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More Chinese firms eye potential of cold chain logistics

More Chinese firms eye potential of cold chain logistics

Staff Reporter

2014-06-15

The fresh food e-commerce sector is expected to post rapid growth over the next five years as several enterprises in China have made investments in the sector, which is expected to stimulate the development of cold chain logistics, reports Guangzhou’s 21st Century Business Herald.

Shenzhen-based delivery company SF Express has already opened Heike, an online shopping service community store, which integrates services with SF Express’ cold chain logistics.

“After opening cold chain logistics, its operations will speed up when the company’s partners receive more orders,” said Li Dongqi, CEO at SF Best, an online food store under SF Express.

Other domestic firms are also striving to tap into the fresh food sector, the paper said. Cainiao Network Technology, which was founded by Jack Ma, co-founder and chairman of Chinese e-commerce giant Alibaba, and other investors, announced recently that it planned to expand its cold chain 24-hour delivery business to Beijing and Guangzhou.

Last month, Amazon China invested US$20 million in Shanghai-based Yummy77, which was the company’s first strategic investment after entering China’s market. Jingdong Mall CEO Liu Qiangdong, meanwhile, has also announced plans to team up with Dalian Zhangzi Island Fishery Group, China’s largest seafood company, to achieve vertical integration in the online-to-offline supply chain in the seafood sector.

E-commerce firms have become the most important factor driving the development of cold chain logistics. Last year, the capacity of cold storage in China was 26 million tonnes, up 36% from a year earlier. SF Best recorded sales of 400 million yuan (US$63.8 million) in 2013, surging by 536% from 2012, while fresh food sales at Jingdong grew five fold this year, compared with the sales reported in 2013.

Several analysts predicted that the cold chain industry will maintain a 20% growth rate this year, they also projected that an additional 30 million tonnes of cold storage will be in demand during the next five years.

Top-tier Chinese cities are experiencing the largest growth in the sector, with Beijing, Shanghai and Guangzhou each having seen a 30% increase last year. However, the circulation of cold chain logistics in the country is merely 19%, reflecting a serious shortage in capacity of cold storage and the number of refrigeration trucks. In comparison, such circulation has reached over 85% in advanced countries such as Japan and the United States.

“Fresh products have strict requirements for cold-temperature delivery. The development of cold chain logistics has constrained the development of fresh food e-commerce,” said Tang Zhong, the CEO of a vegetable delivery firm.

To save costs, some truck drivers tend to turn off the refrigerators and turn them back on when they arrive at their destinations, the paper said.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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