Glowing Prospects For Cold Chain In The Philippines
Monday, October 7th, 2019
With growth rates rivalling China and a young and growing population, the Philippines is one of the most dynamic economies in Asia. By SSI SCHAEFER.
Reinforced by higher private consumption due to lower inflation, steady growth of remittances and improving real incomes, the Philippines has enjoyed annual Gross Domestic Product (GDP) growth of over 6 percent since 2012. The World Bank expects the Philippines to make the leap from a lower-middle income country with a gross national income per capita of US $3,660 in 2017 to an upper-middle income country (per capita income range of US $3,896 – 12,055) in the near term.
Expenditure on food and beverage is seen to grow along with the country’s improving economic health. IGD, a research and training organisation, forecasts the Philippine grocery retail market will grow an average of 9.3 percent year-on-year from PHP 4.53 trillion in 2016 to reach PHP 7.08 trillion in 2021 to become the fifth-largest grocery retail market in Asia, after China, India, Japan and Indonesia.
Supermarkets have sprung across the island nation with big chains opening large, Western-style stores in Metro Manila, Cebu, Davao and other key provincial cities including Bacolod, Cagayan de Oro and Iloilo in response to the growing demand for fresh and frozen produce from supermarkets.
As perishable food requires special care, proper temperature controlled cold chain facilities are needed. It is common knowledge that fresh food continues to break down throughout the shelf-life. The higher the temperature, the faster is the natural degradation. Green vegetables can stay fresh for a month when stored at 0 degrees. For fish and meat, the decay sets in in a matter of hours in the tropical heat but can be kept well for weeks with proper refrigeration.
Robust Capacity Expansion
Drawn by the promising potential, investment in cold chain logistics has spiked. In a recent report, Philippine Cold Chain Market Outlook to 2023 – By Service Mix (Cold Storage Market and Cold Transportation), Ken Research estimated that the Philippine cold chain market expanded at a compound annual growth rate (CAGR) of 9.3 percent between 2013 and 2018, with cold storage facilities increasing at a faster pace of 12.3 percent as against cold transportation, 5.5 percent.
The report noted, “The Philippine Cold Chain Market has witnessed robust growth over the period 2013-2018. Government initiatives, high domestic consumption and market’s growing food safety concerns have propelled the Philippine cold chain market over the period. Additionally, there has been a gradual shift of people purchasing frozen products from supermarkets instead of wet markets in Philippines over the last five years.”
Government subsidy has also encouraged cold chain companies to focus on cold storage business and increase the pallet position, the report added.
In the next five years, 2019-2023, Ken Research expects investment in cold chain logistics to edge higher to 9.4 percent, supported by increasing sales of meat, seafood and. Investment in cold storage facilities is projected to increase at a CAGR of 11.7 percent and transportation, 5.7 percent.
Capacity expansion is backed by capacity building to raise industry standards. Several initiatives have been launched in recent years, among them is the Philippine Cold Chain Project. Funded by the United States Department of Agriculture, the four-year project sought to enable residents of the resource rich Caraga Region in Mindanao, a potential breadbasket for the Philippines, to raise production standards to meet international safety requirements through improved technologies and development of cold chain-related markets.
Much more effort is needed given the scale of the country’s needs, the size of the agricultural and aquaculture sectors and the vital role they play in the Philippines economy.
Modernising Cold Chain In The Philippines
In 2017, ISOC Holdings, Inc., a pioneering company set up by Engr. Michael C. Cosiquien, established ORCA Cold Chains Solutions to leverage on the group’s well-established capabilities in project development and management to expand into perishable food storage.
“We want to modernise the cold chain industry. Among our ASEAN peers, we feel that we are lagging,” Yerik C. Cosiquien, ORCA Cold Chain Solutions President, said.
ISOC is rolling out three cold storage facilities that aim to bring the Philippines up to speed on cold chain, with several more on the planning board.
The first facility opened in Alabang in September 2018. Equipped with a blast freezer and chiller, it stores food products such as fruits, vegetables, seafood, meat and poultry. Each pallet is given a unique QR (quick response) code that digitally records the product codes, description, weight and expiration dates. Customers have easy access to the product inventory information and have real-time updates via an app-based site.
The Alabang facility is just a sample of things to come. “ORCA Alabang is a teaser for the bigger and more exciting ORCA sites,” Cosiquien said.
While Alabang is a conventional cold storage facility, Taguig and Caloocan are fully automated warehouses equipped with computer-controlled Automated Storage and Retrieval System (ASRS) that can operate 24/7 with minimal human oversight.
Supported by a robust warehouse management system (WMS) to oversee the movement and storage of inventory, the facilities can process high volumes of orders quickly and accurately with minimal shipping errors and provide customers real-time visibility anytime of the day or night.
“The ASRS has been available to our ASEAN neighbours since 2004. Now, we can finally say that we are on par with them,” Cosiquien said, adding that one of ORCA’s long-term plans is to be one of ASEAN’s premier solutions providers in the cold chain industry.
For its ground-breaking effort in Taguig and Caloocan, which have around 20,000 and 15,000 pallet locations, respectively, ORCA was awarded pioneer status by the Philippine Board of Investments (BOI).
“We need to use technology to modernise our economy to be more competitive in the region,” Trade Undersecretary and BOI Managing Head, Ceferino S. Rodolfo, said during the awarding.
ORCA was delighted with BOI’s recognition.
“BOI has been a great help to us with the tax duties, imports, benefits, and the tax holidays. What we can do now is to focus on bringing the technology to our country and closer to the Filipinos,” Cosiquien said. “We are trying to bring very innovative products from other countries to our country so that finally we can reap the benefits and hopefully help in lowering the costs.”
Automated Palletised Rack Supported Warehouse From SSI SCHAEFER
The innovative logistic system is provided by SSI SCHAEFER , a leading provider of products and systems for material handling products and solutions. SSI SCHAEFER secured the contract on the strength of its reputation in the Philippines, where it has an office since 1992, its track record in the installation of rack supported storage facilities, the system of choice for ORCA Taguig and Caloocan, and its ability to handle challenging projects.
Rack supported storage facilities, which make maximum use of storage density (storage per cubic feet), are ideally suited for cold store. As the racking system is the primary structural support, no conventional structural columns are needed. The walls and the roof are fixed directly onto the rack structure. This inside-out approach offers several advantages over a conventional warehouse, where there must first be a building before freestanding racks can be installed to accommodate storage needs.
As no columns are needed, a rack supported warehouse can be completed much faster. Also known as a rack clad warehouse, the installation of the rack, the material handling equipment and the cladding can be undertaken simultaneously. For the same reasons, it is also cheaper to build as compared with a conventional warehouse with similar storage capacity.
Equally important, a rack supported warehouse makes the most of the available space, which is vital for a cold store where the investment cost is high, as much as 10 times the cost of a conventional dry warehouse.
While a rack supported warehouse suits ORCA to a T, building such a facility in a country known for its seismic activities and typhoons presents added design challenges. Building it to a height of 40 m, roughly 12 stories tall, to maximise land area adds a further dimension to design and construction requirements.
SSI SCHAEFER has proven equal to the task. Both the rack supported facilities are designed to withstand typhoons with 280 km winds, in a seismic area classified as UBC zone 4. Taguig and Caloocan will break new grounds for ORCA and the Philippines when they become operational in August 2019 and early 2020, respectively. Extending 40 m high, the rack clad buildings are the first of their kind in the Philippines.
“The rack supported storage facilities at ORCA Taguig and Caloocan are the industry first in the Philippines and SSI SCHAEFER is honored and privileged to be associated with it,” said Brian Miles, Regional Managing Director (Asia, MEA, ANZ).
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