Cold storage as a service: InspiraFarms launches its on-demand pay-as-you-chill model in Mexico
Local access to cooling provides an opportunity for small farmers to store and aggregate produce from a number of different farmers, and to be able to take advantage of the growing demand for fresh produce in both domestic and international markets, that require consistent quality, volumes and food safety levels.
Two-thirds of the 3 billion rural people in developing countries are smallholder’s farmers with plots of less than 5 hectares, who face capital limitations and considerable distances to markets. These producers have to overcome significant challenges to access the services and infrastructure that would enable them to reach the appropriate inventory volume and quality level for their agricultural output to reach profitable markets.
Therefore, most small farmers don’t have access to cold storage, due to their inability to invest capital or due to the lack of cooling facilities close to their area. These farmers are thus at a relative disadvantage in the supply chain.
There is an urgent need to rethink technology solutions in order to create the right environment to effectively reach and serve large numbers of small farmers and agribusiness, especially in terms of physical access and affordability.
InspiraFarms Pay-as-you-chill: how does it work?
InspiraFarms is launching its cold storage on-demand model, a pay-as-you-chill rental service with the objective of providing universal access to its energy efficient cold storage solutions. This focuses on small farmers and those based in the first mile of distribution that requires cooling access, but with limited purchasing capability.
InspiraFarms installs the infrastructure near strategic production areas, for which an agreement is reached with a number of users, such as farmers’ cooperatives or agribusinesses with a large number of small farmer suppliers. The process starts by analysing and defining the level of services required, considering the needs of the customers, and then planning the size and type of infrastructure.
Fees for the service are calculated according to the type of produce and the projected volumes to be stored. Considering each specific case, numbers can be agreed either based on weight or number of crates to be stored, or even flat rates for long-term agreements.
The model enables farmers to benefit from InspiraFarms energy-efficient cooling technology without requiring an upfront investment, but just paying for the actual services used. InspiraFarms installs and maintains the equipment and infrastructure, recovering the costs through periodic payments made by the customer. This provides small farmers with the opportunity to enter the cold chain without having to purchase the technology and infrastructure, but still being direct users of it.
Additionally, the service provides an opportunity to develop small-scale rural cooling hubs that can be distributed around high-density small-scale production areas. These can be made available to local producers and organisations for harvest periods, leased for short periods, and complemented by a range of value-added services. These services, such as capacity building and assistance with market access, provide the support that can elevate small-scale production to a new level of competitiveness and sustainability.
InspiraFarms is scaling and implementing the roll-out and provision of services, and in some cases will partner with the ecosystem (such as private 3rd party logistics providers and distributors) to scale up if additional capacity is required.
Mexico selected as the pioneer for launching the service
Mexico has been selected as the first territory for launching InspiraFarms’ on-demand service. With the support of IADB and Shell Foundation, the initiative is starting operations in July 2019, in Aquixtla, in the State of Puebla.
There is a high demand for short-term refrigeration coming from small Mexican farmers. Mexico’s high concentration of small-scale farmers and volumes of production (40% of Mexico’s agriculture sector is comprised of 2-20 hectares per production unit); the increasing integration of small scale farming into high value markets (domestic and fresh produce exports); and the still low investment and penetration of cold chain in the first mile of distribution, indicates an urgent need to take all CAPEX out of the equation and open up refrigeration services.
Each on-demand cold storage unit will benefit over 200 small-scale producers, with the potential to increase their overall net income by over 30% as a result of significant post-harvest loss reduction and increased quality standards.
In the short term, InspiraFarms will roll-out an important number of units in key production areas in Mexico, and the second stage will launch the model in Kenya.