Cold chain may be the next opportunity for Indonesia’s logistics startups

Indonesian last-mile logistics startup Paxel found that almost half of its shipments are of frozen food – primarily from MSMEs sending their products to customers. This is despite the company’s fleet mainly made up of motorcycles that are not equipped with any kind of refrigeration.

That has led the startup, which banked US$23 million in August, to eye cold chain fulfillment as part of its strategy going forward, says CEO and co-founder Zaldy Masita.

Paxel is not the only startup to bet on the sector. Cold chain players Superkul and Fresh Factory, both of which were founded in 2020, have also raised seed rounds this year, both led by East Ventures.

(From left) Paxel founders Bryant Christanto, Johari Zein, and Zaldy Masita / Photo credit: Paxel

Cold chain logistics as a whole is a large market in Indonesia due to the country’s size, as well as its agriculture and aquaculture industries, which require refrigeration at some point in their supply chains. In 2021, Indonesia’s cold chain logistics space was worth almost US$5 billion in 2021, and it’s set to grow at a compound annual growth rate (CAGR) of 10.2% in the next 10 years, according to Allied Market Research.

“More than 15% of Indonesia GDP is cold chain-related, and if 10% of this is the logistics costs, then this is an industry that is very significant,” says Larry Ridwan, the founder and CEO of Fresh Factory.

But it’s not a space many startups have entered, partly because of high setup and operational costs making it more complex than usual logistics operations. The dominant players are large conventional ones, including local firms Diamond Cold Storage and Wahana as well as global shipping company Maersk.

At the same time, with ecommerce logistics increasingly reduced to a price war and with fuel prices soaring, cold chain may present a growth opportunity.

Soaring demand?

A cold chain refers to “a combination of temperature-controlled surface transport and supply chain,” Allied Market Research noted.

It added that cold chain logistics involves “the freezing solutions required to maintain the quality and shelf life of products,” which include frozen food, fruits, vegetables, meat, and medicine. This covers the transport, storage, and fulfillment of these products, which involves specialized warehouses, vehicles, and other equipment.

These startups can integrate cold chain services with tech platforms such as on-demand apps for last-mile delivery and smart warehouse systems for storage. As Fresh Factory’s Ridwan notes, the cold chain sector was not tech-enabled historically.

“Startups will not compete directly with conventional companies. They provide different services that open the potential for collaboration,” emphasizes Devina Halim, principal at East Ventures.

Superkul, for instance, is collaborating with marine product exporter and frozen food producer PT Sekar Bumi for last-mile deliveries. Paxel has also announced a partnership with ice cream company Wall’s Indonesia for an instant delivery service.

Fresh Factory, which provides hyperlocal fulfillment center services, indirectly cooperates with conventional players because some of its clients also rent warehouses from conventional players, resulting in supply chain integration.

More complicated operations