World Resources Institute’s Sustainable Enterprise Summit March 17 - 18, 2004 Washington, D.C.

1. World Resources Institute’s Sustainable Enterprise Summit March 17 - 18, 2004 Washington, D.C. Dr. Mario L. Rodenstein

2. Providing Nutrition Through Tomorrow’s Markets Frame of Reference - From General to Particular • Nutrition and Health is becoming the dominant issue for the Food Industry • Food is clearly recognized as a key factor in Public Health: • - Under-Nutrition in D&E regions keeps GNP potential low • - Global Obesity epidemic is running • - Role of food in prevention of chronic disease is strongly established THE FOOD INDUSTRY MUST BE PART OF THE SOLUTION

3. Unilever’s Popular Foods Business in Africa has taken this Challengevery seriously 4 years ago • It is an excellent example of how a Company creates a successful business and at the same time helps to reduce malnutrition in one of the poorest areas of the world. In other words “BUILDS A GOOD BUSINESS BY DOING GOOD”

4. There has been a fundamental shift in how health is being defined in developing countries • In the past, health meant disease and the food industry could not help • Today the emphasis is on health enhancement and prevention, and here we can make a big contribution • BUT • In the countries we are discussing here, much of the population lives on less than one dollar a day, so that selling brands profitably to people with such a low income at a price they can afford to pay represents a formidable hurdle

5. The only way you can persuade people to switch to a fortified product is if you can sell it at or close to the price of raw, non fortified alternatives • And the only way you can do this is by rethinking the business system, the supply chain, the financial structure and the way brands are normally sold • This is exactly what the Popular Foods Business in Africa has done and what I would like to share today with you

6. Critical Success Factors • Scrutinize the cost of everything, use local raw materials • If something does not add value, take it out • Outsource production to third parties, reducing costs and creating jobs • Develop partnerships with local manufacturers and train them • Work together with Health Organizations in a symbiotic form (Unicef) • Adequate package sizes to out of pocket possibilities (100g iodized salt at 6 US$ cents) • Assure large volume, lower but sustainable margin for Company and partners • Address reaching into rural areas (microfinancing) • Invest in Science (Unilever Health Institute)

7. Present Business (under Annapurna Brand) • Iodized Salt • Iron Fortified Whole Maize Flour • Fortified Cassava based biscuits (Zn+Vitamin A)

8. Unilever Corporate Purpose • Our purpose in Unilever is to meet • the everyday needs of people everywhere We anticipate the aspirations of our customers and respond creatively and competitively with branded products and services, which raise the quality of life.

9. Any food & drink available and accessible to the mass market which is sold either loose or as a brand and which plays an integral role in the everyday popular diet. Competitive Environment

10. Annapurna Business Model PHYSICAL SUPPLY CHAIN IS IN HANDS OF 3RD PARTIES 3rd Parties Selection of manufacturing partners Manufacturing and processing Re-engineering raw material supply chain Product development Process development Appoint Key Distributors High availability High turnover, lower margins Generatingdemand Fresh stocks Frequent distribution (Micro-) Financing Localised communication Infomercials together with Health authorities School education programs Endorsement by Key Opinion Formers INTELLECTUAL PROPERTIES (PATENTS & BRANDS) OWNED BY UNILEVER The UNICEF - Unilever relationship has been critical to Annapurna’s success in Ghana

11. Product and Process Development: Principles • Affordability • Price is determined by the market, work backwards to determine product costs • Local raw materials • Simple, robust, effective and low cost technology • Nutrition • Contribute to the eradication of protein energy malnutrition and micronutrient deficiencies • Supported by sound scientific evidence • Endorsed by External Experts • Taste & Convenience • IS A MUST

12. Re-engineering the supply chain: Principles Use of local raw materials Increase quality and yield of raw materials Eliminating storage and distribution waste Simple and robust technology “Small” scale, 3rd party, local production to reduce transport costs Eliminate unnecessary intermediate trade Risk and costs of raw material stocks Guaranteed market $

13. Availability

14. Micro-credit program enabling women in villages to buy Annapurna salt on credit at local distribution points for onwards sale...Informal information exchange...External view on health claims and levels of micronutrient fortification...Raising awareness through endorsement of iodised salt...RESULTING in:Significantly increased household consumption level of iodised salt. Annapurna became market leader in 3 years time. …and other examples from Ghana.

15. Annapurna Whole Maize Flour Example from Kenya

16. Posho flour = Unbranded Made by small informal millers = Posho millers (loose) 1,600,000 MT consumed 900,000 MT traded More nutritious than Sifted Shelf life < 1 week “Long lasting satiety” Fluctuating prices and availability Variable quality Time consuming Sifted flour = Branded Made by large millers (packaged) 800,000 MT traded and consumed Missing fat, minerals, vitamins and fibre “Empties quickly” Shelf life > 6 months 20-30% more expensive than Posho Example from Kenya Maize flour is the staple food. The market is segmented into two types: Sifted and Posho flour…

17. Example from Kenya With Posho consumption making up the largest consumer segment… Popular Foods target market Sifted Flour (kg/caput/yr) Posho Flour (kg/caput/yr) Posho Flour (kg/caput/yr) AB 4% 56 kg 0 kg? C1 13% 69 kg 5 kg 39 kg 41 kg C2 33% D 38% 9 kg 79 kg E = 12% 88 kg 0 kg 800,000 MT Population = 29M 1,600,000 MT 1,600,000 MT Total flour market = 2,400,000 tons Total flour market = 2,400,000 tons

18. Example from Kenya End 2002 Unilever entered the market with Annapurna Whole Maize Flour...

19. Example from Kenya … and UNICEF’s involvement into the project. National health status survey Iron deficiency awareness poster campaign Steering committee efficacy study

20. National data shows progressive increase in household consumption of iodised salt Annapurna Iodised Salt introduced in the year 2000 References: Unicef End Decade Databases-1DD, Ministry of Health unpublished data, 2002

21. Raw salt is Annapurna’s main competitor Source: Research International, data 2003

22. Provide free iodised salt samples to Unicef Distribute iodised salt at an affordable price in trade channels in the identified regions (100g sells at ¢500) Share market research data to evaluate the effectiveness of the campaign Organise awareness campaign via schools Provide iodine test kits Provide trained personnel Evaluate in-home and market penetration of iodised salt after 6 months Proposed Mechanics for the Campaign UNILEVER UNICEF

23. Increase sales of Annapurna salt Create credibility with education authorities and consumers Build on corporate reputation Increase of iodised salt penetration Harness the effectiveness of a commercial distribution network to meet public health objectives Building on a successful public / private partnership UNILEVER UNICEF Benefits to Unicef and Unilever The Ultimate Benefit is that the Ghanaian consumer is better off and this is in the interest of Unicef and Unilever

24. And one of them is Nura Hamid, now selling Annapurna Iodised salt in her town Saltpond...