How To Start a Cold Storage Business in 8 Steps

Do you want to start a cold storage business? Find here a detailed cold storage business plan sample checklist for your ready reference. This article includes cost, investment, profitability, and subsidy information.

If you are looking for a one-time investment business, then starting cold storage is just perfect for you. Generally, in this business, the initial investment is higher compared to other small businesses. However, this type of business ensures a constant return on a long-term basis.

Cold storage is a profitable business both in developing and developed countries. You will find two different types of cold storage according to the storage facility. One is specific for one product (for example potato) and another is multipurpose. However, multi-purpose cold storage ensures better returns and profitability overall.

Is cold storage a profitable business in India?

Globally, the wastage of fresh vegetables and fruits is huge. Generally, food crop-growing countries hold the maximum share of the wastage of fresh foods. Cold Storages are essential for extending the shelf life, period of marketing, avoiding glut, post-harvest losses reducing transport bottlenecks during the peak period of production, and maintenance of the quality of the product.

Besides, cold storages have an important role in reducing the wastage of perishable commodities. In addition, it helps in providing remunerative prices to the growers and to make available farm products to the consumers at competitive and affordable prices.

Additionally, changing lifestyles and demand for processed or packaged food are creating the need for cold storage solutions globally.

Here are the 8 Steps to Start Cold Storage Business

1. Create A Business Plan

Starting a cold storage business demands strategic planning and careful implementation. Therefore, crafting a business plan or project report is the most important aspect of starting this business. According to your investment capacity, you will need to decide the business size.

Additionally, you must have financial planning with a projected ROI and payback period. A business plan helps you in numerous ways. It helps in commencing the business properly, getting finance, and ensuring smooth operations.

2. Secure A Location

Location plays an important role in this business. You must secure a location either near the producing farms or consumer centers. Because you must cater to the local produce for your warehouse. Additionally, you will need to procure approximately one acre of land for a multi-purpose/multi-commodity cold storage plant of 5000 MT capacity.

3. Obtain The Permissions & Licenses

Generally, this business attracts different licenses and permissions. And it depends on the specific location where you are starting the business. Additionally, check the upcoming compliances and tax liabilities also.

4. Cost of Starting a Cold Storage Business

The initial investment is definitely very high in this business. Generally, the investment includes acquiring the land, building construction, obtaining permissions and licensing, arranging utilities like water, electricity, etc. Additionally, you will need to invest a major startup capital in procuring the cooling machinery. Generally, modern and updated machinery ensures better performance and long-term sustainability.

Apart from the above-mentioned fixed costs, you will need to consider the working capital expenses also. The major considerations are staffing, utility bill payment, and promotional expenses.

The cost and investment will largely depend on the scale of the cold storage unit. However, according to experts, the estimated project cost for setting up 5000 MT Cold Storage may be in the range of Rs. 3 Crore – 4 Crores in Indian Rupees. The cost of land is an additional investment you need to make.

5. Arrange Finance

Cold storage is a capital-intensive business. You must have an investment capacity of 3 to 4 Corers for commencing this business. Generally, you can set up this business with financial help from banks. In addition, check if there is any subsidy or Govt. grants available for this business.

6. Cold Storage Business Subsidy

In India, the National Horticulture Board provides subsidies for cold storage businesses for entrepreneurs. You will need to apply online. There you will need to fill up an online IPA (In-Principle Approval) application Form. Before submitting the application, carefully read and understand the Operational Guidelines of the relevant scheme.

For more detail, you can follow this link http://nhb.gov.in/coldstorage_scheme_guideline.aspx?enc=3ZOO8K5CzcdC/Yq6HcdIxGnFC+VjFQvFstMfkdm4FxM=

7. Build The Cold Storage

The next step is building the warehouse and installing the machinery. Consult with an experienced architecture firm for planning and building construction. Get the quotes from the reputed machinery suppliers.

Choosing the right machinery is an important part of the overall performance of the store. In addition, check the price, customer feedback, and warranty periods. Ask the machinery supplier for on-site training.

Also Read: Best Agriculture Business Ideas with Low Investment

8. Promote Your Cold Storage Business

The overall success of running cold storage comes from the right advertising and promotion. And you must start the awareness campaign when you start to build the store. According to the products you want to accommodate, identify the target demographics.

Target segments include supermarkets, wholesalers, and warehouse companies in urban as well as electrified villages. In this business, your target audience will be the growers. producers, retailers, distributors, exporters, etc.