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Lustrum Symposium Sustainable Solutions, Focus on Africa

Lustrum Symposium Sustainable Solutions, Focus on Africa. Affordable Healthy Food for the Bottom of the Pyramid (BoP) . Geert Verhoeven Delft, 1 November 2007. Friesland Foods. Multinational company

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Lustrum Symposium Sustainable Solutions, Focus on Africa

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  1. Lustrum Symposium Sustainable Solutions, Focus on Africa

  2. Affordable Healthy Food for the Bottom of the Pyramid (BoP) Geert Verhoeven Delft, 1 November 2007

  3. Friesland Foods • Multinational company • Wide range of natural, nutritional and high-quality dairy products, fruit-based drinks and ingredients • Health, convenience, reliability and vitality for consumers are key characteristics • Strong position on dairy markets in over 100 countries especially in West and Central Europe, the Middle East, West Africa and Southeast Asia

  4. Production and sales locations Europe / Africa and Middle East / Asia

  5. Mission • To create value for our owners, the member farmers, in short and long term, by means of profitable international dairy (related) activities • To develop, produce and market a broad range of reliable, natural and nutritious dairy products that should contribute to well being and vitality of life

  6. “Reach the unreached” “The aspiring poor present a prodigious opportunity for the world’s wealthiest companies. But it requires a radical new approach to business strategy” C.K. Prahalad and Stuart Hart “The fortune at the bottom of the pyramid” Strategy+Business, January 2002

  7. >$15,000 Wealthy 800 Emerging Middle Class (MOP) 1,500 $1,500-15,000 Bottom of the Pyramid (Prahalad & Hart, 2002; Hart & Christensen, 2002; London & Hart, 2004; Prahalad & Hammond, 2002) <$1,500 4,000 Of 6.5 bil. people approximately 4 bil. earn less than $2 per day ... Saturation of current markets Population in millions Purchasing Power Parity in U.S. dollars Existing capability; New market New capability;New market

  8. Mumbai, India Dharavi (Shantytown) Warden Rd. (Suburb) Multiplier Cost of Credit (Annual Interest) 600 – 1000% 12 – 18 % 60 – 75 X Municipal Grade Water (cu.m) $1.12 $0.03 37 X Phone Call (per minute) $.04 - .05 $.025 2 X Diarrhea Medication $20 $2 10 X Rice (per kg) $0.28 $0.24 1.2 X The poor live in high cost economies Source: C.K. Prahalad and A. Hamond, ‘SERVING THE POOR, PROFITABLY’

  9. Our challenge is to make this Nutrition (and hence better health) • Affordable, Accessible and Available. BoP consumers are a big opportunity for Friesland Foods • Globally more than 4 billion people live at the BoPon less than $ 2 per day • Nutrition is a key necessity for these consumers especially for their children (from 0 to 10 years) • This is related to a deeply rooted aspiration of parents to give the best to their child(ren) • Nutrition, health, education, living standards (clothing, shelter) are some ‘visible’ manifestations of this aspiration. • Success of parents is measured by success of their child(ren)

  10. Project for BoP • The Board of Management fully supports the initiativeto look into possibilities to produce affordable healthy food products for people living at the Bottom of the Pyramid • For a solution to be sustainable we strongly believe it needs to be based on economic principles

  11. Approach: “Deep listening”Getting to know live at BoP Teams in Indonesia, Vietnam and Nigeria • visited both urban and rural BoP-communities • 1/3rd of the urban population in developing countries lives in shanties / slums • had multidisciplinary backgrounds • had a multiparty background (local Friesland Foods, Friesland Foods HQ and NGO’s) • lived their lives • aligned with them

  12. School in Nigeria

  13. School in Nigeria 130 children in one roomAge of children? 12

  14. Overall findings (of deep listening phase) • Life at the Bottom of the Pyramid is hard, insecure and feels like a trap Many elements influence this feeling of chaos and insecurity and it is very difficult to pinpoint cause and effect of extreme poverty. The teams have all referred to the situation as a revolving circle, a maze where the exit is hard to find. We recognise the following dimensions in this vicious circle…

  15. Livelihoods Hazardous, unhealthy ,insecure, Assets Lack of Working capital Body Poor Health, Poor Appearance Early Aging Capabilities No Skills No Confidence Behaviour Lack of initiative Hard working but often no job Outlook Lack of LMT Planning Lack of education Insecurity Lack of protection No Peace of Mind Fear Social Relations Gender unequal Discriminating Social structures Isolating Disempowering Vicious circle of life at the BOP

  16. Considerations (for Business Model) BoP people avoid governmental, non governmental institutions, Distrust, anticipated costs, physical distance, need for planning, lack of anticipated benefit, lack of self confidence … Implication: whereas collaboration with government, NGO, Schools and medical facilities will be necessary to scale up it will not suffice. An extra dimension of bringing the solution to the community, every single day, will have to be build in. Modern families but disempowered women… Women are often more entrepreneurial than men. Still: men take up an authority position Implication: the need for “completing” the family income and the more entrepreneurial pre-disposition make women the obvious target for implementing BOP solutions. This could and should imply an empowerment of women but only to a level where the role of women does not threaten the authority position of men. It is important to look for solutions that are inclusive to both men and women and to portray women as partners Power to the children Children have serious responsibilities; are a source of hope to their parents. They have an appetite for learning Implication: defining children +2 as the target group for using future solutions is one thing. The BOP reality also makes us consider children ( 6-12) a target group to contribute to the solution. Their openness to change and the hope they bring to the parents could make them advocates for changing eating habits. The already existing practice of helping to provide some income for the family could offer opportunities for making them agents of change.

  17. Conclusions • Affordable means:euro cents- N 5 to N 10 Nigeria = 3-6- Rupiah 500 Indonisia = 4 € 0,05 per portion- VND 1000 Vietnam = 5 • Nutrition = filling / tastyFriesland Foods will focus on protein and fortification • Organisation. There will certainly be additional costs to reach and service BoP consumer • Lower unit price, higher packaging and distribution costs will mean lower GPC. Large volumes will be required • Children 2 years + PrimaryYoung Adults Secondary

  18. Nutritional Deficiencies • Macro nutrients • Protein • Micro nutrients • Vitamin A • Iron • Iodine • Zinc • Calcium

  19. Protein • Important for growth and development • Amount important • Quality important • Protein Digestibility Corrected Amino Acid Score (PDCAAS) • Composition of essential amino acids • Protein of animal origin (milk, meat, egg protein) has high PDACAAS • Soy protein has slightly lower PDACAAS • Combination of different sources can increase PDACAAS • Cost per portion

  20. Cost example protein • Serving of 200 ml • Protein content of 5% • This is 10 g of protein • Therefore research for affordable protein necessary

  21. Alternative Protein Sources • From insects, caterpillar (WUR) • Brewer’s grain, Beet or cane pulp, Maize gluten, soy hulls, Locally available by-products • Release vegetable protein from cell walls • Cellulolases, Xylinases • Separation • Processing costs will be crucial • Bioreactor (enzyme of micro-organisms) • Algae production • Algae consist of 60-70% proteins, 20% carbohydrates, 11% fats (including essential, polyunsaturated fatty acids), 12 different vitamins (like vitamin B12) and 12 mineral (like calcium and iron)

  22. Approach affordable protein • Access information on composition, prices, taste, nutrition and modification technologies • Contact Technology Partners • Set up Technology Development Plan with partners • Feasibility tests of processing alternative protein sources into “tasteful nutritious protein” • Tasteful = the protein source can be applied in a (dairy based) food product with acceptable taste properties Findings up to now: • If basic material containing protein is cheap then processing is expensive: total cost comparable

  23. (254 million Preschool children) Blindness / Reduces immune system effectiveness VITAMIN A > 80 million people IODINE Mental Retardation 1.7 billion people IRON Mental and physical retardation Focus Vitamin and mineral deficiencies Source: ‘WHO’

  24. Iron fortification • Important for blood production and cognitive development • Bioavailability high as Fe2+ • Fe oxydises easily to Fe3+ ; results in: • Low bioavailability • Off taste • Colour effect • Stabilisation of Fe2+ in food is very difficult (targeted encapsulation technology) • Application in dry products easier than in liquid products

  25. Friesland Foods Initiatives • Short term • In Indonesia, Vietnam and Nigeria local development projects have started and will lead to market introductions in 2008 • Long term • More research is needed in the area of • Affordable Protein • Fortification

  26. Let’s work on this together!

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