Freshly picked delivered fresh
All that matters in perishable logistics is time and freshness. Constant temperature keeps the good care of perishables while air cargo transports them around the world. Reji John ... After four months of reasonably satisfactory growth, the month of May brought only limited increases in air cargo volumes. Worldwide year on year growth was a meager 1.8 percent, fueling suspicions that air cargo may have to face some adverse market conditions once again. Worldwide yield (in USD) was down by two percent compared to April. The growth in May came specifically from Africa and the Middle East & South Asia (MESA), with year on year increases of eight percent and 5.5 percent respectively. MESA was also the fastest growing destination. Interestingly, the Americas did best when it comes to yield comparisons with May 2014. As has been the case for a while, perishables and pharmaceuticals were the engines of growth again, the former playing a much larger role than the latter in terms of volumes. Worldwide growth in May was completely driven by these two categories with growth figures of seven percent and 13 percent. In other parts of the world, Australia, India, Norway and the Netherlands did best in terms of perishable volume growth year on year. Whether it is the blueberries of Argentina, asparagus of Peru, cherries and salmons of Chile or the flowers of Columbia and Kenya, air cargo has made valuable contributions to making these industries grow bigger in scale and revenue. In perishable logistics, time is of the essence to ensure produce, flowers, fish, and other products reach their destinations while they still offer maximum appeal and shelf life. As a result, many of these goods move via air. Think about perishable logistics in the context of rapidly changing consumer behavior and technology adoption in human life. Perishable logistics is an evolving science, as changing consumption patterns, variable regulation, rising customer expectations, and shifts in services converge to create a complex and changing supply chain. Perishables shippers use both passenger aircraft and freighters to speed goods to their destinations, according to market needs, the nature of the commodity, product margin, and individual preferences. Passenger flights are generally more frequent, less expensive, and more widely available, but they require adherence to tight timetables, and goods may get bumped at the pilot's discretion. Freighters offer better temperature control, fewer inspections, and additional capacity, which is particularly valuable for large quantities of short-season goods. But freighters can be more costly, may fly less often and to fewer locations (depending on the region), and may sit until they reach capacity, endangering perishables. Air cargo has long competed with ocean shipping for some perishables commodities. One common pattern is for the beginning-of-the-season harvest to ship via air so it's first to market, followed by ocean shipping as the full season gets underway, says Markus Fellmann, global vice president of Hellmann Perishable Logistics, a Miami-based unit of third-party logistics provider Hellmann Worldwide. "In the past, we moved a lot of bell peppers in sea containers to the United States, but in the past five years, the volume has decreased," says Marcel van der Pluijm, account manager, United States and Canada, at Global Green Team, a fruit and vegetable trading company in Maasdijk, Holland. "Transit times are too long by steamship, so 99 percent of peppers move by air." One of the biggest challenges of perishable transportation from the origin of perishable goods is either the complete lack or the inadequate cold chain network or cold room facilities. “Currently we have no other option but dealing with the lack of cold rooms in West and Central Africa. However we see more and more interest in developing such infrastructure with the most recent one being in Lagos International Airport. On a wider discussion we would expect airport authorities to invest or allow private investments as it is a key success factor to develop export of perishables allowing them to compete with other regions which are already well structured like Latin America,” says Loic Gindre, Subsaharan Africa Commercial Manager, Air Capacity Sales for DHL Aviation. DHL Aviation ships around 10,000 tonnes of perishables a year and the annual rate of growth in the volume shipped is estimated to be around seven percent. “What we have noticed is that when we enter a new market it supports the development of exporters. In essence the more capacity air lift is available the more exporters will export,” says Gindre. For London-headquartered IAG Cargo the growth in perishable volume has been consistent. “We have seen continued growth in our perishables volumes, with 2014 closing four percent up on tonnage versus 2013, making the category an important part of IAG Cargo’s business. This has been helped by continued investment in our perishables service,” said Daniel Johnson, Manager of Global Products at IAG Cargo. In April of this year IAG Cargo moved its London Heathrow perishable handling facility to WFS. According to Johnson, this transition has provided customers with a smooth and faster service, with them now being to collect direct from Airport within two hours of arrival. IAG Cargo’s Perishables Handling Centre in Madrid, at 16,400 square meters, is fitted with a perishables section of 2,500 square meters and has a cold store of 800 square meters for the storage of meat and fish. It also has a dedicated refrigerator of over 150 square meters for the storage of fruits and vegetables. Commenting on the potential for growth in perishables by air from Africa Gindre believes that it is significant. “However European markets become more and more demanding in terms of certification, quality, cold chain monitoring which will require African exporters to invest more in the whole supply chain,” he cautions. Perishables represent a significant portion of IAG Cargo’s business and according to Johnson this will continue to do so. “We have maintained a good year-on-year performance for our perishables product, Constant Fresh, helped by ongoing investment in our capabilities. Our South American network connections are particularly strong, providing IAG Cargo’s customers with great opportunities to connect exotic fruit and vegetables from Latin American countries, to markets all over the world,” he says. Speed, according to Johnson, is absolutely critical to any good perishables product. “We have therefore focused on the rapid handling from aircraft arrival at Heathrow, through the perishable handling facility, to the consignee. We also see a number of our customers upgrading their bookings from Constant Fresh to Prioritise in order to benefit from our same day connecting service at Heathrow, which is of huge value to time sensitive products. Fresh fish for example, can get from east to west in one calendar day,” explains Johnson. For Chinese, the colour red, particularly a rich ruby red, has a special place in their life and cultural traditions. They believe that red brings good luck. That is making cherry growers in the US consider China as a major export destination for cherries, which are rich in antioxidants and help to reduce inflammation, among other health benefits. While certain provinces in China grow considerable volume of cherries for domestic consumption, there is strong demand for foreign varieties because of their superior taste and quality. Premium shopping malls sell imported cherries during the US growing season from April to July, and the Chilean season of November to January. "The cherry is one of those perishable goods that is very attractive to the Asian consumer. Tastes good, looks great. It's very appealing. The product safety is insured,” says Keith Hu, director of international marketing at Northwest Cherry Growers in Yakima, who has witnessed an enormous growth in cherry exports from the Northwest to China. In 2007, Hu's company coordinated shipments of 285,000, 20-pound boxes to China. In 2012, that number grew to 2.06 million. The value of the perishable cargo has risen from $12.3 million in 2007 to almost $89 million in 2012. However, what is unique to China is that there is a rapid growth in people moving online to buy their daily needs including fresh fruits and vegetables sourced both from domestics markets from foreign destinations. China surpassed the US in 2013 as the largest e-commerce market. One quarter of Chinese population (300 million) shop online. Online shopping accounts for 10 percent of all retail sales and expected to double by 2020.Online food purchases currently accounts for 3.3 percent of total sale. Food is the fastest growing segment in e-commerce. Chinese online retailer JD.com, which started its operation with sales of consumer electronics, is making itself a market place for several other commodities including fresh avocados from Mexico and American cherries. It partnered with FruitDay, a Shanghai-based importer of fresh produce, also an investor in JD.com, which sells fresh fruit on JD.com. The investment will be used to build additional infrastructure to store, ship and track fresh produce. It will build robust logistics network in China where fragmented and under-developed transportation infrastructure hinder growth at every stage. In fact, it is the airfreight industry that is making the Chinese consumer access their favourite cherries and other exotic fruits and vegetables from around the world round the year. In June last year, China Cargo Airlines, subsidiary of China Eastern Airlines started weekly flights from the Seattle's SeaTac International Airport to Shanghai, known as "cherry charters" in the Northwest. China Eastern not only flies the cherries to China, it also offers them on its passenger flights and on its e-commerce site, eaemall.com. There are also other places from where cherries are being brought into China; Chile and Australia are among the top sources of cherries sourced for Chinese consumption. FedEx, UPS, Korean Air, Asiana Airlines and China Airlines in Taiwan are airlines hauling cherries to China from around the world. Steven Fang is a deputy general manager with China Eastern subsidiary Eastern Air Express in Shanghai but he has a more challenging job in managing EAEMALL.com, the e-retail outlet launched in 2012 by another China Eastern subsidiary Eastern Air Logistics. EAEMALL.com sells cherries imported from Chile. Earlier cherries were imported by commercial flights via the US or Europe, However, with China Eastern’s launch of EAEMALL.com, the carrier has been using freighter charters to import several tones of cherries both from the US and Chile. The aircraft brought in 170 tonnes of cherries and 30 tonnes of blueberries destined for wholesalers, supermarkets and e-tailers, the latter category including the EAEMALL.com channel, launched in 2012 by another China Eastern subsidiary, Eastern Air Logistics, in addition to third-party websites such as JD.com and WOMAI.com. According to Fang, who spoke about this unique venture at the IATA’s World Cargo Symposium in Shanghai in March this year, China Eastern flew 900 tonnes of cherries and 100 tonnes of blueberries into Shanghai in 2014. “A substantial portion, close to 40 percent of the imported cherries and blackberries were sold on EAEMALL.com,” Fang confirmed. Sellers on Alibaba’s consumer-to-consumer site, Taobao, also offer fresh food products. Maggie Chen, senior logistics manager at Cainiao, a platform started by Alibaba and a consortium of logistics companies in 2013, has said as much as 80 percent of all fruits and vegetables in China are transported at room temperature in outdated trucks, leading to a 40 percent spoilage rate. It is reported that Alibaba plans to invest $16 billion in China logistics, and has taken a minority stake in several logistics companies in the recent past, including Shanghai YTO Express. Speaking about the challenges and opportunities for the Chinese perishable market Clement Lam, director and general manager, Swire Pacific Cold Storage said that the expanding middle class are more capable and willing to afford high quality food product. “Consumers are moving from the traditional wet market to modern supermarket, due to the food quality, hygiene and particularly because of the recent spread of epidemic disease like bird flu,” says Lam. “While the traditional wet market is predominantly confined to sell local food product, consumer is now able to shop for a much wider range imported products in the modern supermarket for their daily consumption,” he adds. Turkish Cargo is a significant player in the perishable transportation and the carrier sees opportunities by building up its existing strengths in transporting niche segments, such as perishable cargo. For perishable cargo carriages requiring special levels of temperature, attention is paid in the broadest sense to provide the cold chain in all operational processes from acceptance to delivery in compliance with IATA Perishable Regulation (PCR) and related procedures of the company. Turkish Cargo is firmly focused on enlarging its market share. It has presence in more than 265 destinations. With so many air carriers vying for the perishables market, it is the product or the service differentiation that keeps the leader ahead in this highly competitive market. “We are the only cargo airline offering guaranteed weekly flights from most perishable exporters countries in the area. The other cargo airlines mainly land if they have southbound cargo making the production of perishables more complex to adjust,” promises Gindre. Recently IG International (IGIPL), one of the leading names in fresh fruits imports and exports in India launched Fremont Mandarins from Australia for the first time the country. Speaking at the launch Susan Jenkin, CEO, Ironbark Citrus, said, “The Indian fresh fruit market is one of the world’s fastest growing markets. We are delighted to partner with IG International to promote our product in India. Our premium mandarins are extremely popular throughout the world and are sold in many countries. We are confident that India will become an important market for this wonderful fruit.” Air India SATS Airport Services (AISATS) has started work on building a dedicated perishable cargo handling centre, the AISATS Coolport, at Kempegowda International Airport in Bengaluru, India. Once completed, the 40,000 tonne AISATS Coolport will cater to a wide range of commodities such as pharmaceutical products, fruits, vegetables, and flowers. In recent years there has been a substantial increase in perishable cargo handling volume. Since 2010, AISATS Bengaluru has witnessed a year-on-year increase of 37.9 percent. The facility will be equipped with a drug controller lab testing facility, separate ripening zone, land-side truck-docks, warehousing and re-distribution centers, cold room facilities with different temperature zones and a testing facility as per Plant Quarantine requirements for EU and US bound shipments. Experience and knowledge is critical to understanding the characteristics and needs of each commodity, so many forwarders, airlines, and other service providers train and employ staff devoted specifically to perishables. Like all shippers, perishables companies are seeking improved information on the location and condition of their precious cargo. That's prompting carriers and logistics companies to beef up IT, enhance their portals, offer improved logger devices, and even develop their own mobile apps. The idea is to increase the supply chain visibility through advanced trace and track technology innovation. Shippers are increasingly demanding to know information like temperature, humidity levels, and sun exposure. It is a fact that there is no uniform metrics; however, the effort is on at individual company level to establish global best practices.