Current State of the Cold Chain
in the Philippines
Team Report, Executive Summary
The following findings and recommendations resulted from the USDA Emerging Markets assessment trip to the Philippines in 1998:
U.S. perishable food products destined for the Philippines (especially fruits) are often stored in a controlled-atmosphere environment or extended nitrogen storage facilities in the United States prior to shipment. Despite these modern post harvest shelf life-extension treatments, there is little knowledge in the Philippines about how these practices improve imported product quality.
Once loaded on ocean going vessels in the United States, most imported U.S. refrigerated foods spend two to three weeks in transit prior to arrival in the Philippines. Many U.S. exporters of perishable food are using temperature monitors to track temperature, however importers have little understanding of the value of these recording devices to facilitate price adjustments discussions related to breakdowns in the cold chain in transit. While advanced technologies like humidity control and ethylene oxidizers (to prevent ripening) are available by major carriers, they are currently not being used.
The team found the Port of Manila and Cebu facilities were modern and well managed, however once refrigerated ocean containers are accepted from ports by Philippine importers, with few exceptions, the cold chain deteriorates rapidly.
Upon arrival, many refrigerated containers are opened and unloaded manually therefore exposing perishable items to extreme temperatures and humidity for excessive time spans. Even those importers and distributers who expeditiously place perishable product in refrigerated cold storage often do so after excessive handling and local transportation without the benefit of proper refrigeration.
Lack of an adequate transportation infrastructure (roads particularly) makes it extremely difficult to move perishable agricultural items to cold storage in a timely manner. Currently it is illegal to use large refrigerated trucks (any vehicle over 2-3 tons) on Manila streets during large portions of the business day. Product arriving at cold storage facilities are handled manually at unloading docks in ambient tropical air which results in excessive exposure to heat and humidity. Inter-Island movement of refrigerated products is often unreliable due to failure of some shipping companies to allocate appropriate attention and resources to maintaining the cold chain during transit.
Economic losses associated with heat and humidity stress are even more pronounced for domestically-grown and transported perishable food products. Shrink losses run can be as high as 50 percent of product weigh. Clearly, improvements in the cold chain would benefit not only importers and but also local agricultural producers in Northern Luzon (e.g., Baguio and Cayagan areas) and outlying agricultural producing islands such as Mindanao.
Given a general distrust in the efficacy of many public cold storage facilities that offer refrigeration services to the food industry for lease, many large Philippine food processing firms and/or retailers have their own cold storage facilities and do a fairly good job of maintaining the cold chain within their operations. Even so, Philippine food processor representatives believe that cold chain improvements are sorely needed for improved domestic market sales of their own food product lines.
Currently, there are six medium to large public cold storage facilities in the Manila area who lease space to firms seeking temporary storage for imported perishable products. The Team noted great inconsistency in construction of cold storage facilities which presents special challenges in introducing new technologies to improve efficiency and reduce operational costs.
Given the current state of the economy (cold storage throughput for food processing and fast food is down 15 - 20 percent), most observers think the amount of public cold storage capacity is adequate. However, additional capacity will likely be required once the economy resumes growth and imports expand.
With the exception of one very modern facility visited by the USDA Team, perishable products stored in local cold storage, generally do not adhere to best industry practices followed in the United States. Specifically, problems were observed in maintaining proper temperatures for specified refrigerated items, lack of humidity control, absence of ethylene oxidizers to prevent premature ripening of fruit, lack of understanding of storage guidelines related to incompatible perishable items (e.g. apples stored with spices), failure to maintain proper air circulation/velocity in chiller rooms, failure to use regular defrost cycles, lack of adherence to industry standards on proper time limits for perishables left in cold storage, little attempt to optimize stacking parameters, and an almost total absence of automated cold storage inventory control technologies.
While there is a organization representing ice and cold storage companies in the Philippines it is reportedly not active in identifying needs and provide assistance to its members on matters such as operational improvements, standardization in practices, or training. Other associations with potential interest in improving the cold chain such as the Meat Importers Association reportedly do not focus heavily on educational issues either.
Apples are the most important U.S. fresh fruit item imported in the Philippines and serve as a good indicator of the general trends and practices in the cold chain in the Philippines. The bulk of U.S. apples are sold by wholesalers to "wet markets" (i.e., open-air street markets) distributers where little, if any, refrigeration is available. After consumers purchase apples from wet markets, the product is stored unrefrigerated at home which further reduces shelf life. As a result, U.S. apples and many other U.S. imported fruit items are generally consumed in state of dehydration with compromised flavor and texture.
Even in modern Philippine supermarkets, perishable fruits and vegetables are often stored in chiller rooms without regard to humidity needs or product compatibility. On the sales floors, product is generally displayed on modern refrigerated racks that are maintained acceptable temperatures although product load limits in the display cases and stacking pressure guidelines appear to be generally ignored by store managers. While supermarkets are better at handling and displaying refrigerated food items than wet markets, the quality of product is well below what could be presented if simple storage, display, rotation, and home care use changes were introduced. Supermarket use of Aconcessionaires@ (outside contractors) to maintain the fruit and vegetable displays may be counterproductive in terms of exacerbating the tendency to over-handle delicate perishable foods.
Among Philippine businesses involved with distribution of perishable food items, the Team found a high level of interest in learning ways to improve the cold chain. However, it was apparent that the information must be based on an economic gain in terms of cost/loss savings, increased sales, and improved profitability.
Currently the average Filipino consumer has little to no reliable reference point to measure good or poor quality in many perishable food products. Consumer-driven pressure on businesses to provide better quality perishable products is lacking and would be helpful to spur market development for U.S. perishable food items.
Economic hard times have reduced expenditures of Philippine families on home appliances hence, the short run outlook for improvements in household access to home refrigeration is not good. However, resumed growth in the economy and corresponding future expansion in personal income should lead to growth in the number and capacity of refrigerators thus setting the stage for expanded sales and imports of U.S. perishable consumer-oriented products.
Recommendations for Follow-up:
Since the state of the cold chain in the Philippines with respect to imported products is at a early evolutionary stage, there is an acute need for information at all levels in the industry from importer to end-consumer. However, given limitations in EMO training resources, the first priority for USDA should be to address fairly simple and inexpensive educational remedies to current Philippine industry practices that would reap the most pronounced gains in terms of the quality of U.S. perishable imports being sold in the market.
Based upon the USDA Team=s observations and the expressed needs of major associations and companies visited, education is critically needed in the following topical areas: 1) proper temperature guidelines for fruits, vegetables and other important imported perishable items, 2) the importance of humidity control to maintain product quality; 3) the use of ethylene oxidizers to prevent premature ripening of fruits and vegetables; 4) incompatible perishable food items and associated storage guidelines; 5) methods to improve air circulation/velocity in chiller rooms; 6) the importance of defrost cycles in cold storage facilities; 7) storage time limitations for various imported perishable foods; 8) methods to optimize stacking/shelving parameters in cold storage facilities; and 9) use of automated cold storage inventory control technologies.
Since processed fruits and vegetables, fresh fruits, meats and certain other higher value perishable food imports (e.g., french fries and ice cream) constitute the bulk of U.S. perishable food trade with Philippines by value, EMO follow-up training activities may at this point be best limited to improving the cold chain (proper transportation, handling, and storage) for these specific items. Later efforts could be expanded to include other perishable products provided demand warrants a broader focus.
Education efforts should begin with a USDA-sponsored technical training seminar(s) undertaken in 1999 which will target to those groups of individuals or companies recommended by cooperating industry associations, companies, and FAS Manila. Efforts should be made to time these training activities with annual meetings the major associations or major food exhibitions in Manila. Efforts should be made to draw attendees from other metropolitan areas such as Cebu City and other outlying Islands.
Subsequent to the first seminar, a follow-up seminar should occur within a year to signal the on-going commitment of the United States to the Philippine market. Subsequent seminars should be more specialized and perhaps include a hands-on workshops in HACCP and other best industry practices related to the cold chain (e.g., ISO 9000) as now employed in more developed markets.
Given the fact that availability of affordable credit is a major constraint in the Philippines at present, USDA seminars should include information or a presentation on USDA's Facilities Guarantee Program and other credit programs if Post concurs.
USDA may wish to consider mounting an effort to help establish a public cold storage association in the Philippines in association with the International Association of Refrigerated Warehouses (IARW). Much of the preliminary groundwork for establishing a local association such as this has been developed by the IARW and information such as the ACodes of Recommended Practices for Chilled and Frozen Foods@ are easily transferable to new member countries. The benefits in terms of improved handling of U.S. perishable products could make this effort well worth the initial investment.
FAS Manila may want to reinforce to Philippine-active U.S. Cooperators the need to work closer together on stimulating demand for higher quality U.S. perishable products through education of the end consumer. Point of sale demonstrations and informational advertising may need to be instituted or expanded to better familiarize Philippine consumers with a higher potential standard/expectation for U.S. perishable foods than currently exists in the market. The advice and help of FAS Commodity Divisions and the Cooperators should be sought accordingly.
Noting the success of recent Cochran supermarket visits to the United States, a team of current importers of U.S. perishable food products from the Philippines (including supermarket executives) should be invited to the United States to visit state-of-the-art post-harvest food preparation sites, public cold storage facilities, transportation and distribution centers involved in the maintenance of the cold chain for U.S. perishable foods. Participants would observe best industry practices in the United States to establish a direct information link to the Philippines. Alternatively, Trade and Investment Program of ICD may want to consider seeking EMO funding for and coordinating a Philippines Cold Chain Maintenance team visit to the United States.
To signal reciprocity and U.S. openness to two-way agricultural trade in these difficult economic times for the Philippines, a more concerted effort by the United States may now be appropriate to open U.S. markets to high quality tropical items (e.g. mangoes) in exchange for greater willingness to further liberalize access to the Philippine market for U.S. perishable agricultural products.
While traffic congestion in Manila and the need for road improvement in outlying Philippine areas are paramount factors affecting the timeliness of delivery and resulting quality of perishable agricultural products, comprehensive transportation infrastructure improvements are clearly beyond the scope of this project and should be viewed as long-term economic development challenges for the Philippine Government into the next century.