demand. Spoilage losses of up to 33 per cent on perishable freight are common, as are illnesses caused by poor handling.

Some frozen products can be maintained for extended periods and are less vulnerable than chilled or refrigerated goods to temporary interruptions in the storage chain, says Cheng.

Chicken, for example, has a rated shelf life of one year at -18 degrees C, although problems can mount quickly if temperatures rise; the bacteria count in chicken doubles every six hours when chicken is stored at 4 degrees C (a typical refrigerator temperature). Other frozen products require more sophisticated temperature-controlled handling, and may not fare well in China's warehouses, which customarily store frozen products at -18 degrees C. From a distributor's point of view, frozen goods are easier to handle, as these products can more easily endure temporary breakdowns in the cold-chain. Chilled meats, dairy products, fruits and vegetables, on the other hand, have short shelf lives and will deteriorate rapidly without efficient handling under controlled conditions.

The lack of controlled atmosphere equipment makes it expensive to transport frozen and perishable foods. China now produces such equipment, but incentives in the value chain are not yet sufficient enough for them to be widely used.

To accommodate both domestic and international demand for perishable foods, cold-chain infrastructure and its management must be improved, says Clausen.

In developed countries, processed food markets are characterized by a network of cold storage warehouses. These are companies that consolidate food from farms, processors, and other enterprises and then distribute them to regional and local warehouses, which ultimately deliver foods to retailers and consumers. In China, these crucial intermediary links have not kept pace with consumer demand or productive capacity.

Producers and retailers have thus had to piece together delivery networks. Customers receive small shipments from large numbers of suppliers, but with little consistency. Producers must deal separately with cold storage warehouses and arrange for inter-city and intra-city transport. Cold warehousing facilities are one important link in the cold chain; temperature-controlled transportation is another.

Railways remain the most common method of distribution, including frozen food products. Transporting frozen goods by rail in China, however, has big drawbacks, including the need for advanced bookings and ongoing relationships with railway administrators. As temperature-controlled equipment is not always available, food products, in some cases, are simply cooled with bagged ice and covered with a blanket. Marketers of temperature-sensitive food products also have concerns about excessive loading and unloading under less than ideal conditions, high damage potential, and unreliable delivery times, Cheng says.

For domestic markets, such practices increase the risk of food-borne illness. For international markets, this can preclude access altogether.

Neol Ryan, president of Danfoss's Refrigeration & Air-conditioning Sales in Asia Pacific, says China's rapid economic growth and its quick development of modern retailing formats would stimulate widespread adoption of cold-chain systems. The cold-chain equipment industry is currently at a level of 11 billion yuan (US$1.35 billion) and is expected to grow by 15 to 20 per cent a year.

"The huge cold-chain market will also spawn millions of employment opportunities, which is very important for China," says Clausen.

China 's per capita income is quickly approaching US$7,500, the inflection point for strong cold-chain demand. Speedy adoption of modern retailing practices in the cities will stimulate strong short haul and regional cold-chain development in urban areas, says Ryan.

Experts have proposed to establish a national cold-chain association to regulate the development of the industry and reduce waste. But the task will not be easy.

The industry involves many different departments and industries, so it will be difficult to reach a consensus between all the relevant parties.

Still, there is evidence that, when the incentives are attractive enough, China has the ability to produce and transport high-value perishable products that meet or exceed international standards, says Cheng.

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