The venerable Hong Kong conglomerate Swire Group has mounted probably China’s single-most ambitious cold chain-related project, a $450 million investment in eight cold storage facilities around the country.
“We are building the best in class, comparable to any in the world,” said Clement Lam, director and manager, Swire Pacific Cold Storage Ltd. China, in a telephone interview.
Swire, best known as the owner of Cathay Pacific, is one of the world’s leading cold storage operators. It owns United States Cold Storage, with 36 facilities around the US, totaling nearly one million pallet positions, as well as operations in Australia, Sri Lanka, Vietnam and mainland China.
In China, Swire began with a cold storage joint venture in Guangzhou in 2008. Swire has since opened four more facilities: Nanjing, Ningbo, Langfang, in Hebei province, and Shanghai. Two more are being built in Chengdu and Xiamen, with scheduled openings during the first quarter of 2017. An eighth facility is set for Wuhan, where Swire is now negotiating with the government for land.
The building program is not only costly, but drags down group profitability. In 2015, Swire Pacific Cold Storage lost HK$102 million ($13.15 million), which the company attributed to both operating losses in all but the Guangzhou facility, and development costs.
Lam termed the facilities expensive to build but “actually very efficient in terms of operating costs.”
Swire builds and operates its facilities to insure integrity and standards, Lam said. The China facilities range in size from about 50,000 pallet positions to 80,000. Each offers multiple temperature-controlled chambers. Like facilities being built in Europe and the US, Swire’s cold storage warehouses emphasize sophisticated IT systems for multiple tasks: monitoring, tracking, handling, inventory and order management and climate and energy control. The one-year-old Ningbo facility, for example, has 70,000 pallet positions in two warehouses, offering 24 separate temperature chambers and state-of-the-art IT.
Swire Cold Storage customers read like a who’s who of food and beverage: Dairy Queen, Mission Foods, Coca-Cola, Yum Foods, Cargill, Nestle. That’s not surprising given the exacting handling and quality assurance standards these global players demand. However, while most of its customers are multinationals, Swire has been able to attract some local producers as well. Lam said Swire is negotiating not only with other international companies for more business, but also Chinese supermarket chains, for example. Swire is looking for a mix of customers, with different price points and yields. And Lam believes as China’s own emphasis on food safety gains ground, more local customers will opt for Swire’s operations.
According to Swire’s annual report, at the end of 2015, business in Shanghai, Hebei and Ningbo is growing, but still ranged between 31% and 40%.
“We are here for the long run,” said Lam.
While Swire’s cold storage has obvious appeal for ice cream or frozen French fries, the company is also making a push to attract fresh imported fruit. It has handled apples from the US, citrus from South Africa and cherries from Chile.
Lam cited the New Zealand kiwifruit giant Zespri as one notable client. Not only can Swire offer precise cooling facilities, but can dovetail with Zespri’s own IT capabilities, allowing the company to track and trace every kiwi that lands in China, which, after all, is where kiwifruit originated.