With about four billion low-income consumers worldwide, there is an increasing need to address both their economic and social needs through sustainable business models.
There are a number of initiatives that have been developed in recent years to combat malnutrition – largely prevalent in impoverished and food-insecure regions – with social enterprises. Bringing these initiatives to scale, and sufficiently marketing products to drive demand, is presenting new challenges, along with innovative solutions.
BRAC, one of the world’s largest international development organizations, is implementing a new project in sub-Saharan Africa that caters to both the nutritional and economic needs of communities at the bottom of the economic pyramid (BoP). To maximize reach and impact, BRAC is partnering with communities, governments, and multilaterals on agriculture initiatives to create a self-sustaining enterprise that improves nutrition and empowers rural farmers. Working with small-scale farmers in Uganda’s Mbarara and Masaka districts, BRAC has developed an inclusive business model to improve maternal and child nutrition through the cultivation and consumption of Vitamin A-enriched Orange Fleshed Sweet Potato (OFSP). This fortified potato has been shown to reduce stunting in children under five and also address other effects of malnutrition prominent in the region. The initiative aims to empower farmers by reducing their dependence on informal or subsistence livelihoods, including them in sustainable value chains.
To build the value chain, BRAC is working with Ugandan farmers to improve their overall agriculture productivity and market their produce. The program uses a “train the trainer” model to provide information on crop production and also supplies high quality inputs (e.g. disease resistant seeds, fertilizers and pesticides) at an affordable cost. BRAC’s community agriculture promoters, or trainers, link small-scale farmers to the supply chain as for-profit businesses, rather than with donor subsidies. The resulting OFSP products, including chips and flour, incorporate support costs as part of their overall pricing structure, thus aligning incentives along the chain and increasing the possibility of success as a business.
On the demand side, BRAC is educating its cadre of community health workers in the region on the nutritional benefits of the sweet potato and advising they recommend it for pregnant mothers and children under the age of five.
But there are still a number of challenges to sufficiently marketing to consumers on a larger scale. The first is the lack of market research on consumer buying patterns.
“Because most Ugandans consume their food in fresh or semi-processed forms (e.g. milled, freshly squeezed juice), little research has been done on consumer patterns and behavior,” said Dr. Hannan Ali, BRAC Uganda Program Manager who oversees the sweet potato project. “However, the dairy industry, poultry, confectionery, snacks, fruit juices and flour industries seem to be taking the lead and doing the most innovation.”
With a development space gravitating towards sustainable models, there are still challenges ahead for organizations looking to establish socially oriented businesses. For businesses specifically focused on providing nutrition, especially for BOP consumers, companies will likely struggle to keep goods affordable and accessible for consumers.
Production costs can be high. For example, mineral and vitamin premixes are expensive and adding them to everyday consumables like maize flour would drive up the price, making it prohibitively expensive for the very populations that need these goods.
Governments and international development organizations have a role to play in subsidizing products to make them affordable for BoP consumers. If multiple stakeholders come to the table, each have a role to play: private companies bring their business acumen, technology, and technical expertise, while governments can provide funding and support markets for the food-products. Dr. Hannan points to RECO Industries in Uganda as one successful example that supplies UNICEF in Uganda with nutritional foods for undernourished children.
Research and analysis of BoP markets will help international partners and governments think more creatively about nutritional products and services that meet the unique needs of low-income communities. Organizations should realize there are limits on what market-based approaches to hunger and poverty reduction can accomplish. In turn, there are numerous disadvantages to more traditional approaches that tend to focus on the very poor, resulting from an assumption that they are unable to help themselves and must rely on charity or public assistance. The shift to inclusive businesses recognizes that being poor does not eliminate an individual from commerce or market-based approaches. Focusing on people as consumers and producers will ensure we develop solutions that can make markets more efficient, competitive, and inclusive, benefiting both the health and prosperity of low-income consumers.
This blog is part of the December 2016 series on Inclusive Business models delivering nutrition, in partnership with DFID and GAIN. Don’t miss the webinar series in January 2017 on Marketing nutrition to the BOP.