How to Start Cold Storage Business in the United Arab Emirates (UAE): A Step-By-Step Guide

Cold storage warehouses, also known as low-temperature warehouses, are facilities or enclosed structures where low/freezing temperatures are maintained to protect the commodity stored from getting spoilt. Cold storage warehouses are generally used for those commodities whose shelf-life has to be increased since they will be used later and cannot be stored at normal temperatures. The main aim of cold storage is to keep the commodity safe for an extended period.

How to Start Cold Storage Business in the United Arab Emirates (UAE)
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Most cold storage facilities can be manually adjusted to meet the requirements of the item which is being stored. To keep the commodity safe and fresh for a long time, it is essential to know the temperature at which it needs to be reserved because different items have different environmental requirements. Many commodities are stored in cold storage facilities, such as fruits & vegetables, candles, plants, cosmetics, etc. 

How to start cold storage business in the United Arab Emirates (UAE)

The basis on which the cold storage system works

The cold storage system works on the same principle as the refrigerator. The electronic devices which are used to keep the enclosed warehouse cold are:

Compressor: The compressor manages the refrigerant flow in the cold storage facility. They are the leading equipment required for cooling the temperature and consume almost the entire power. The main purpose of the compressor is to increase the refrigerant’s temperature and pressure and retain it until it moves to the condenser.

Condenser: The work of the condenser in cold storage is to remove the heat from the refrigerant and convert it into a liquid state. The effectiveness of the cold storage system depends on the efficiency of the condenser.

Receiver: The receiver stores the high-pressure liquid refrigerant till the time it moves to the expansion valve

Expansion Valve: The primary purpose of the expansion valve is to lower the temperature & pressure of the refrigerant using a throttling device. The throttling device uses friction to reduce the temperature & pressure of the refrigerant, and then the refringent moves to the evaporator.

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Fish Cold Storage
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Evaporator:  The evaporator is used to lower the temperature of the storage compartment so that the food can be preserved. The temperature is reduced because the evaporator takes the heat from the liquid refrigerant and vaporizes it, creating a cold atmosphere. 

Blowers: Blowers help spread the cold air throughout the storage warehouse and facilitate keeping the desired temperature. 

Types of cold storage

  • Refrigerated containers – This cold storage facility is used for small commodities (for example, frozen vegetables) that need low temperatures for storage. These are the most basic and efficient types of cold storage.
  • Blast Freezers and Chillers – This cold storage method is used when the items are supposed to be kept at extremely low temperatures so that the quality is not affected. They meet large storage requirements and are used by high-end restaurants and similar companies. 
  • Cold rooms are room-size insulated refrigerators or blast chillers used for temperature-sensitive commodities.
  • Pharmaceutical-grade cold storage warehouse – This cold storage method is usually used in hospitals and other medical facilities to store medicines, vaccines, blood samples, etc.
  • Plant attached cold storage warehouse – This type of cold storage is located inside the factory or plant so that goods can be sent to the cold storage immediately. 
  • Dedicated custom cold storage warehouse facilities – These are custom-made cold storage facilities to meet the customer’s specific needs/requirements. 

Benefits of using a cold storage facility

The temperature can be adjusted:  The temperature in the cold storage facilities can be manually adjusted to create an environment required by the product (temperature can be regulated according to product type). The moisture content in the cold storage facility can also be controlled using a dehumidifier. 

The cold storage facility can be customized according to product type: The cold storage warehouse can be made according to the requirement of the product. Therefore, the cold storage facility’s features, shapes, dimensions, etc., can be altered according to the customers and product needs. Additionally, mobile cold storage facilities can be made.

Can be used as a shared storage place: The cold storage facility can also store commodities that do not require low temperaturesThe temperature and moisture content of the storage facility can be adjusted and used for storing ordinary things.  

Cold storage facilities can be used as a backup storage area in case of power cuts: During power cuts, the items kept in the refrigerators can be transferred to the cold room so that the commodity is not ruined. In addition, since the cold rooms are air-tight, they remain cold for longer. 

Cold storage warehouses help save money: The cold storage facilities save money because they reduce the spoilage of commodities. For instance, restaurants sometimes prepare food and store it in the fridge so it can be used later, stock the food commodity so that the restaurant does not face a supply crunch, etc. 

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Refrigerator
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Commodities that are stored in cold storage facilities

Cold storage warehouses are used for storing numerous commodities for which the shelf life needs to be increased: Some of the products which are warehoused in cold storage are:

Food Commodities: To increase the life span of the food items, they can be stored in low temperatures. The cold temperatures help keep the food safe/fresh and free from fungi & bacteria. The cold storage facilities are used by many organizations such as supermarkets, food outlets, restaurants, etc. Some cold storage facilities for storing food commodities are domestic fridges (used in restaurants, hotels, homes, food joints, etc.) and blast freezers (when the food item is to be stored for an extended period). 

Candles: The candle makers require cold storage facilities for storing candles, especially in areas where the temperatures are hot & humid and also during the summer months. The high temperature melts the wax used for making candles, resulting in a considerable loss to the candle makers.

Plants: The cold storage facilities can be used to keep plants fresh and healthy for long periods. The decorative and ornamental flower company especially needs cold storage facilities if their stems have been cut. 

Cosmetics: The cosmetics companies need cold storage facilities because heat can destroy the cosmetics products (such as lipsticks, mascaras, nail paints, etc.). High temperatures can melt cosmetic products, thereby destroying their product. Thus, cosmetics companies need optimum temperatures to store the product.  

Pharmaceutical companies and hospitals: Pharmaceutical companies and hospitals need cold storage facilities so that medical products such as vaccines, medicines, syrups, blood samples, etc., can be stored at low temperatures and ensure that the chemical composition & properties of the medical products are not changed.

Textiles: Cold storage facilities are often required by textile companies. The companies that use organic materials such as fur, skin or wool, etc., always need cold storage facilities to prevent the organic material from getting rotten and unfit.

Why are cold storage warehouses required in the United Arab Emirates/ Is the cold storage business profitable in the UAE?

The United Arab Emirates is located in a geographical location where the temperatures are very high and humid. The harsh and arid climate of the country makes it an obligation to have cold storage facilities. Many necessary products/commodities get destroyed in warm temperatures; thus, it is essential to have cold storage facilities in the country to save the product from getting destroyed. 

Considering the environmental conditions of the UAE, there is a massive demand for the cold storage business. Every entrepreneur wants to invest in a company that provides long-term benefits/profits. In the case of the cold storage business, though the initial investment is relatively high, the long-term returns are also exceptionally high. The demand for perishable food products (fruits, meat, eggs, etc.) is also increasing. 

Types of cold storage facilities that are used for storing food items in the UAE

Considering the country’s hot climate, any food company needs to have access to a cold-storage facility to keep the food product fresh and healthy for an extended period. Many types of cold storage warehouses are available in the country. Additionally, the low-temperature warehouses can also be custom-made depending on the financial resource and requirements of the customer. (For instance, cold storage can be made for either multiple storing products or a single product). The different types of cold storage that are used for storing food items are:

  • Onion and potato cold storage rooms
  • Red meat cold storage rooms
  • Fish and Seafood cold storage rooms
  • Poultry cold storage rooms
  • Bakery products cold storage rooms
  • Fruits cold storage rooms
  • Citrus food cold storage rooms
  • Milk and milk products storage rooms

Each type of cold storage facility has different features which depend on the product requirement.

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Milk product storage
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Advantages of opening a cold storage facility in the UAE

The UAE’s very hot and humid climate creates numerous opportunities for the cold storage business. The owner can make huge profits since the country’s cold storage business is profitable. Some of the other benefits of opening cold storage business have been discussed below: 

  • The UAE has a 100% income tax exemption on all personal and corporate income. 
  • In UAE, foreign investors can now have 100% ownership in their cold storage business.
  • The UAE law allows 100% of the profit earned by the cold storage company to be transferred back to their home country. In liquidation, 100% of the capital can be returned to the foreign investor’s home country.
  • Skilled and unskilled people of all nationalities live in the country. Any nationality person can be hired for various jobs.
  • The country has access to all the latest technologies used in the cold storage business. Additionally, the UAE provides the best infrastructure, such as logistics, roads, etc., to carry the business of cold-storage warehouses. 

Step-by-step process of opening a cold storage business in the UAE

Cold storage is a profitable business in the country. Before setting up a cold storage business, it is essential to analyze the market and do significant research. The business owner (whether new or existing) should be well informed about various factors that will impact the cold storage business in the country. Below are the steps that are needed to be followed to open a new cold-storage business in the country: 

Deciding the location of the company: The very first step in opening a new cold-storage business in the country is to choose the site- that emirates to set up the business and the economic zone. The country has two economic zones: the mainland and the free zone. The entrepreneur first needs to decide about the site of the cold warehouse because the rules and regulations change according to the economic zone and the emirates. 

Also, there are exclusive benefits of setting up a business in the two economic zones. The majority of the cold storage facilities are located in free zones such as Jebel Ali Free Zone (JAFZA), Dubai Airport Free Zone (DAFZA), Dubai Investment Park (DIP), Dubai Internet City (DIC), Ras Al Khaimah Economic Zone (RAKEZ), Sharjah Free Zone (SAIF), etc. 

Legal Requirements: Many legal requirements must be followed to open a cold-storage business in the United Arab Emirates. In the case of carrying out warehouse business, an entrepreneur will require a trading license as well as a warehouse license. 

Obtaining a trade license: To obtain a trading license, all the relevant documents and trade license application has to be submitted to the Department of Economic Development (DED). The Department of Economic Development is responsible for issuing all the trade licenses in the country. The authorities verify the submitted documents, and after the authorities approve, DED issues a trading license. Some of the documents that need to be submitted to DED are:

  1. Application form for obtaining the license
  2. Shareholder’s passport copies
  3. Description of the business activity

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Refrigerating goods
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The entrepreneur also needs to get approvals from external bodies. For instance, for setting up a business in Dubai, consent from the Dubai Municipality is required. It is important to remember that the legal requirements change from one emirate to another emirate. Also, the rules change as per the economic zone. 

Warehouse license: The general documents that need to be submitted to obtain a warehouse license for getting a permit are:

  1. Cash or bank guarantee. In the case of private warehouses, a bank guarantee of AED 50,000 is required, and a bank guarantee of AED 15,00,000 is necessary in the case of a public warehouse.
  2. Copy of trade license
  3. Emirates ID
  4. Certificate of civil defense
  5. Residency visa
  6. Certified copy of lease document or ownership documents
  7. Copy of warehouse plan
  8. List of commodities that are going to be stored

Create and list a trading name: The entrepreneur needs to make and register the business’s name. The name must be trademarked so that no other company can use it. Also, various websites provide information about the existing names of the company.

Select the company structure: The entrepreneur needs to decide about the type of company to open: whether sole proprietorship, partnership, limited liability company, etc. The rules and regulations that must be followed change according to the company type.

Apply for Visa: Before starting any business in the UAE, it is essential to have a UAE residency visa. The business owner can also sponsor their family members so that the family can shift from their home country to the UAE. 

The owner is also responsible for sponsoring the visa of the employees hired. The maximum number of visas a business owner can apply for depends on the size of the business. Also, many business organizations want to employ only those who already have residency visas. The process followed for obtaining a visa are:

  • Entry permit application
  • Adjustment of status
  • Medical test report
  • Emirates ID registration
  • Visa stamping

Deciding whether to buy or rent a space: The entrepreneur needs to determine whether space for the cold storage business will be rented or purchased. If the area is rented, the entrepreneur must acquire and submit a tenancy contract and EJARI (in case the owner wants to set up a business in Dubai) to the Department of Economic Development (DED). EJARI is a government program to regulate all the tenancy contracts in Dubai. Therefore, EJARI acts as evidence of the tenancy contract.

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Water bottle cold storage
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Buy equipment necessary for opening a cold storage facility: To set up a cold storage business, it is essential to buy all the required equipment and ensure that the infrastructure necessary for carrying out business is provided. Whether a single product cold warehouse is opened or a multi-product cold warehouse, the decision about cold storage equipment is crucial because the type of cold storage equipment impacts the long-term life of the product.

Open a bank account: Any person who enters into any monetary transaction (such as obtaining a loan) in the country must have a UAE bank account. Before opening a bank account, it is essential to research the benefits provided by different banks and then make an informed decision about which bank to select for opening a bank account. 

Frequently asked questions (FAQ)

What is the cost of obtaining a warehouse license in the UAE? 

The cost incurred in obtaining a warehouse license in UAE depends on various factors such as size, location, type, specifications, customization of cold storage, power consumption, assembling, etc. For instance: 

  • In Hamriyah Free Zone, the cost of obtaining a warehouse license is approximately a minimum of AED 85,000/year for 307 sq.m 
  • In Sharjah Free Zone, the cost of obtaining a warehouse license is approximately a minimum of AED 48,000/year for 125 sq.m

What is the difference between a free zone and a mainland?

Mainland UAE: The companies located on the UAE mainland are also known as onshore companies. The license to carry on the business to companies located on the mainland is issued by the Department of Economic Development (DED) of the relevant emirate. Additionally, the company on the mainland can do business in the local market and outside the UAE without any restrictions.

Free zone UAE: The company located in the free zone are allowed to do business in only the free zone in which they are incorporated (within designated jurisdiction). Business owners can avail many tax benefits by setting up a business in the free zone. In the UAE, there are more than 35 free zones. 

Other differences between a free zone and a mainland include office space, business, scope, audit requirement, capital requirements, visa requirements, etc. 

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