Introduction
Cold Chain or Temperature Controlled Logistics refers to a whole supply chain of products that require a specific temperature since they are collected from the farms or manufactured till they are delivered to end customers such stores, restaurants, etc. Therefore, this industry ranges from vaccines that need to be kept at -80º Celsius to fruits and vegetables that should be kept at 15º Celsius, going through frozen fish and meat, flowers or dairy products.
In general, TCL is still in an early stage in LatAm, where waste and informal logistics are responsible for a significant portion of the production. Therefore, more and more, investments in TCL market are being carried out, either by funds, logistic operators or port operators among others, although there is large gap yet to be closed. This increasing appetite is supported by solid and stable strong EBITDA margins of 30-60%.
LatAm TCL market
The LatAm TCL market is a market with huge potential with over 350 million tonnes of products requiring temperature controlled logistics. This huge market is led by countries such as Brazil, Mexico or Colombia and at the same time, by fruits and vegetables industry, among others
However, LatAm TCL market suffers from higher logistics costs and lower penetration than other world regions, especially if we compare to more developed regions such as North America or Europe. This is as a result of the challenges that the region is facing, such as:
- Limited infrastructure in transport network and warehousing
- Outdated warehouses and aged fleet (>15 years in LatAm)
- High investments levels required for infra and equipment upgrade
- Lack of integration systems and lower IT developments, as specialized human resources
- Atomization of players, with small to medium local players
- High seasonality of some cargoes leading to higher dimensioning
The lack of a developed TCL industry is especially critical in Dominican Republic. Indeed, according to the UNEP, Dominican Republic is the country with the largest ratio of food waste with around 160 kgs per capita.
Case study in Dominican Republic
The north-west region is one of the most fertile regions of Dominican Republic. In fact, it concentrates most of the Guinea production, which it is mostly exported though the ports of Haina and Caucedo in the South. Although producers and export associations are located in the north region, there is still a lack of value added services provided to cold chain, specially in the case of medium and small scale producers. Main gaps are:
- Pre-cooling of products to slow down its maturation is not a widespread practice
- Land transport is not done by refrigerated trucks and is costly
- Scarce supply of TCL warehouses in the north of the country
- Cooling and preservation is usually carried out in refrigerated containers
- Customs procedures at the Port are often lengthy and cause cargo losses
The overall TCL market potential in Dominican Republic is estimated at around 6.5 million tonnes, which translates into 400 thousand square meters, mainly for fruits and vegetables and for dairy products in a lesser extent. On the other side, overall current TCL offering only covers around 10% of the total maximum potential. In addition, there is even a more limited TCL offering on the northern region which limits the export potential of the producers, specially to developed countries where the traceability of the cold chain is more and more a must.
As a result, a new facility in the north-west region of 9 thousand square meters of cold warehouse was designed. This facility will provide both storage services and added value services, such as pre-cooling, sorting, traceability, packaging, cross-docking or certification, and it will be mainly oriented to serve the needs of local producers.
Alhambra Advisors
Alhambra Advisors provides comprehensive services related to logistics and cold chain industry. Within this context, Alhambra Advisors provides services ranging from the strategy definition (market assessment and definition of the value proposition) to assessing the feasibility of the project (concept design and business plan).