World Resources Institute’s

Sustainable Enterprise Summit

March 17 - 18, 2004

Washington, D.C.Dr. Mario L. Rodenstein

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 establishedTHE FOOD INDUSTRY MUST BE PART OF THE

SOLUTION

• Unilever’s Popular Foods Business in Africa has

taken this Challenge very 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”

• 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

• 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

• 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)

Critical Success Factors

• Iodized Salt

• Iron Fortified Whole Maize Flour

• Fortified Cassava based biscuits (Zn+Vitamin A)

Present Business (under Annapurna Brand)

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.

Competitive Environment

• 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.

3rd Parties

PHYSICAL SUPPLY CHAIN IS IN HANDS OF 3RD PARTIES

Selection of manufacturing partnersManufacturing and processing

Re-engineering raw material supply chain

Product developmentProcess development

Appoint Key Distributors

High availabilityHigh turnover, lower

margins

Localised communicationInfomercials together with

Health authoritiesSchool education programs

Endorsement by Key Opinion Formers

Generating demandFresh stocks

Frequent distribution(Micro-) Financing

INTELLECTUAL PROPERTIES (PATENTS & BRANDS) OWNED BY UNILEVER

Annapurna Business Model

The UNICEF - Unilever relationship has been critical to Annapurna’s success in Ghana

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

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

$

Availability

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.

Annapurna Whole Maize Flour

Example from Kenya

Maize flour is the staple food. The market is segmented into two types: Sifted and Posho flour…

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

With Posho consumption making up the largest consumer segment…

AB4%

C113%

C233%

D38%

E = 12%

Population = 29M

Posho Flour (kg/caput/yr)

Total flour market = 2,400,000 tons

1,600,000 MT

79 kg

Sifted Flour (kg/caput/yr)

56 kg

69 kg

39 kg

9 kg

800,000 MT

0 kg

Posho Flour (kg/caput/yr)

Total flour market = 2,400,000 tons

0 kg?

5 kg

1,600,000 MT

41 kg

88 kg

Popular Foods target market

Example from Kenya

End 2002 Unilever entered the market with Annapurna Whole Maize Flour...

Example from Kenya

… and UNICEF’s involvement into the project.

Example from Kenya

National health status survey

Iron deficiency awareness poster campaign

Steering committee efficacy study

National data shows progressive increase in household consumption of

iodised salt

0 0.3

28

50

0

10

20

30

40

50

% household

consumption

1990 1995 1998 2002

Year

References: Unicef End Decade Databases-1DD, Ministry of Health unpublished data, 2002

Annapurna Iodised Salt introduced in the year 2000

0

10

20

30

40

50

60

70

% In- home

presence of

salt

J an Feb Mar Apr May

Annapurna

Raw salt

Panbros

Afe

Source: Research International, data 2003

Raw salt is Annapurna’s main competitor

Proposed Mechanics for the Campaign

• 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

UNILEVER UNICEF

Benefits to Unicef and Unilever

• 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

The Ultimate Benefit is that

the Ghanaian consumer is better off and this is in the interest of

Unicef and Unilever

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