GAIN Business Alliance Forum, London 2012

Forum Report

About the GAIN Business Alliance

The GAIN Business Alliance (BA) is a uniquely positioned global network of companies dedicated to promoting sustainable market-driven interventions at the Base of the Pyramid (BoP). Utilising our networks and innovative tools, GAIN links and leverages the core strengths of its BA members with nutritional experts, in-country implementers, academia, NGOs, financial partners, institutional partners and international donors to facilitate sustainable interventions that increase the availability of more nutritious and affordable products to the BoP market. These interventions increase collective return, reach and impact for the private sector while filling nutritional gaps.

Contents: The GAIN Business Alliance Forum addressed the following topics:

1) The context for nutrition2) The future of nutrition3) Innovative business models4) Building brand value and thought leadership5) Unlocking opportunities in the enabling environment6) Scaling through partnerships

Panel Discussion “Scaling through Partnership”, with Jane Nelson, Senior Fellow and Director, Harvard Kennedy School CSRi, Jeff King, Marketing Director, Disruptive Innovation, Hershey Company, Charlotte Pedersen, Manager Business Development - Dutch Alliances, Coordinator of the Amsterdam Initiative Against Malnutrition (AIM), Samuel Ntim Adu, Chief Executive Officer, Yedent Agro and Yasuhiko Toride, Director of Nutrition Improvement Projects, Associate General Manager R&D Planning Dept, Ajinomoto Co., Inc.

1. Context for Nutrition

Despite the Food and Agriculture Organization of the United Nations estimates that 870 million people are going to bed hungry and 3 million children a year die of preventable malnutrition-related illness, nutrition only represents 0.3% of official development assistance in an era of declining aid assistance. Despite these challenges, 2012 has seen further momentum towards building recognition of the critical importance of nutrition in human development, evidenced by the growing profile of the Scaling Up Nutrition (SUN) movement, the UK’s Olympic Hunger Event and the growing alignment of donor policies in support of nutrition. Alongside this increased profile is a growing recognition of the critical role that markets and the private sector can play. Against this backdrop, the GAIN 2012 Business Alliance Forum continues to bring together GAIN Business Alliance members and expert practitioners to share the latest insights and experiences of market-driven interventions that increase the availability of more nutritious and affordable products to the BoP market.

3 MILLION CHILDREN EVERY YEAR DIE OF OF PREVENTABLE MALNUTRITION- RELATED ILLNESS

2. The Future of Nutrition

In examining the key trends shaping the nutrition agenda and the implications for business and stakeholders, the discussion highlighted the significant opportunities and examples of success in large scale fortification of staples and condiments, targeted nutrition for mothers and infants during the critical first 1000 days, and the integration of nutrition into the agricultural value chain. Challenges and complexities persist around how to develop business models that meet the needs of the poor in ways that are commercially sustainable and scaleable, how to engage BoP consumers and to motivate behaviour change, and how to work with governments to establish the enabling environment. In the area of targeted nutritional support for mothers and infants during the critical first 1000 days, the session emphasised the clarity that now exists around the need for exclusive breastfeeding for the first six months of a child’s life, and the benefits of appropriate complementary feeding after six months to ensure that mothers and infants continue to receive vital micronutrients.

2. The Future of Nutrition

To ensure continued progress, two key issues were highlighted:

First, the need to do more to address the challenge of behaviour change and education in the public health context, and how to create demand for affordable and appropriately formulated complementary feeding products that increase choice for mothers, and enable companies to achieve commercial viability through scale.

Second, the need to create appropriate regulatory frameworks that balance the need to address issues of food safety, quality and marketing, but also continue to incentivise the private sector to innovative and invest in developing pro nutrition business models. Large scale fortification of staples and condiments was identified as an intervention that has delivered significant impact at scale, at relatively low cost, and with minimal changes to eating habits.

Looking forward, two key issues and opportunities were identified:

First, the need to establish appropriate regulatory frameworks to drive safety, quality and mandatory fortification, but also to incentivise the private sector to invest in voluntary fortification.

Second, significant opportunities were identified around integrating fortification into processed foods, and for the private sector to leverage institutional demand to kick start opportunities, for example school feeding programs.

In the area of agriculture and nutrition, which GAIN is placing increasing emphasis on, there is growing recognition of the need to improve the nutritious quality of food and dietary diversity alongside increases in the quantity of food being produced. There is also a need to focus on improving nutrition opportunities in on-farm food consumption amongst producers and farming communities. Looking forward, key risks include food price volatility and climate change impacts.

Key areas of focus going forward will be:

First, the need to build the evidence base through research to establish the benefits of integrating nutrition into agricultural production, for example the addition of micronutrients into fertilisers and modifications to post harvest processing techniques.

Second, more emphasis on creating markets for nutritious foods, with GAIN pioneering efforts to bring together local businesses and supporting the development of products and services in Kenya, Tanzania and Mozambique. How to enable local small and medium sized companies to access market opportunities and to address technical and financing challenges was a recurring area of discussion.

Third, the introduction of new modern agricultural technologies including bio-fortification.

3. Innovative Business Models to Drive Supply and Demand: Lessons from the Field

BA Forum members shared their experiences and insights of pro nutrition business models, highlighting opportunities to achieve nutrition impact and financial return through processing innovations in support of large scale fortification, amplification of development impact through local sourcing of raw materials, and innovative distribution and demand creation strategies amongst BoP consumers, underpinned by partnerships.

3.1 Driving Local Product and Manufacturing Innovation to Amplify Impact Innovations in product development and manufacturing were explored from two standpoints. First, Cargill showed how aligning nutrition and core business goals through the voluntary fortification of vegetable cooking oils in India enabled the Company to build competitive advantage and reach 25 million consumers with essential vitamins A, D and E. Second, Ajinomoto showed how a series of partnerships with local suppliers, NGOs, the government and international development agencies in Ghana, have helped it to develop and pilot an innovative micro-nutrient supplement, targeting mothers and infants in the 6-24 month age range. In addition, the project features an innovative local sourcing and manufacturing model, which further amplifies the company’s development contribution through technology transfer and livelihood opportunities.

Both case studies emphasised the importance of aligning projects with the core business, of establishing senior level buy-in and support, and in the case of Ajinomoto, the role of partnership to bring in non-core capabilities and to facilitate scale up.The Ajinomoto case study further highlighted regulatory challenges where frameworks are not well established. The Cargill case study highlighted the opportunity for GAIN to bring together other successful examples of voluntary fortification to strengthen the overall evidence base and business case.

Fokko Wientjes, DSM

3. Innovative Business Models to Drive Supply and Demand: Lessons from the Field

3.2 Building Cost-effective Distribution Networks to Achieve Reach and Scale

Developing cost effective distribution models capable of delivering nutritional products at scale to widen reach and drive profitability is a key challenge identified by many businesses. Building distribution networks can be challenging, especially as traditional channels tend to be weak in areas where infrastructure is poor and populations dispersed. Whilst some companies are leveraging existing networks, others are building new ones that are more capable of extending their reach to the poor, whilst other companies are partnering with non-traditional organisations like NGOs and governments to access their networks. Both Bel Group and DSM are piloting the use of street food and vendors in the informal sector to reach BoP consumers - with a range of interventions and partnerships to help these small businesses to grow and succeed. For both companies these models combine a social return - bringing nutritious products to the BoP - with a financial return. Key success factors include factoring in adequate margins for street vendors, understanding how to organise street vendors into groups, sustaining support though sales training, equipment and access to credit, and consulting with governments on the establishment of these programs.

3.3 Changing Behaviour and Creating Demand

Companies marketing nutritional products to the poor often have to change perceptions of risk and value to unlock demand. Changing the mindsets and behaviours amongst distributors, retailers and BoP consumers is key to generating demand for products that tackle malnutrition. In recognition that the promise of better nutrition often does not sell products, key learnings include the need to invest more resources in understanding the contexts, barriers and drivers of BoP consumers and finding ways to tap into emotional drivers of purchasing behaviour. Nutritional messages are often too complicated to engage consumers. Unilever’s Lifebuoy campaign on hand washing uses five levers of change – that benefits need to be understood, easy, desirable, rewarding and easy to incorporate in to everyday habits. PSI’s methodologies for reaching consumers place a strong emphasis on the four Ps of product, pricing, place and promotion. Key insights for effectively reaching consumers include aligning locally with government public policy priorities, utilising advocates that target audiences trust, and piggy backing off existing initiatives to enable more rapid reach at scale. Key challenges identified include building greater clarity around where the role for business begins and ends, and the need for governments to establish frameworks for acceptable and responsible marketing practices, with the private sector also emphasising robust self-regulation. GAIN can help to play a role by helping to share insights on consumer behaviour and purchasing habits and helping to facilitate dialogue around public policy development.

4. Building Brand Value by Mobilising Consumers

A growing number of businesses are tapping in to the power of their brands to mobilise and engage consumers in causes that emphasise social goods. At the same time, a growing body of evidence points to consumers wanting to engage with companies and brands that have a strong social purpose. Future Fortified, launched by GAIN in 2012, aims to create a platform for businesses and brands to engage consumers in programs that address malnutrition. Amway described the business rationale for partnering its Nutrilite brand with Future Fortified to engage its customers and wider consumers, through the medium of sport, on the importance of nutrition, and to recruit support for its programs that address malnutrition in developing countries. The program strengthens the Nutrilite brand and reinforces product attributes, in addition to enabling consumers to take action to help address the problem of malnutrition and stunting. In sharing insights about establishing the UK’s most recognised sustainability brand Fairtrade, the Fairtrade Foundation emphasised the importance of building customer insights, being able to sustain product quality at scale, having clarity of purpose, being relevant and desirable to consumers and securing trust through transparency.

5. Unlocking Opportunities in the Enabling Environment

In the context of food security and the need to increase both food production and quality, barriers to businesses often include inconsistent and inefficient regulatory environments covering quality and safety standards, and limited availability of finance for producers. Ensuring food safety and quality along the food value chain is now recognised as a critical component of improving food security, both in terms of protecting consumers and minimising wastage. Given the complexity and resources required to manage food safety in often deep and complex food value chains, Mars identified the opportunity for companies to do more at the pre competitive stage to collectively address issues of food safety. This could be achieved by bundling resources and making learnings and experiences of companies more available, potentially through an open source platform. There are also opportunities for businesses to do more to help regulators become more familiar with factories and manufacturing processes.

In the area of food fortification, BASF emphasised the importance of partnership in establishing quality, safety and marketing frameworks, identifying the work of the Strategic Alliance for the Fortification of Oil and Other Staple Foods (SAFO). In addition to strengthening the overall enabling environment, a key element of this work is to support small producers who want to fortify their products with essential micronutrients, with an emphasis on clustering to make technical support more accessible to dispersed businesses. A key issue identified is the need to ensure a level playing field between local producers and importers.

RaboBank Foundation identified the significant opportunity of engaging the estimated 525 million smallholders around the world to address food security challenges, highlighting the need for businesses, governments and development partners along the food value chain to align with smallholders around a strong shared vision and the need for greater collectivisation of farmers to make the provision of finance more manageable.

David Meller, Director of Product Integrity, Fairtrade Foundation

5.1 Improving the Functioning of the Regulatory / Enabling Environment

In the context of creating enabling environments that support nutrition, it is vital for businesses to go beyond the business model to also consider how to create a supportive ecosystem, comprising interconnected and interdependent stakeholders to ensure a successful and sustainable outcome. In explaining this approach, Endeva outlined its analysis of three different approaches which include individual company based initiatives, project based alliances and sector level initiatives. Key strategies in establishing ecosystems include establishing a common vision, information sharing, public policy dialogue, awareness raising and the need to create new organisations, with all these activities underpinned by a core coordination role.

Looking at the broader legislative and regulatory public health context, a number of challenges were identified for businesses looking to engage in public health regulatory processes at both the international and local levels. Business can make a critical contribution to influencing the policy agenda, by advocating for political commitments, by leveraging unique insights to help governments understand how policy initiatives can impact nutrition outcomes and business, by helping governments to develop more practical processes for public policy development and to identify opportunities for collaboration. This requires business to track policy developments at both the national and international levels. A key role was identified for GAIN to create platforms to facilitate policy engagement between the private and public sectors, and to tap into the regulatory expertise within companies.

5.2 Enabling Access to Finance

It is increasingly understood that current available development assistance is insufficient to address the financing requirements in the agricultural and food sectors, and that private capital can address this gap. With access to finance a key constraint, there is growing interest amongst some commercial banks and impact investors to help small and medium sized businesses to scale up and better serve the market.

JP Morgan highlighted the availability of capital but the lack of investible opportunities as a key bottleneck, ie revenue generating businesses with a sound business model.To bridge this gap a growing number of commercial lenders, social investors who are able to accept lower returns and greater risk, and donors are working to enable early stage higher risk investment opportunities to build a pipeline for commercial investment. There are significant challenges in financing smallholder farming models relating to scale and risk and return requirements. Lion’s Head identified the need for more specialist agricultural lenders able to deploy relatively small amounts of capital quickly and efficiently.

There is growing interest amongst banks to work with multinationals to channel financing to smallholder farmers operating in their supply chains, using purchase contracts as collateral, or using their relationship with farmers to help lenders assess risks.

5. Unlocking Opportunities in the Enabling Environment: Lessons from the Field

5.3 Impact Measurement to Strengthen the Business and Nutrition Case

There is widespread consensus that we need to know much more about how different businesses and business models impact on nutritional outcomes at the local level. Understanding impact is important for strengthening the business case, and provides greater clarity for businesses, governments and donors on how to target resources most effectively. Building a better understanding of approaches that work, and those that do not will also help like-minded companies replicate successful models more rapidly.

The Business Innovation Facility (BIF) identified measuring impact as complex and consequently the need to be clear about focus (measuring effectiveness of the contribution that business can realistically have towards wider goals, with a focus on critical success factors), and the Donor Committee for Enterprise Development (DCED) highlighted the need to have a clear understanding of the “results chain” - the logical links between program inputs, outputs and outcomes. GAIN can serve as a place that companies can come to get advice on how to measure impact, and for results and protocols to be shared.

5. Unlocking Opportunities in the Enabling Environment: Lessons from the Field

Panel Discussion “Unlocking Opportunities”, with Gib Bulloch, Executive Director, Accenture Development Partners, Pierre van Hedel, Chief Executive Officer, Rabobank Foundation, Dr. Andreas Bluethner, Team leader, Food-Fortification/BoP, BASF and David Crean, Global Innovation Director, Mars.

6. Scaling through Partnerships

Successful partnerships are recognised as increasingly important to delivering business-led approaches to tackling malnutrition and to ensuring project sustainability and scaleability. The partnership between Hershey and NGO Project Peanut Butter, anchored around Hershey’s core business goal in Ghana of strengthening access to a quality supply of peanuts, will help to establish a local peanut processing facility, increasing the local availability of nutritious ready to eat food and providing livelihood opportunities. Ajinomoto’s partnership with local agri-processor Yedent and DSM in Ghana is helping to drive a new social business model focused on making available multi-nutrient supplement to mothers and infants in the first 1000 day context. Additional partnerships with JICA and USAID and NGOs CARE and Plan, have helped to leverage additional expertise in distribution and demand creation. Partnership with the government has helped to address regulatory requirements. The success of the partnership is underpinned by three key factors: 1) a shared vision and mission; 2) a sustainable business model; 3) a focus on value chain efficiency and a clear understanding of what the consumer is willing to pay.

The Amsterdam Initiative against Malnutrition (AIM) is an example of a partnership that brings together businesses from across the food value chain from producer to retailer, and key enablers such as finance institutions, supported by donor and government investment. The partnership addresses systemic barriers with the start point being a focus on demand creation for aspirational nutritious products. The partnership also focuses on local capacity building, for example around strengthening quality control systems, knowledge sharing and policy and advocacy. In examining good governance and accountability of partnerships, this can be improved by ensuring representation from different stakeholder groups, the establishment of an external technical partnership advisory board, and through a clear vision and indicators.

In summary, key partnership models highlighted during the Forum include: core business focused partnerships; partnerships focused on brand marketing to mobilise consumers and employees; strategic CSR and philanthropy-based partnerships to pump prime innovative approaches; pre-competitive business to business alliances; and public policy partnerships with governments to address systemic challenges in the policy environment.

Charlotte Pedersen, Manager, Business Development-Dutch Alliances, Coordinator of the Amsterdam Initiative Against Malnutrition (AIM)

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GAIN’s Business Alliance

Global Alliance for Improved NutritionRue de Vermont 37-39

1202 Geneva - Switzerland

www.gainhealth.orgwww.gainhealth.org/events/business-alliance-forum