Journal of Food Distribution Research

Infrastructure Needs Assessmentfor Distribution of FrozenProcessed Potato Productsin Southeast Asian Countries

Victoria Salin, Rodolfo Nayga, CatherineViator, Wuyi Fang, and Wipon AiewTexas A&M UniversityDepartment of Agricultural Economics

The purpose of this project is to assess thecommercial feasibility of investments in cold chaininfrastructure improvement needed to distributefrozen foods in and beyond major cities in Thailandand the Philippines. Quick-serve restaurants andUS shippers have successfully penetrated the majorurban centers of Manila and Bangkok. Growth op-portunities are expected in the secondary cities. Theobjectives of this project are to:

(1) develop pilot projects illustrating businessopportunities with commercial potential in theinfrastructure needed for transportation andhandling of frozen foods to secondary cities inthe Philippines and Thailand; and

(2) draw conclusions about feasibility of projects,using risk analysis based on economic condi-tions and institutional constraints.

A research team visited the capital cities andmajor secondary cities in the Philippines and Thai-land during May and June 2000. While there, ap-proximately 80 companies were interviewed in-cluding cold storage businesses, transportationservice companies (shipping lines and trucking andrailway cargo service companies), port authorities,frozen food companies, quick service restaurants,banks, and government officials.

Current Situationin Cold Chain Infrastructure

The main issue in distributing frozen proc-essed potato products in the Philippines is insuffi-cient quality cold storage, especially in secondarycities such as Bacolod and Cebu. The expensiveinter island shipping cost from Manila to secondarycities is another bottleneck. Freight rates of interisland shipping are higher than international ship-ping charges. For example, the cost from Hong

Kong or Japan to Manila is about $1500 per 40-foot container while from Manila to Cebu the costis $1800 to $2000 per 40-foot container. Third,although Manila and Cebu have moder seaports,the port in Bacolod is incapable of handling 40-footcontainers. Because the seafood industry in Ba-colod is declining, cold storage and port facilitieshave not been developed It was also noticed thattraffic congestion is a serious problem in Manilaand makes inter-city deliveries more difficult.

Compared with the Philippines, Thailand hasless severe problems in distributing frozen proc-essed potato products from ports to secondarycities. Private cold storage facilities (owned byfrozen food exporters and importers, including animporter of french fries) are modernized and canmeet strict quality standards. In addition, the ca-pacity is enough to satisfy current demand. Thereis only one public cold storage available in theBangkok area and none in the other cities visitedbecause of lack of demand. Ports in Thailand andLaem Chabang have good facilities to handle im-ports and exports of frozen food products. Thai-land has a well-built highway system connectingthe Bangkok ports to secondary cities.

Cold storage companies in both countriescited high electricity costs as a major problem. Insome of the secondary cities in the Philippines(Cebu City, Bacolod City) and Thailand (Phuket),electricity blackouts and erratic voltage are also aconstraint.

Proposed Pilot Projects

Proposed projects in the Philippines include:

(1) Construction of new public cold storage ware-houses in Cebu City and Cagayan de Oro.

(2) Add more outlets to an inter-island vessel toaccommodate a larger volume of refrigeratedcontainers.

Proposed projects in Thailand include:

(1) Construction of a new public cold storagewarehouse in Phuket.

(2) Expansion of reefer van fleet in Phuket.

The preliminary financial analysis and risk as-sessment for the proposed projects is available ifpotential investors are interested.

200 March 2001

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Figure 1. Shaded Relief Map of the Philippines.

Source: PCL Map Collection. The University of Texas at Austin. "World Atlas and Maps: Shaded Relief Mapof the Philippines." <http://geography.about.com/science/geography/library/maps>.

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Research Updates 201

Journal of Food Distribution Research

Figure 2. Shaded Relief Map of Thailand.

Source: PCL Map Collection. The University of Texas at Austin. "World Atlas and Maps: Shaded Relief Mapof Thailand." <http://geography.about com/science/geography/library/maps>.

202 March 2001

Research Updates 203

Summary

The project team feels that the market is welldeveloped and will continue to expand in the Phil-ippines. Investment in cold storage warehouses inCebu City and Cagayan de Oro and adding moreoutlets on inter-island vessels in the Philippineswill be feasible given its declining tariffs, marketsituation, and competition. The level of capacityutilization is critical to the financial returns ex-pected on the cold storage investments.

Cold chain infrastructure in Thailand is basi-cally sufficient to meet the current distributionneeds of frozen processed potatoes. Thai consumeracceptance of western-style quick-serve restaurantfoods is lower than the level observed in the Phil-ippines. However, it is possible that extra cold stor-age in Phuket and trucking fleets near ports couldhelp improve the efficiency of distribution if thedemand increases in the near future.

Innovative MarketingOpportunities for Small Farmers:Local Schools as Customers

Dan SchoferAgricultural Marketing ServiceU.S. Department of Agriculture

The U.S. Department of Agriculture's (USDA)Agricultural Marketing Services (AMS) and theNatural Resources Conservation Services (NRCS),the West Florida Resource Conservation and Devel-opment Council (WFRCDC), and the Small FarmerOutreach, Training, and Technical Assistance Proj-ect, Florida A&M University (FAMU) have workedtogether over the past 3 years on a pilot project ti-tled: Innovative Marketing Opportunities for SmallFarmers: Local Schools as Customers. A group ofsmall farmers in the Florida Panhandle organizedinto the New North Florida Cooperative and estab-lished a central location in Marianna, FL, 70 mileswest of Tallahassee. The Cooperative recognized aconsiderable opportunity in serving local schooldistricts with fresh agricultural products.

The Cooperative overcame initial difficulties,including lack of organization, economic difficulties,social attitudes, existing customer preferences, andlack of equipment. Realizing that effective organi-zation was critical, these limited-resource growersformed a management team as a governing body for

the Cooperative. The management team addressedproblems and handled day-to-day business activitiesin a unified, methodical way. The Cooperative ac-quired capital and purchased necessary startupequipment, such as a refrigerated trailer, cutting ma-chines and wash sinks. The Cooperative developed agood working relationship with the Food ServiceDirector for the Gadsden County School District byproviding high-quality produce, prompt deliveries,fair prices, and courteous professionalism. Thevending experiences of the 1997/98 and 1998/99school years were positive steps for the Cooperativein building a long term, reputable business. The Co-operative's main product was fresh-cut leafy greens,but watermelons, strawberries, blackberries, andmuscadine grapes were also sold. Word of mouthadvertising has portrayed the Cooperative as a repu-table vendor and opened doors of opportunity inother school districts, including Jackson, Leon, andWalton Counties.

The project's objectives for the 2000/2001school year are to expand current marketing anddistribution of agricultural and value-added prod-ucts through additional, non-traditional marketingchannels including additional school districts,military bases, and prisons.

Innovative Production and MarketingSystems to Provide Small Farmers withSustainable Job and Income Opportunities

S. Sink, C. Coale, G. Haugh, and D. ReavesVirgnia Polytechnic Institute and State University

Objectives

* Identify markets for various horticultural andvalue-added products and services

* Develop production scenarios to supportidentified market demand

* Develop integrated production, handling, andstorage systems to support vertical market op-portunities

* Estimate cost and revenue streams for se-lected value-added products and services

* Evaluate project's effectiveness and contribu-tion to small farmer sustainability

This project is a two-year cooperative agree-ment with the U.S. Department of Agriculture, and