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Mapping the Potential of Private Sector Nutrition Solutions in Brazil Second Draft
Project Coordinators: Haroldo Torres and Luciana Aguiar September, 2010
PROJECT SPONSORS: •
GAIN – GLOBAL ALLIANCE FOR INCREASED NUTRITION
•
IDB – INTER-AMERICAN DEVELOPMENT BANK
For more information: www.planocde.com.br or haroldo@planocde.com.br
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PROJECT TEAM
Project coordinators Haroldo Torres Luciana Aguiar Analysts Haroldo Torres Luciana Aguiar CĂŠlia Nishio Daniel Izzo Ana Florice Ishiki Interviewers Ariana Rumstein Beatriz Rudge CĂŠlia Nishio Camila Antonino Haroldo Torres Regina Rudge Interviewee recruitment Novo Conceito Recrutamento e Pesquisa, LTDA Special support Beatriz Rudge (translation and editing) Edgard Barki (critics and comments) John Sydenstricker Neto (project design)
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CONTENTS Executive Summary
4
1. Introduction
6
2. Methodology
9
3. The state of nutrition in Brazil 3.1 Key child nutritional facts 3.2 Access to food products 3.3 Nutritional policies 3.4 Nutritional Regulatory Framework 3.5 Possible areas of action for IDB and/or GAIN
14 16 20 24 30 35
4. The role of the private sector and its impact on nutrition 4.1. Evolution scenario of the private sector in Brazil 4.2 The private sector 4.3. The base of the pyramid market for the food industry 4.4. Companies' perspective on nutrition for the base of the pyramid 4.4.1 Knowledge about nutrition 4.4.2 Development of nutritional BOP products 4.5 Nutrition in infancy at the base of the pyramid 4.5.1 Barriers to the development of fortified foods aimed at BOP young children 4.6 Opportunities for action by IDB and GAIN
37 38 41 46 52 52 54 58 60 62
5. Strategic aspects of the development of sustainable and replicable business models in nutrition 5.1 International benchmark cases 5.1.1 Success factors 5.1.1.1 Demand Generation 5.1.1.2 Supply and Distribution Chains 5.1.1.3 Enabling environment 5.2. Brazilian Business Cases 5.2.1 Regional Companies 5.2.2 Multinational Companies 5.3 Comparison between Brazilian and Benchmark international cases 5.4 Possible areas for IDB and GAIN actions
66
6. Development of partnerships in the field of nutrition in Brazil 6.1. The current stage of the debate on cooperation for nutritional enrichment 6.2 Major points of consensus identified 6.3 Main areas of dissent 6.4 Opportunities for action by IDB and GAIN
80 81 83 85 88
7. Protocol for companies investing in bop food enhancement projects 7.1 Elements of the protocol
90 91
References Annex 1: Basic Regulatory information Error! Reference source not found. Country Data
67 69 70 71 72 73 73 75 76 78
98 101 102
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EXECUTIVE SUMMARY
The objective of this study is to assess how different private, public and NGO organizations in Brazil are addressing the nutritional needs of low-income families. More specifically, the aim of the study is to understand the main drivers and/or barriers that stimulate and/or limit private sector participation and to identify and propose guidelines for future collaboration and partnerships between the private sector, federal government, GAIN and IDB in Brazil. The most important issues covered by this report are the following:
1. The study was based on a national and international literature review (nutrition indicators, nutrition policies and nutrition business cases) and 22 personal indepth interviews with key informants. Most interviews (18) were performed with business executives of large and medium sized food companies located in six different Brazilian states; 2. Over the last 20 years Brazil has experienced a significant increase in the type and quantity of food on offer, partly due to improvements in income distribution, overall economic growth and developments in agribusiness; 3. Brazilian nutritional indicators are within the Latin American range, showing an improvement in some general indicators (i.e., infant mortality, birth weight). However, micro-nutrient indicators suggest that there are important deficiencies of vitamin A and iron even among children in relatively well-off areas. There is a high coverage of iodized-salt (96%) – albeit there are some areas of iodine deficiency. The information for other important micro-nutrients is either incomplete or unavailable on a national scale; 4. There is a wide variety of federal programs in the field of nutrition. The most significant involve compulsory food enhancement programs (iron, folic acid and iodine). There is limited policy enforcement; 5. Food programs designed for low-income groups (i.e. within the Ministry of Social Development) do not target children; 6. The regulatory framework is overwhelmingly complex. It probably inhibits product development and innovation and favors the more organized/larger companies; 7. The environment within the food industry is highly competitive, with the presence of both national and multinational companies. Product line differentiation between multinational and regional companies is low; 4
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8. Despite different product development know-how, most interviewed companies have initiatives regarding enhanced nutritional products. Part of this is associated compulsory enhancement rules; 9. Some multinational companies developed a highly efficient and well planned base of the pyramid (BOP) nutritional strategy while regional companies often do not have explicit nutritional BOP strategies. All the regional companies interviewed, however, have at least one product that could have a specific strategy to that end; 10. The most important barriers identified by both multinational and regional companies are:
pricing
achieving adequate margins with nutritional BOP products
appropriate distribution
tax regulations and costs
repositioning the mind set of their teams towards BOP nutritional products
complexity of the regulatory framework
11. With regard to international business cases, success factors include the areas of consumer acceptance (demand generation), supply chain and enabling environment. Very few projects cover them all; 12. In Brazil, only a limited number of business cases were identified in comparison with the international scenario. These cases also depend on fewer success factors than the international benchmarks; 13. Relevant cases are more often found in very large organized multinational companies, but not necessarily in all of them; 14. The presence of public-private partnerships in the nutrition field in Brazil is probably very low. There was not one significant initiative identified during the interviews. However, among companies and government executives, there is significant consensus on key nutrition issues that could be used as starting points for dialogue.
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1. INTRODUCTION
Over the last few years, international attention on how to release the potential of private firms to address the needs of poor families increased significantly. Micro-credit activities have grown in many countries following the pioneer example of Grameen Bank in Bangladesh. Large international companies have started addressing the socalled base of the pyramid markets (BOP) due to two aspects; a) the economic growth observed in developing nations over the past decade and b) the recognition that these markets may represent a significant source of growth for companies facing stagnant markets in developed countries (Prahalad, 2005). In Latin America, independent efforts on the part of private corporations are quite limited but some promising initiatives are emerging in areas such as health provision in Venezuela, building materials in Colombia, and beauty products in Brazil, to mention but a few (SNV, 2008; Auleta and Puente, 2009). One important exception in the quite limited Latin American landscape is the program Opportunities for the Majority (OMJ), an initiative by the IDB, which seems to embrace two connected foci not seen elsewhere. On the one hand, it helps national governments recognize such potential and adapt their institutional environments in order to give private companies a smooth operation in low-income markets. On the other, the program recognizes the particular needs of private companies operating in BOP markets in Latin America. This is particularly true for small and mid-size companies due to the significant constraints of capital and human resources they usually face. In Brazil, the government has been slow in recognizing the new possibilities hidden behind such developments. Although there are some successful efforts in the microcredit field – Crediamigo by Banco do Nordeste is a significant case – there are very few efficient and broad initiatives regarding the promotion of real private sector engagement in other areas. The existent institutional barriers to companies to operate in low-income markets are huge and are not being thoroughly debated and/or efficiently addressed. This picture is quite similar to the one identified in the food business. The regulatory environment is overwhelming, limiting product innovation (chapter 3). As a consequence, efforts on the part of private corporations have also been quite uneven, with some promising initiatives emerging among multinational companies, but very few of them developed by Brazilian organizations (chapter 4). In other words, the huge potential in this area has yet to be fully tapped, although a few promising business 6
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cases have been identified (chapter 5). In light of the above, this document addresses the problem of the development of a commercial market for low-cost enhanced foods and related products in Brazil. The aim is to address the nutritional needs of the poor, contributing to improve the nutritional status of low-income communities. The study has shown that such initiatives are dependent on different dimensions of nutritional issues in Brazil, such as:
a. Agro-economic environment: The overall agricultural conditions in Brazil have been improving significantly over the last 20 years, increasing access to food products across the country. Brazil is a traditional food exporter, which has resulted in significant increases and overall agricultural productivity and the systematic decrease of food prices particularly when compared to other references such as the minimum wage; b. Health policies: Brazil does have nutrition policies addressing the well-being of children under 5 years of age, such as the distribution of vitamin A pills in low income communities and the training of health professionals in nutritional issues. The government compulsorily require the enhancement of wheat flour (iron and folic acid) and salt (iodine). There is limited policy enforcement particularly in the case of wheat flour. Some specific health campaigns, for instance, which may influence mother's behavior in different ways, are not always compatible with private sector involvement; c. Impact of government nutrition programs: There are few food distribution programs addressing children from 6-24 months. The most important current federal nutrition program is the school food program which excludes this age group. Food programs designed for low-income groups (within the Ministry of Social Development) also do not target small children. d. Government institutions: The strong regulatory approach to food products has a large influence on corporate behavior. Both the laws regarding enhanced food products directed at children and general tax policies discourage private enterprises in the area, reducing the innovation and the overall number of options for the consumer. e. Standard products: Multinational companies with standardized products do find it difficult to customize their offerings to fit the needs of low income groups. One of the key problems multinational companies face is adapting their professional’s mindset to work with BOP consumers. f. Food technology: In the case of domestic and/or medium-sized companies, 7
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their food technology capacity is quite limited in terms of developing new products and providing appropriate nutritional solutions for low income groups. With very few exceptions, the existence of in-house expertise in food technology seems to be quite limited among the local companies interviewed. g. Logistics: The fragmented nature of low-income markets in Brazil renders logistic related issues quite complex to all companies, particularly the multinationals. A large number of small retailers – many of them informal – distribute the bulk of food products. The development of cost-effective distribution strategies is therefore one of the key challenges for companies operating in such markets. We have identified very few successful business cases addressing this important issue. h. Nutrition education: According to both private and government informants, Brazilian consumers are not well informed about nutritional facts. The overall low level of education among low-income families in Brazil also contributes to consumer habits which are inadequate from a nutritional perspective. There are nutritional educational programs both at government and private level, but they almost never overlap. This seems to be one of the most promising areas for public-private cooperation.
In general terms, the project has assessed how different private, public and NGO organizations in Brazil are addressing the nutritional needs of low-income families. The focus point was to understand the main drivers and/or barriers that stimulate and/or limit private participation. Such an understanding has allowed us to propose some guidelines for future collaboration and partnerships between the private sector, national government, GAIN and IDB in Brazil (section 6). Finally, we developed in chapter 6 a basic protocol for companies aiming at addressing the nutritional needs of low income groups. A detailed description of the methodology is presented in chapter 2. The following chapters further develop the points presented here.
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2. METHODOLOGY
The mapping analysis presented aims to provide an overall picture of the nutrition sector in low-income groups by identifying relevant companies, government policies and programs, as well as NGOs, operating in the field. We interviewed eighteen company executives and four government and NGO officers. We also reviewed an extensive literature on nutrition and policy issues in Brazil. First, the study interviewed four relevant government and NGO officials, as follows:
The nutrition unit of the Ministry of Health. It is the key office for nutrition policies within the Ministry of Health; The nutrition unit of the Ministry of Social Development. It is the office for nutrition issues within the ministry that manages large cash transfer programs for low income families (Bolsa Familia and others); Pastoral da Terra, located in Paraná, which is the largest NGO operating within the nutritional field in Brazil. It is a grassroots organization that acts through catholic charities and manages a significant amount of government funds; Banco de Alimentos, is a local NGO based in Sao Paulo, which aims to organize the distribution of food donations provided mainly by private companies.
Given the complexity of the nutrition policies we considered, the number of interviews performed with government and NGO officials was quite limited. A broader coverage of the issue would require interviews with at least four other federal organizations (Ministry of Education, Ministry of Work, Ministry of Agriculture and Anvisa) as well an assessment of nutrition policies in the most important states and municipalities.1 To compensate for this, we produced an extensive literature review covering aspects of the international nutritional debate, national nutritional indicators, nutritional policies
1 Interviews with other relevant stakeholders such as business and professional associations would also add new perspectives on the issues not considered here (see chapter 6). 9
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and the nutrition regulatory framework.2 These analyses, presented in further detail in chapter 3, have the following major goals:
Provide a general picture of the nutrition conditions and the economic and agricultural aspects that shape them; Understand the main forces and stakeholders that influence nutritional policies; Develop a detailed understanding of the nutrition policies and how these relate to private companies, specifically identifying key government programs in the field, how they are funded, how they operate their main results and stalemates. Only national policies were covered, as analyzing sub-national ones would require significant additional time and resources; Gather first-hand information on how the national government respond to private participation in the field, and how they perceive both government and private actions in the area; Determine key NGO actions and how they relate to both government and private sector initiatives in the field.
The present study has also mapped eighteen relevant small (5-40 million dollars), medium (40-200 million dollars) and large private companies (more than 200 million dollars) that already operate in Brazil and provide food products targeting low-income families. A detailed description of the interview materials is presented in chapter 4. A list of the interviewed companies is presented in table 1, below. The sample clearly presents a good distribution of companies in terms of size (8 large and 10 medium/small companies) and regional location, with coverage of six different Brazilian States. We selected from a list of 50 relevant companies identified through business sources (Exame, 2009; Valor, 2009). The original list was submitted to IDB and the selected companies were contacted. During the interviews, other relevant companies were suggested by key respondents (snowball technique). The final list of companies comprised those consenting to participate in the survey after an average of at least three contacts per company.3 We consider this quite representative of the
2
In order to cover this last issue we contracted a specialist on nutrition regulatory issues who produced a background paper on the regulatory framework (Bartels, 2010). 3
Some very relevant companies decided not to participate in the survey. 10
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food business in Brazil, albeit the sample is small considering the total number of companies operating in the food business. Four companies interviewed are in the top ten companies in the food and beverages ranking, as discussed in chapter 4. Table 1: Interviewed companies Name
Size
Type Regional
Headquarters location (State) Goias
Sales in Brazil 2008 (US$ millions) *
Workers (2008) 210
F1
5-40 US$ million
F2
More than US$ 200 million More than US$ 200 million 5-40 US$ million
Regional
Minas Gerais
282
393
Oils (soya and others)
Santa Catarina
10,112
8,500
Parana
*
142
Oils, flours and milk products Fruit juices
More than US$ 200 million More than US$ 200 million More than US$ 200 million 40-200 US$ million 40-200 US$ million More than US$ 200 million
Multinational
Sao Paulo
*
50
Micro-nutrients
Regional
Sao Paulo
671
2,500
Multinational
Parana
1,802
7,000
Regional
Ceara
101
605
Regional
Ceara
93
120
Sao Paulo
2,797
17,000
Regional
Parana
118
1,000
Multinational
Sao Paulo
555
2,000
Multinational
Santa Catarina
5,007
60,000
Regional
Ceara
*
550
Fruit juices
F15 F16
40-200 US$ million More than US$ 200 million More than US$ 200 million 40-200 US$ million 5-40 US$ million 5-40 US$ million
Regional Regional
Sao Paulo Sao Paulo
* *
* 160
F17
5-40 US$ million
Regional
Sao Paulo
*
210
Fruit juices Milk and products Fruit juices
F18
40-200 US$ million
Regional
Parana
*
1,200
F3 F4 F5 F6 F7 F8 F9 F10
F11 F12 F13 F14
Multinational Regional
Multinational
Main products Flours and cereals
Flours, cereals and bread Juices, chocolates and food snacks Milk and milk products Flours and cereals Milk products, chocolates, cereals and food snacks Flours and cereals Milk and milk products Processed meet
milk
Pasta, milk products and cereals
Source: Interviewed companies and Exame (2009) for information on sales. * Note: Information considered confidential by the interviewee.
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The study has specifically gathered information on the following aspects of the operation of these companies:
Main activities and markets, including data on distribution practices, pricing, product development and promotion etc; Product development strategies looking at nutritional aspects and relating them to consumer preferences and needs; Supply chain and how it affects pricing and products; Funding and financial aspects to understand how individual companies finance their operations; Institutional constraints that limit a company's actions in the food business – i.e. fiscal and regulatory issues.
Thirdly, the study also developed a baseline and scoring analysis that can provide comparisons between companies’ strategies within and across regions (chapter 5). This comparison was based on a literature review of key international business cases in the field of nutrition. It was then used as benchmarks for analyzing six Brazilian cases. When selecting these cases, we looked at their problem solving abilities, economic viability, use of nutritional solutions, whether they reached the base of the pyramid, their scale and their ability to be replicated in other contexts . The analysis of company strategies in addressing low-income markets considered the following:
General company commitment to BOP markets; Presence and quality of systematic product development in line with BOP nutritional needs; Pricing strategy aiming at targeting BOP consumers; Specific supply chain and distribution strategies to reach low-income communities; Overall base of the pyramid culture; Expectations regarding governmental and international organizations’ support for new products with low cost and enhanced nutritional value. Capacity for partnership building aiming at developing BOP projects. 12
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Finally, we tried to identify the key elements that would allow the IDB and GAIN to build a common understanding with their partners of market-based solutions for nutrition in low-income markets in Brazil. It should be noted that this is not necessarily simple. In chapter 6, we argue that the Brazilian federal government has quite a restrained perspective to public-private initiatives regarding nutrition issues. By the same token, companies also find it difficult to cooperate but for different reasons. In light of this, we attempt to identify the most important areas of consensus in the field as a possible starting point to a better dialogue between government and private companies. We expect that such an understanding would allow the IDB and GAIN to establish new partnerships in the nutrition field.
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3. THE STATE OF NUTRITION IN BRAZIL
This section provides an overview of nutrition conditions in Brazil as well as offering an understanding of its most important nutritional policies and programs. Since the regulatory framework regarding food products is quite complex, we will spend some time discussing the most important regulatory issues concerning enhanced nutritional products, as well as the conditions shaping cooperative actions in the field. Agribusiness is highly developed in Brazil. The country is a significant exporter of a large variety of food products: sugar, soy beans, coffee, rice, corn, poultry, pork and beef. The only important food product that is regularly imported is wheat flour. In this context, there are many opportunities to increase the efficiency of food value chains and to develop initiatives that may contribute to income generation for the Brazilian population at the base of the pyramid, that depends upon food production or trade for survival. It also provides an opportunity for companies who can make improvements in this area. Strengthening operations throughout the supply chain can reinforce gains in productivity and consumption, resulting in substantial income generation for the most poor (BCG, 2009). The real price of food products in Brazil has been declining significantly over the last 15 years which – associated with the policies of social protection (such as income transfers) and the reduction of poverty levels - has produced increased access to food products among low income groups. Traditional health indicators such as infant mortality are declining steadily and the level of sub-nutrition also appears to be decreasing, although the statistics in this area seems to be weaker (sections 3.1 and 3.2). Broader access to food products and the characteristics of the average diet have reduced the number of nutritional problems across the country, although they may still be severe in some particular areas in the Northeast. Access to energy sources (such as sugar or carbohydrates) is quite universal and access to proteins has improved significantly in the recent past due to the decline of food prices and the increased availability of meat. Also, in many regions, climate conditions allow easy access to fruit and vegetables, so health policy has focused its attention on a rather limited range of micronutrients such as Vitamin A, Folic Acid, Iron and Iodine (Ministry of Health, 2007). New nutritional concerns such as obesity - typical of more developed countries – are also increasing rapidly (section 3.3).
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A key aspect of the Brazilian policy regarding the food and beverage business is that the regulatory framework in Brazil appears to be excessive. One company executive of a middle sized company reported that it took him almost one year to get a negative answer from one regulatory agency regarding the launching initiative of just one product.4 The time required for food and beverage companies to have a new product with a specific nutritional claim approved by the national regulatory body (ANVISA), is at least six months, and sometimes considerably longer, depending on the complexity of the process. A company trying to launch an enhanced nutritional product needs to produce eight different documents (including some sophisticated technical analyses) in order to have the product approved by ANVISA. Some products must be approved both by ANVISA and the Ministry of Agriculture (MAPA), which causes further delays and more bureaucracy. The approval process may be subject to the discretionary powers of public officials, increasing the risks for the company that is trying to deliver the innovation. In summary, the number of documents required, the length of the process and the associated risks tend to increase the cost and risks of launching new products significantly as well as limiting overall innovation (section 3.4). Furthermore, there seems to be little genuine cooperation between the government and the private sector with regards to nutritional issues. Government agencies do not expect food companies to be cooperative. The public officials interviewed seem to put much more emphasis on regulation rather than on public-private cooperation. For example, when asked about the potential of private-public cooperation in Brazil, a Federal Government official stated:
“I believe that the major concern of the (nutritional) policy in Brazil is to strengthen the public sector because in the food area almost everything has been given up to the private market.”
On the other hand, private companies and even some NGOs do not necessarily expect to establish significant cooperative initiatives with the government. They tend to see
4
“A gente vê muito o entrave nos órgãos governamentais... por exemplo, a gente precisou passar pela regulamentação do Ministério da Agricultura, do MAPA: a gente demorou cerca de 08 a 10 meses para ter um parecer técnico deles informando que maçã com colágeno não seria possível, solicitando informações adicionais; é um processo que demorou quase 1 ano... ou seja, enquanto você desenvolve um produto o mercado já está reagindo de outra forma." Interview with a middle sized company executive, January 2010. 15
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the government more as a burden than a possible collaborator. This position is clearly stated by one of the NGO officers interviewed:
“In the public sector, from my experience, they only try to benefit from us. The city administration and other public agencies have asked us to do different things, and we have done a lot. We have stopped because it does not get us anywhere. It is abusive�.
Overall, the agro-economic conditions in the country have favored a steady improvement of the general nutritional state, which does not necessarily reaches all regions and social groups. Federal Government adopts a highly regulatory perspective, somehow averse to broader cooperation with private entities that could enhance nutritional access. Although the government intention is to enforce minimum standards and avoid abusive practices on the part of private organizations, it also restrains innovations that could increase access to key micronutrients and speed up the process of nutritional improvement. These issues are discussed below.
3.1 KEY CHILD NUTRITIONAL FACTS Statistics on nutritional issues in Brazil do not always provide a very clear picture of the most important trends. Few national surveys are updated regularly and most analyses are based on case studies with limited scope. However, the literature revision presented here is able to demonstrate two things. Firstly, the most important nutritional indicators in Brazil do not significantly differ from other average-income Latin American countries such as Mexico and Colombia, and secondly, there seems to be a general improvement in the basic nutritional indicators, but not necessarily all of them. We detail this information as follows:
a) Low birth weight statistics were quite stable in Brazil between 1994 and 2006, according to DATASUS, the official organization responsible for collecting health data in Brazil. The percentage of live newborn infants that weigh less than 2,500 g was 8.75% in 1994 and 8.23% in 2006, having reached a low of
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7.68% in 1999.5 These variations are not very significant; especially considering that they may be affected by underestimates in the poorer states of the country. In 1996, the World Health Organization (WHO) estimated that low birth weight in Brazil was 10.0%, a level much lower than some other developing countries, such as the Philippines (20.0% in 2000) or Ecuador (16.0% in 1999). According to WHO, Brazilian low birth weight statistics are similar to other medium-income countries in Latin America, such as Mexico (9.0% in 1999);6 b) Although Brazil is not well placed internationally in terms of child mortality (107th in the UNICEF under-five mortality rank), the indicators on child mortality (under fives) and infant mortality (under one) are declining steadily. According to UNICEF data, child mortality has decreased from 58 per 1,000 in 1990 to 22 in 2007. For infant mortality, the decline was 49 to 20 per 1,000.7 These statistics are consistent with those collected by DATASUS in Brazil; c) There are still problems associated with child nutrition, but the indicators show improvement. Brazil, along with most Latin American countries, is on track to reach the UN Millennium Goals of reduction of the prevalence of underweight children (UNICEF, 2009: 19). The estimate of under-fives suffering from underweight (moderate and severe) was 5.7% in 1996 according to the statistics published by DATASUS and 4% for 2000–2007, according to statistics of NCHS/WHO organized by UNICEF. These levels are similar to other medium income countries in Latin America such as Mexico (5% in 2005) and lower than Colombia (7% in 2005).8 However, since the under-five population is 13.7 million (IBGE, PNAD-2008), UNICEF indicators show that the absolute numbers are quite impressive: 550,000 underweight under-fives living in Brazil. Other sources indicate significant improvement of similar indicators such as the proportion of children with low Z score of weight per height that was supposed to have reached 1.4% in 2006 (Ministry of Health/Cebrap 2009). d) The prevalence of exclusive breastfeeding between 0 and 5 months was 40% in 2006, similar to the average of Latin American and Caribbean countries (41%), according to UNICEF. The levels of breastfeeding with complementary food between 6 and 9 months reached 70% and the proportion of children aged 20
5
See: http://tabnet.datasus.gov.br/cgi/tabcgi.exe?idb2008/d16.def
6
See: http://apps.who.int/whosis/data/Search.jsp?countries=%5bLocation%5d.Members
7
See: http://www.unicef.org/infobycountry/brazil_statistics.html
8
See: http://www.childinfo.org/undernutrition_underweight.php 17
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to 24 months still breastfed was 25% in 2006. These levels were also similar to the average for Latin American and Caribbean countries.9 Public policies in Brazil strongly emphasize the importance of breastfeeding and this issue influences the regulatory agenda (sections 3.3 and 3.4); e) Data from a recent survey indicates a national prevalence of vitamin A deficiency of 17.4% in children under-five (Ministry of Health/Cebrap, 2009). However, this survey also shows a higher prevalence both in the poor Northeast region (19.0%) and the richer Southeast (21.6%), which is surprising, as these regions have significant differences in levels of education, income and proportion of the population living in urban areas. UNICEF estimates that the prevalence of vitamin A deficiency is moderate in Brazil, between 10 and 20% for children of pre-school age10. It is well established that the consequences of vitamin A deficiency are dramatic for children by reducing immunity, causing blindness and increased mortality (Horton, Greig and Lakshman, 2009); f) The one national survey of nutrition indicates a 20.9% prevalence of anemia (hemoglobin <11g/dL) in children with 6-59 months (Ministry of Health/Cebrap, 2009). There is a high prevalence in both developed Southern areas and the less developed northeast and, in urban areas, the prevalence is even higher. Given the policy of compulsory enhancement of wheat flour with iron, this is quite unexpected (see section 3.3); g) The proportion of households consuming adequately iodized salt reached 96% in 2006 due to the legislation defining iodine standards for commercially distributed salt (Ministry of Health/Cebrap, 2009 and DATASUS). This indicator is higher than the Latin American and Caribbean average (89%).11 The prevalence of iodine deficiency is relatively low (1.4%) â&#x20AC;&#x201C; albeit higher levels in some specific areas in the interior of the country furthest away from the sea. (Ministry of Health, 2007).
Although some case studies exist, there is little data for important micro-nutrients such as zinc and vitamins, and the absorption of micronutrients (such as iron) in specific populations is rarely addressed. It is true that the federal government has established policies for the enhancement of commercialized wheat flour with iron and folic acid (section 3.3), but other relevant micro-nutrients are not considered within
9
See: http://www.childinfo.org/breastfeeding_iycf.php
10
See: http://www.childinfo.org/vitamina.html
11
See: http://www.childinfo.org/idd_profiles.php 18
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the scope of public policies. The prevalence of so called “hidden hunger”, associated with micro-nutrient deficiency, is relatively unknown in the country, especially for micronutrients not included in the public policy agenda (Ministry of Health, 2006). 12 It is important to note that “hidden hunger” may occur even among children with average weight and its prevalence is much higher than the traditional lack of energy sources (Kennedy, Nantel, and Shetty, 2003). Other nutritional issues such as overweight are also becoming part of governmental concern with the improvement of general socioeconomic conditions. According to DATASUS, in 2002-2003 the proportion of over weighted people (body mass index or BMI >= 25 kg/m2) ranged in Brazilian state capitals from 32% in Aracaju to 46% in Rio de Janeiro for people over 15 years old.13 Adult overweight and obesity have grown considerably in Brazil in the last 30 years, particularly among men (Ministry of Health, 2006). There is less information about childhood obesity. Changes in lifestyle associated with the general urbanization process and the increase of women into the job market, result in significant changes in nutritional behavior. The number of meals taken out of the household is increasing and children are more often having meals without parental supervision. Meals are becoming more common as part of child care arrangements, such as nurseries and schools and consumption of industrial food is increasing. These trends may produce significant changes in access to micro-nutrients, but they are neither currently well established nor understood by the literature in the field (Garcia 2003; Mello, 2004). In summary, general socioeconomic development appears to have narrowed the profile of traditional nutritional problems in Brazil, although poorer sanitation conditions and lower levels of education in mothers (in comparison to similar
12
“O país não dispõe de informações recentes, de representatividade nacional, sobre carências de micronutrientes; contudo, estudos disponíveis de abrangência local, realizados por diferentes instituições em várias regiões geográficas, permitem inferir que a carência de vitamina A (hipovitaminose A) e a anemia por carência de ferro são as principais deficiências nutricionais que acometem a população brasileira. Os distúrbios por deficiência de iodo (DDI) parecem ser ainda um problema em regiões isoladas, provavelmente em função do consumo de sal destinado à alimentação animal pelas populações rurais, muito embora tenha havido sucesso da intervenção por meio da iodação do sal para consumo humano. Recentemente, a carência de ácido fólico tem sido evidenciada, o que fundamentou a decisão governamental da fortificação universal das farinhas de trigo e milho produzidas no País com ferro e ácido fólico” (Ministry of Health, 2006: 19). 13
See: http://tabnet.datasus.gov.br/cgi/idb2008/d24b.htm 19
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countries) still contribute to higher levels of infant mortality.14 In other words, the so called “nutrition transition” is, apparently, quite advanced (Caballero and Popkin, 2002). Access to energy sources (such as sugar or carbohydrates) is quite universal and access to proteins has improved significantly in the recent past due to the decrease in the price of food and the increased availability of meat. However, it is of note that when considering a new nutritional agenda, including emerging issues such as obesity and “hidden hunger”, current knowledge is rather limited.
3.2 ACCESS TO FOOD PRODUCTS Over the last 40 years Brazil has undergone significant agricultural and socioeconomic transformation, resulting in increased access to food products. These changes have affected both the type of food on offer and the capacity of families to afford it. There has been a high degree of rural-urban migration and a significant increase in agricultural productivity. According to the country statistical bureau (IBGE) in the 60s, more than 50% of the population lived in rural areas, whereas now more than 80% of the population lives in urban areas. On one hand, this urbanization process makes industrialized food more accessible but, on the other, distribution issues may limit access to certain types of food for poor people living in the outskirts of metropolitan areas or in shanty towns, and who also have to pay higher prices than the average population for the same products (Kunreuzher, 1973). The country is now considered quite developed in the area of agro-business, being a significant exporter of a large variety of food products. Brazilian agriculture maintained an average annual growth rate of about 5% between 1960 and 2000. The country is the world’s largest sugar producer. It is also one of the three largest producers of soy bean, maize, cacao, oranges, sugar cane, cassava, banana, cashew nuts, pepper, beef and chicken. The country is among the ten largest producers of pork, eggs, rice and milk. The only important food product that is regularly imported is wheat flour (FAO, 2000; IBGE, 2007). One important aspect of food prices in Brazil is that they are affected by value added taxes levied by local state governments (ICMS). Although the levels of taxation may vary from state to state, they are often more than 10%, representing quite a burden
14
Sanitation conditions and mother education are variables traditionally associated with infant mortality levels (UNICEF, 2009). 20
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for the poorest families. Although the taxation on food products remains a highly regressive factor in general economic policy, other agro-economic developments resulted in improved access to food. The real price of food products in Brazil has declined significantly over the last 15 years. For example, compared with food prices, the minimum wages increased more than 100% over this period (Box 1).
Box 1: Minimum wages and Food Prices in Brazil
According to the Ministry of Labor, around 40 million people in Brazil earn the minimum wage (currently around R$ 510 or US$280 per month). The increase in food prices is also below the average price index (IPCA) and even after the rally of the commodity prices in 2007-08, food prices in Brazil are, in 2010, on average, 18% lower than in 1995. Minimum wages do not regulate the income of all families. Among the poorest groups, a large proportion of families receive wages below the minimum wage. It happens when the main provider in the family is either unemployed or working in the informal job market. The Gini index, a measure of income concentration, still shows
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very high levels of inequality (around 0.55 in 2008). However since 1990, it has systematically declined, according to the time series organized by IPEA in Brazil.15 As a consequence of the reductions in the level of inequality, the proportion of very poor households - with an income below R$ 607 per month (or US$340 as of January 2010) - has declined from 29% in 2002 to 24% in 2008, according to the statistics of the Brazilian household survey (PNAD/IBGE). At the same time, the proportion of families in the mid-range of income distribution (from US$680 to US$1,670) has grown considerably from 26 to 33%. This data is presented in Table 2, below.
Table 2: Household income distribution in Brazil (%), 2002 and 2008 2002 Household monthly income Less than US$340 (R$0 to R$606) 29 From US$ 340 to less than US$680 (R$607 to R$1,213) 31 From US$680 to less than US$1,670 (R$1214 to R$3033) 26 From US$1,670 to less than US$3,370 (R$3,034 to R$6,066) 9 US$3,370 and more (R$6,066 and more) 5 Total 100 Source: PNAD/IBGE. Note: Original data in Brazilian currency (values of July 2008).
2008 24 28 33 10 5 100
Furthermore, social programs were greatly boosted by the 1988 Constitution and the coverage of the programs has increased impressively since the stabilization plan of 1994. There is now a wide range of social programs in place, contributing both to growth of family income and the prevention of inevitable expenditure such as health payments. As a result, very poor families now have broader access to food products. The most important social programs that may impact on the nutritional condition of children are worth mentioning:
a) The cash transfer program, Bolsa FamĂlia, has reached 12 million families in 2009, according to the Ministry of Social Development. Typically, this program targets families below the official poverty line with transfers per family of less than US$100 a month. It requires that the family keeps their children at school and follows the official vaccination program. Some evaluations of Bolsa
15
See: www.ipeadata.gov.br 22
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FamĂlia indicate that the program is well targeted and its social impact is quite significant (Ferreira, Leite and Ravallion, 2007); b) The food school program (Merenda Escolar) reaches 35 million students per day, according to the Ministry of Education, and is focused on public primary schools16. It is a federal program which is implemented by municipal and state schools. It is certainly one of the most important nutrition programs in the country. Despite the fact that it does not reach children from 6 to 24 months, it contributes to the reduction of household expenditure, particularly for families with a large number of children; c) Brazil also has an extensive public health program (SUS) performing 230 million ambulatory procedures per month according to DATASUS, including medical appointments, emergency procedures, vaccination and others. This program also provides free services for 12 million hospital inpatients per year. Except for access to pharmaceuticals (which can be expensive and not often available with any charge), SUS almost guarantees universal health coverage for low income families, particularly in larger urban areas. The public health system also disseminates information about nutrition, in addition to distributing certain nutritional supplements (such as vitamin A) (see section 3.3)17.
Overall, the improvements in income distribution and the advancements in social programs potentially allow poor families to enhance their diets. Combined with the decrease in food prices, the access of poor families to food products has increased significantly over the last 15 years, contributing to the changing picture of chronic nutritional problems. However, such access does not necessarily guarantee the intake of all essential micro-nutrients in the daily diet and does not necessarily prevent â&#x20AC;&#x153;hidden hungerâ&#x20AC;?.
16
Primary school coverage has reached 97% in 2008 for children between 7-14 years old (IBGE-PNAD 2008) 17
There are other important social policies in place, particularly in the areas of education and social security. Although significant per se, we are not going to discuss them here because their immediate impact in access to food products from children seems to be smaller. 23
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3.3 NUTRITIONAL POLICIES The objective of this section is to discuss the most important aspects of federal nutrition policies in Brazil. We are not going to discuss state or municipal policies in detail, but it is important to note that Brazil is a highly decentralized country. The most important social policies (particularly health and education ones) are organized and funded at the federal level but implemented locally (Arretche, 2004). Well-off states and municipalities, particularly those in the Southern part of the country do have some leverage to establish local standards and policies and do so quite often. The most important actors in the arena of federal nutritional policy are the Ministry of Health, the Ministry of Social Development and Hunger Alleviation and the National Agency for Health and Safety (Anvisa), although at least seven different federal organizations and councils are also involved in one way or another18. In this chapter, we will focus our attention on the three institutions which have a broader impact on the target groups of this study (6-24 month old children and low income families). First, we will discuss the policies of the Ministry of Health and the Ministry of Social Development, while the regulatory issues are going to be discussed in section 3.4. The Nutritional Division of the Ministry of Health, (Coordenação Geral da Política de Alimentação e Nutrição) is the department with the major responsibility for implementing nutritional policies and initiatives within the large national network of the public health care facilities: primary health care facilities, public and private hospitals and clinics financed by government funds. For 2010, this division has a budget of R$ 67 million (38 million dollars), R$ 36 million dedicated to initiatives within the health care system, R$ 22 million dedicated to micro-nutrient supplementation and R$ 9 million allocated to states and municipalities. Their activities can be briefly described as including the definition of practices and standards within the health care system, the coordination of nutrition education initiatives, the management of the most important nutrition programs and the collection and monitoring of nutritional data. It is important to note that although responsible for formulating the most important nutritional policies, including those related to compulsory food enhancement initiatives the Ministry of Health is not
18
The most important federal organizations concerned with nutritional issues are the following: Health Ministry, Anvisa, Ministry of Social Development and Hunger Alleviation, Workers Food Program (Ministry of Labor), School Food Program (Ministry of Education), National Council for Food Security and Ministry of Agriculture (Ministry of Health, 2006). 24
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responsible for the enforcement of some of these policies. This is the responsibility of Anvisa, the regulatory agency. A more detailed description of the activity of the Ministry of Health Nutrition Unit is shown in table 3 below.
Table 3: Nutritional Action – Ministry of Health, Nutrition Unit Decentralization initiatives, Nutritional education Nutritional programs and development of practices actions for specific nutritional and standards within the deficiencies health care system Provide financial and Develop continuous Offer doses of technical support to state educational activities vitamin A within and municipal secretariats for health care the health care in nutritional issues; professionals; system in target areas and groups;
Define the protocols for health care for children with malnutrition within the public health care system (SUS);
Provide nutritional information for the general public;
Prevent Anemia and Iron deficiency through the enhancement of wheat and corn flours;
Define the projects and activity in the field of childhood malnutrition;
Promote nutritional initiatives within the school system (in cooperation with the Ministry of Education).
Also enhance wheat and corn flours with Folic acid;
Include nutritional components in the protocols of health care of particular sociodemographic groups (rural population, Native American population, etc.
Coordinate the policy regarding Iodized salt.
Source: Ministry of Health Ministry of Health, 2006.
In addition to the activity within the health care system to treat and prevent malnourishment, the most important programs coordinated by the Ministry of Health target four micro-nutrients: vitamin A, Iron, Folic Acid and Iodine. Other important 25
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micronutrients (such as Zinc) are not subject to federal policies, and the availability of general information and data on them is scarce, although several studies suggest that therapeutic zinc supplements can reduce mortality from diarrhea in children below the age of five, by 50% (Horton, Greig and Lakshman, 2009). The policy regarding Vitamin A has been in place since 1983. At first, this policy was based on the distribution of doses of Vitamin A for children between 6 and 59 months in the Northeast and in some areas of the State of Minas Gerais (Jequitinhonha and Mucuri). This distribution was associated with vaccination campaigns and the provision of primary health care facilities. Thus the impact of the policy was highly influenced by the coverage and efficiency of the primary health care units, which may vary depending on local capabilities and administration skills. In 2001, a policy was introduced in the local hospitals was to provide tablets (200,000 IU of vitamin A) to mothers after birth. The justification was that even in the poorest macro-region of the country (Northeast), 95% of births take place in hospital (Ministry of Health, 2007). Naturally, this strategy is associated with national breastfeeding policies. The coverage of exclusive breastfeeding for children between 0 and 5 months is around 40% (section 3.1), which indicates that the impact is limited. In 2004, the vitamin A program was restructured aiming at mobilizing different stakeholders including local policy makers, health professionals and the general population. A marketing brand “VITAMINA A MAIS” (Vitamin A Plus) was created in order to support a marketing campaign. In 2005, new regulations regarding the responsibilities of municipalities, states and federal government was also established in order to improve coordination of the policy. This program is now called National Program of Vitamin A Supplementation (Programa Nacional de Suplementação de Vitamina A)19. The policies regarding iron deficiency anemia are more recent. The first national policy was established in 1999, and in 2002 the country established a regulatory agenda that made the enrichment of wheat and corn flours, with the addition of iron and folic acid, compulsory (4.2mg of iron per 100g of flour and 150μg of folic acid - Anvisa RDC nº 344, published in 12/13/2002). As well as the policy of flour enhancement, the Ministry of Health also developed a national program of iron supplementation aiming at children from 6 to 18 months and pregnant women (iron and folic acid). This program is implemented through the public
19
See: http://nutricao.saude.gov.br/vita.php 26
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health care system, which requires coordination within the three levels of government (Ministry of Health, 2007). This program is currently called the National Program of Iron Supplementation (Programa Nacional de Suplementação de Ferro)20. There are few studies analyzing the enforcement of such policy. One study that we were able to identify, performed in the city of Sao Paulo (Castro and Silva, 2007), observed that 14% of the 86 analyzed samples of flours obtained from local suppliers in Sao Paulo in 2006 had a level of iron enhancement below the standard established by the public regulations. However, it is important to note that Sao Paulo is one of the most developed regions of the country, with well organized companies and the presence of public institutions and labs that contribute to guaranteeing policy enforcement. The same results are not necessarily going to be found all over Brazil, particularly considering small and less organized national companies located elsewhere. The efforts in iron enhancement are not necessarily paying off as expected because the issue of iron absorption among different socio-demographic groups is not extensively addressed. The latest available indicators reveal that the levels of anemia are still quite high, despite all the improvements in overall economic conditions (see section 3.1). Since 1953 there have been policies on iodized salt in Brazil (Lei 1.944 of August 1953). At first, the policy was that salt for distribution in the locations with identified iodine deficiencies was compulsorily iodized. Further regulation in 1956 defined those areas and ruled that the Ministry of Health would be responsible for micro-nutrient imports. New regulations in 1974 and 1975 extended the compulsory distribution of iodized salt to the whole country, including both human and animal consumption. According to this regulation, every kilogram of salt must contain from 10 to 30mg of metalloid iodine. Industries are responsible for the equipment and costs associated with the enhancement, and the responsibility for enforcement belongs to municipalities and states (Ministry of Health, 2007). In 1984, the Ministry of Health started assuming the costs of the acquisition and distribution of iodine because their policy evaluation indicated that most companies had not enhanced the product and enforcement was considered deficient. Again in 1994, this program was re-structured and a National Program for Iodine Deficiency
20
See: http://nutricao.saude.gov.br/ferro.php
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(PNCDDI) was created (Health Ministry, Portaria nº 2.165). Among other elements, the level of salt enhancement with iodine was increased to 40–60 mg per kilogram. In 1999, new regulations established that the salt industry was to be responsible for the costs associated with Iodine enrichment (Medida Provisória # 1.814-2). It seems that finally the salt industry started to comply with enrichment regulations. According to the latest statistics, iodized salt coverage is around 96% (section 3.1), but there are still concerns regarding the technical standards adopted by the salt industry and the risk of over enhancement (Ministry of Health, 2007). The Ministry of Social Development and Hunger Alleviation is mainly dedicated to the issue of poverty alleviation, managing the national cash transfer programs (Bolsa Familia and BPC). The mission of its Food and Nutritional Unit (Coordenação do Programa de Alimentação e Nutrição) is to contribute to hunger elimination among the poorest groups of the population, particularly those covered by other social programs managed by the Ministry21. Their most important activities are associated with food collection (including government and private donors) and its distribution to social, government or NGO organizations focused on poor groups (such as childcare and elderly care homes), denominated “food bank”22. It also provides for the organization of "popular” kitchens and restaurants at the municipal level that are usually public restaurants that provide meals to low income groups at subsidized prices. Table 4 below summarizes the activities of the Nutritional Unit. Although the food bank initiative involves a large number of municipalities and local NGOs, it does not coordinate its initiatives with other NGOs organized as “food banks”, such as one which was interviewed in Sao Paulo in December 2009 as part of this study (see section 6). Furthermore, the managerial group of the Ministry of Social Development (Nutrition Unit) is doubtful about the possibility of typical private-public cooperation in this field. Donations to the federal food bank program originating from private food companies are insignificant, which is quite surprising considering the size of this sector in Brazil. Presently, the most important partner of the program is Conab (Compania Nacional de Abastecimento), a public company responsible for promoting the regulation of food markets through purchases and sales of food products as well as managing government regulatory food stocks.
21
See: http://nutricao.saude.gov.br/acao_bolsafamilia.php
22
The government “Food Bank” initiative does not have any connection with the NGO “Banco de Alimentos” (Food Bank in Portuguese) also interviewed by the project. 28
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The Ministry of Social Development also runs a program of food acquisition (Programa de Aquisição de Alimentos, PAA) that helps state and municipal administrations buy local production from small farmers. This food is used by municipal programs or donated to the local network of social organizations. This particular program also works in association with the food bank program or "popular" restaurants and kitchens. The basic aim of the PAA is to generate local economic impact in terms of employment and income generation. It is also connected to Conab and to the Ministry of Agrarian Reform.
Table 4: Nutritional Action – Ministry of Social Development Nutrition Unit Mission
Coverage
Volumes Major concerns
Modus operandi
Partnerships
Food bank (banco de alimentos) Acquisition and reception of food donations and distribution to social organizations focused on poor groups (such as childcare and elderly care homes) 89 municipalities, reaching 1,100 social organizations in 2008 7 thousand tons of food in 2008 Reduction of food waste and promoting local productive systems, connecting small farmers and urban markets Municipalities apply for the program and receive financial and technical support from the Ministry. It is a competitive process (tender) With suppliers, donors and NGOs that provide social services
Community kitchens (cozinhas comunitárias) Provide low cost (subsidized) meals in small towns targeting low- income families
"Popular" restaurants (restaurantes populares) Provide low cost (subsidized) meals in large cities targeting low-income families
370 small municipalities in 2008
106 large municipalities in 2008
72 thousand meals per day in 2008 Provision of adequate meals with prices from R$ 1 to R$ 2 (US$ 0.60 to US$1.20)
105 thousand meals per day in 2008 Provision of adequate meals with prices from R$ 1 to R$ 2 (from US$ 0.60 to US$1.20)
Municipalities apply for the program and receive financial and technical support from the Ministry. The meals are subsidized. It is a competitive process (tender)
Municipalities apply for the program and receive financial and technical support from the Ministry. The meals are subsidized. It is a competitive process (tender) Some of restaurants are private owned (hired by the local administration)
Source: Information provided during an interview with the program manager, December, 2009.
Other interesting aspects of the "popular" restaurant and kitchen programs are associated with the usage of their floor space for other social activities. Although 29
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these initiatives depend on the interest of the local government, the Ministry tries to promote them proposing, for example, the use of the space for nutritional and professional courses, including some specific activities oriented to mothers of newborns. The "popular" restaurants and kitchens do have few direct initiatives oriented towards children from 6 to 24 months, but they may contribute to the nourishment of very poor mothers during the breastfeeding period. Finally, Anvisa (Agência Nacional de Vigilância Sanitåria) is the regulatory agency responsible for health safety. Anvisa manages the regulatory framework and most of the regulatory enforcement regarding food and medical products. Most industrial food products must be submitted for approval by Anvisa before being distributed, including all enhanced food products directed at 6-24 month old children. Existing regulations cover a variety of issues such as packaging, nutritional claims, nutritional information provided by the producer as well as communication practices. For non processed foods, however, the regulatory route is simpler, the only inspection required being by the Ministry of Agriculture. Due to its complexity and the impact on innovations by private companies, we dedicate section 3.4 to regulatory issues.
3.4 NUTRITIONAL REGULATORY FRAMEWORK Over the last few decades, Brazil has developed a large regulatory framework for food products, particularly those that target children and those that have some particular nutritional claims. We have listed at least eighteen key federal by laws and legislations in the field (Annex 1), but there is also a large body of regulatory instruments not considered here, particularly those produced at sub-national level. This section also discusses the federal regulatory framework from the perspective of the companies interviewed and we also try to understand this framework per se, based on a direct analysis of the legislation provided by a specialized nutritionist who produced a background paper on this issue for the current project. The companies interviewed showed a different pattern of behavior according to their size. Most medium-sized companies declared that they choose not to develop more sophisticated products in terms of micro-nutrient enhancement (see section 4), focusing on less regulated product lines such as those associated with non-processed foods (mainly meat, milk and non-processed cereals). For products which do not have
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any particular nutritional claim and/or do not target small children, the companies only have to deal with one regulatory agency, the Ministry of Agriculture (MAPA). The regulatory process for industrial products targeting infants is usually much more complex. Generally speaking, products in the Brazilian industrial food market targeting children from 6 to 24 months include the following: modified powder milk, infant formulas, cereal based foods (porridge) and soups. However, there are also other industrial food products (yogurts, flours and cereals) that do not directly target infants, but are consumed by them. The first group of products is currently subject to a difficult regulatory framework managed by ANVISA, demanding sophisticated information on labeling and nutritional claims. The second is also managed by ANVISA, but the regulatory demands are somewhat simpler. For most of the large company representatives interviewed, the existing regulatory process is considered quite slow, costly and excessive. The key issues mentioned during the interviews are the following:
Excessive time required to approve new product developments. Some respondents reported approval delays of up to one year;
Excessive information requirements, including different scientific technical reports on product benefits. The number and complexity of documents required is also large;
Strict regulations regarding product labeling and company marketing strategies increase the costs of product launching and the risks to the company. From the perspective of many of the food companies interviewed, if they are not allowed to promote the benefits of enhanced products, their incentive to produce them is reduced because they cannot use the enhancement as a competitive advantage;
Discretionary powers and ambiguous criteria adopted by the regulatory agencies. The approval process may be subjected to discretionary decisions by public officials, increasing the risks for the company trying to develop an innovation.
According to the information provided by the regulatory agencies,23 the time necessary for food companies to get approval for a new food product with a specific nutritional claim is at least six months. A company trying to launch an enhanced
23
See www.anvisa.gov.br 31
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nutritional product targeting children will need to produce several different documents in order to have the product approved by ANVISA and/or MAPA. Some products must be approved both by ANVISA and MAPA, which may produce further bureaucracy and delays. A summary of the regulatory process is presented in box 2 and table 5, below. Box 2: Federal regulatory agencies regarding nutritional products
Regulatory body MAPA
Products for children from 624 months
Regulatory issues Interaction with Anvisa on labeling and commercialization
Animal originated products, beverages and vinegars
Commercialization
ANVISA
Labeling and nutritional claims
Other products Register
The complexity of the process and the documents required for product registration often demand that applicant companies must have a special nutritional team within the organization dedicated to project approval (which is the case in some of the large companies interviewed) or they are expected to contract specialized consulting firms that will help them through the regulatory process. The legislation changes quite often and the volume of information that the professionals in the field must follow is huge. The requirements cover a range of issues that include not only hard evidence of the product composition and nutritional claims, but also information on the label regarding product properties as well as statements to the effect, for example, that the product is not a substitute for breastfeeding. Non-compliance with the regulations is subject to significant economic penalties, and the applicant must also pay different taxes throughout the process (table 5). 32
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Table 5 Nutritional Regulations – Anvisa and Ministry of Agriculture (MAPA) MAPA
Products without nutritional claims Required forms: Application form Product register Production and packaging process information Labeling information Expected approval time: 3 to 6 months
Products with nutritional claims Required forms: Application form Product register Product composition Production and packaging process information Product evaluation regarding nutritional and health claims (Petition 403) Evaluation of product risks (Resolution 17, April 1999) Labeling information Receipt of payment of taxes (GRU) Expected approval time: 6 months, minimum Observations: Depends on Anvisa approval
ANVISA
Required forms: Application forms (FP1 and FP2) Receipt of payment of taxes (inspection fee) Copy of the business licenses (operational license) and sanitation certificates Labeling information Evaluation of product aspects (when required) Expected approval time: Minimum of 6 months
Observations: Products for children without particular nutritional claims are within this classification
Required forms: Application forms (FP1 and FP2) Receipt of payment of taxes (inspection fee) Copy of the business licenses (operational license) and sanitation certificates Product evaluation regarding nutritional and health claims (Petition 403) Evaluation of product risks (Resolution 17, April 1999) Evaluation of the alleged nutritional and health properties (Resolution 18, April 1999) Labeling information Receipt of payment of taxes (GRU) Expected approval time: Minimum of 6 months
Source: Consultancy on Nutrition (2010).
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The reasoning behind the strong regulatory approach adopted in Brazil is based on attempts by the government to promote exclusive breastfeeding from 0 to 6 months and the protection and incentive of breastfeeding with complementary food products up to 24 months (Ministry of Health, 2007)24. This approach is strongly recommended by international organizations, such as UNICEF and WHO. However, although scientifically based, such reasoning does not necessarily deal with the reality of the female urban population in Brazil, particularly within the context of women entering the labor market, which has increased significantly over the past few decades. The participation of women in the labor market is up to 60% according to the last household survey, and is considerably higher among more educated women, reaching more than 80% among those with a college background (PNAD-2008). One important aspect to consider for the poorest groups is the fact that up to one third of BOP women are the head of the family and the necessity of providing for their family tends to take precedence over breastfeeding. According to the labor regulations, childbearing women working in the formal job market have a right to a four month period of maternity leave, receiving full payment from the employer during this time. However, there are no regulations to cover the recommended breastfeeding in the following 20 months of child development. In Brazil, there is a huge informal job market which is not subject to labor regulations. Thus the nutrition regulatory framework seems to be forgetting the basic practical realities of women in Brazilian contemporary society. The regulatory framework, the number of documents required the length of the process and the risks associated tend to significantly increase the cost of a new product launch when targeting children from 6 to 24 months. Only large and very well organized companies can usually cope with the risks in the absence of other incentives. Ironically, the current policy produces important non-intended consequences: reduction in the number of launches, the restriction of products offered and inhibition of competition. Many women do not breastfeed nor have access to a variety of nutritionally enhanced products that would supply their children's needs for micro-nutrients.
24
This perspective is established by law (Lei 11.265, of January 03, 2006). 34
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3.5 POSSIBLE AREAS OF ACTION FOR IDB AND/OR GAIN Considering the current situation in public policy, there are several dimensions that groups interested in increasing the availability of adequate nutritional products in Brazil could address. The most important ones are mentioned below:
Produce new nutritional information on the most important nutritional deficiencies in the country, in the context of current nutritional transition and the general urbanization process, income distribution and changes in nutritional behavior. Such information would be very valuable to inform public policies and to guide initiatives in the field of product development;
Increase the knowledge and capability of national companies on nutritional and regulatory issues, enhancing their capacity to launch new products and compete with large international organizations;
Encourage the engagement of academics and other research groups in product development projects, particularly the ones developed by middle sized companies, which would also contribute to general professional development of practitioners in the field;
Contribute to reducing costs and risks of the regulatory process by helping the regulatory agencies improve the organization of their procedures and understand the overall social impact of the current regulatory environment. Regulatory agencies of other countries could be presented as a benchmark.
Contribute to a review of the regulatory framework considering both child nutritional needs and the realities of the contemporary family in Brazil, particularly with reference to the new role of women, the contemporary urban job market and the labor dynamics of low income groups;
Enhance enforcement capabilities. Mandatory fortification of food helps to create awareness and improve coverage at a national level, but legislation alone is not sufficient. Monitoring and inspection of the applicability of legislation is essential;
Play a role in enhancing the dialogue between the public and private sectors, including also the existing difficulties in the regulatory arena.
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In the next sections, we will focus on the perspectives of companies on those issues. The above conclusions will be discussed further in the final section of this document.
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4. THE ROLE OF THE PRIVATE SECTOR AND ITS IMPACT ON NUTRITION
This chapter presents a discussion about the role of private companies in the nutrition segment at the base of the pyramid in Brazil, with particular focus on the issue of child nutrition. The interviews point to a significant transformation in the scenario of the food industry in Brazil, with the emergence of regional companies of significant size, and the intensification of competition (section 4.1). We have also observed considerable differences between regional and multinational companies interviewed with respect to their BOP strategies and to the issues of nutrition. While some multinational companies appear to have a clear strategy of action and were able to build an elaborate discourse on the issue of nutrition, these matters often were not even approached explicitly by the regional companies, although most of the companies surveyed actually have some presence in the BOP markets, be it due to the nature of the products they trade or in virtue of their local insertion (section 4.2). The companies interviewed pointed to significant barriers to their activities aimed at the bottom of the pyramid, but the nature of these barriers vary according to the companies' profiles. While regional companies emphasized regional tax problems and other issues associated with the development of products of low disbursement, multinational companies emphasized aspects of distribution and the creation of a mindset focused on the low-income market (section 4.3). With regard to nutritional issues, domestic companies are, generally speaking, less well informed and less concerned about it. They are, however, worried about meeting the requirements posed by legislation and to follow the major movements of nutritional enrichment of products launched by competitors, particularly copying initiatives of multinational companies in the most successful categories and products (sections 4.4 and 4.5). As a result, all the companies interviewed are somehow involved with the issue of enrichment of food products. This trend suggests that the topic of nutrition has entered the agenda of the most traditional companies, even if in response to the competition strategies of multinational groups. It can bring new venues to expand the debate (section 4.6). In summary, in the current scenario of the food sector in Brazil, all companies interviewed do invest somehow in the development of fortified products and are able to deliver nutritional products aimed at the base of the pyramid. However, few companies have deliberate strategies to meet the nutritional needs of this group, being some multinational companies the exception. 37
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In general, even among companies that have deliberate strategies for both nutrition and B0P themes, the issues are developed in parallel, without presenting integrated solutions or particular approaches to meet specific nutritional deficiencies of the lower income groups. On the other hand, few regional companies managed to develop relevant initiatives in the development of products that will meet these needs, although there are barriers along this process. We will detail these elements below.
4.1. EVOLUTION SCENARIO OF THE PRIVATE SECTOR IN BRAZIL
To understand the role of the private sector and its impact on nutrition, it is important to recall the evolution of the private sector in Brazil. From there, one can better understand the differences between multinational and regional companies and their views on the base of the pyramid and nutritional issues. Since Plano Real (1994), Brazil has achieved the stabilization of currency and control of inflation. Up until then, the country had experienced a double-digit inflation rate per month and had undergone several stabilizations plans: from 1942 to 1993 there were seven different currencies until the Real was introduced in 1994. The economic stability along with a progressive decrease in food prices has allowed greater access to food products for lower income families, which was also boosted by the easier access to credit. Added to this, the increase in the minimum wage above inflation rate has increased the purchase power of large numbers of people at the base of the pyramid, heating up the food market as a whole (see section 3). As a result, this market, which until then was dominated by large multinational companies, has grown substantially and has seen the emergency of new local players. Market evolution of food products can be seen in Table 6, below, where we present the evolution of sales of food industry in the Brazilian retail sector between 1996 and 2007. The market for food products has grown and, at the same time, became more concentrated (Veigas, 2006). This process of concentration was due to several mergers and acquisitions, both led by domestic and multinational companies. Among the major merges that have occurred recently, it is worth mentioning the case of Sadia, which operates in the segment of ready-made foods, poultry and sausages, which merged with Perdig達o (operating in the same segment), which had previously acquired the milk processing company Elege. These merges resulted in this new group being positioned second in the food and beverages ranking.
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Table 6: Evolution of the Revenue of Retail Establishments of Food, Beverages and Tobacco. Brazil, 1996-2007 (nominal values) Year Total Revenue (billion R$) 1996 24 1997 26 1998 25 1999 22 2000 24 2001 25 2002 27 2003 30 2004 38 2005 46 2006 53 2007 63 Source: IBGE, Annual Retail Survey Note 1: This refers only to establishments with 20 employees or more. Note 2: The exchange rate considered was of R$ 1.8 per dollar.
In the area of refrigerated beef products, JBS merged with the Bertin group in Brazil, after having made a series of international acquisitions - especially in Argentina, the United States and Australia - creating one of the world's largest companies in the sector of animal protein. In the national ranking, it comes to stand in third place. Table 7, below, presents the ranking evolution of the ten leading Brazilian food and drink companies between 2001 and 2009. NestlĂŠ also made an important acquisition during this period (Garoto). Other smaller acquisitions were made by major companies in the segment. In addition to these large merges, a significant number of national intermediate sized companies also emerged, with revenues over US $ 500 million, but which have not yet reached the rankings of the larger sized companies. In general, their names are relatively unknown internationally - Imcopa, Aurora, Margrif, Caramuru Alimentos, ItambĂŠ, M. Dias Branco and J. Macedo - but some of these companies (such as M. Dias Branco and J. Macedo) have already succeeded in performing an initial public offering (IPO) at the Brazilian stock market.
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Table 7 Ranking of major Brazilian companies of food and beverages, 2001 and 2009 Ranking position 2001 2008 1 Bunge Alimentos Bunge Alimentos 2 Nestlé Perdigão + Sadia 3 Cargill JBS + Bertin 4 Sadia Cargill 5 Perdigão Agroindustrial Unilever 6 Parmalat Nestlé + Garoto 7 Seara LDC 8 Fleischman ADM 9 Kraft + Lacta Kraft 10 Danone Seara Source: Exame (2001 and 2009) and Veigas (2006). In order to meet a growing demand, multinational companies have invested in the expansion and modernization of their industrial plants and machinery. New factories and more modern equipment with a much larger output were installed and purchased. At the same time, the used and depreciated equipment was sold to other, smaller, companies. Armed with such "new" equipment, these companies began to offer a range of products similar to those offered by the multinationals until recently, many of which were of similar quality and reasonable acceptability by the consumer. Although their brands may be little known, regional companies have some relevant competitive advantages, given that they can have a regionalized and pulverized distribution, being able to reach regions geographically distant from the view and distribution structures of the multinationals. Given the market growth, the larger scale and existing regional opportunities, a number of local firms also began to take important steps in reorganization. Traditionally, these companies had a family management structure with little organizational skills. In fact, many of them operated in situations of semi-legality (tax evasion, incomplete register of products, etc.). Nevertheless several of them began to seek resources and experience in larger companies, especially management and finance professionals. An interview with a medium-sized company, with revenues of approximately US$ 120 million a year, exemplifies this:
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"It's a family business that is trying to become professional, and so it hired market professionals, such as is my case (Technical Director), that of the Commercial Director, but we still talk to the people of the family..." Regional company In part, the need for greater professionalization resulted from the need to match the new size, but also because by now multinationals already perceived them as important competitors (competing more fiercely), or else because they had become more visible to the inspection of regulatory agencies. All this led to a relatively more concentrated and professional market environment. The current picture is very competitive, with more brands, more offers, and products with quite similar organoleptic characteristics, among others. Added to this, there is now a consumer eagerness for innovation, promotion, price and products suited to their (new) purchasing power. Although all this movement has generated a picture of stiffer competition, one still can find clear distinctions between the operation modes of multinational and regional companies. Whereas there is less distinction in their product lines, from a long-term strategic viewpoint the differences are still quite significant. These strategic differences will guide those different groups of companies in its perception on the base of the pyramid, nutrition issues and the regulatory framework. These arguments are detailed below.
4.2 THE PRIVATE SECTOR
We were able to clear identify different scenarios in the food sector in Brazil, where national and multinational companies have distinct rhythms and dynamics. The vision of the private sector portrayed in this chapter is based on the interviews conducted in this project and complemented with materials available in open secondary sources such as public reports to investors and newspaper articles. Many of the multinationals interviewed are almost century-old companies, with a long experience in Brazil. In general, these companies have a high market share in their original countries, but these markets present a low or even negative growth rate, be it due to lower economic dynamism, or in virtue of the negative or near zero population growth. In this sense, the logic of adopting a growth strategy in emerging countries like Brazil (and especially the so-called BRIC countries - Brazil, Russia, India and China) seems to be part of a more general strategy of seeking to ensure further growth and profitability in the short and long term. 41
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Given the diversity of the markets where these companies now operate, their enormous size and visibility, society, governments and local NGOs began to question more strongly the social and environmental impacts of the action of these industries, as well as their degree of responsibility as a consequence. For example, during the interviews performed for the current project, both representatives of the federal government and NGOs voiced important criticisms concerning the procedures of multinationals in Brazil. In fact, although these companies have increasingly been called upon to answer for their actions on a global level, in Brazil this tendency gained strength following the re-democratization in 1985, the advent of the press freedom, the 1988 Constitution and a set of associated legal innovations (such as the code of consumer protection and environmental legislation), as well as the increasing mobilization of social movements. The most common response of those companies on the international level (a response often reproduced in Brazil) was introducing to their agenda projects aimed at improving the quality of life for consumers and others related to environment preservation issues. All multinational companies interviewed have a department focusing on social responsibility. Some of these companies spend voluminous resources on efforts to raise consumer awareness and in product design and communication strategies that seek to consider health problems related to a poor diet. Even if doubts and criticisms remain with regard to the sincerity of such initiatives, the position that these companies adopted regarding social and environmental issues in Brazil is no longer reactive and has become, in many cases, pro-active. Strategies for nutrition and base of the pyramid topics began to be defined around 2000, when these matters became clearer on the international agenda and when the Brazilian market started to grow, modernize and become more sophisticated. In 2005, the focus in these areas could be already identified as part of the strategic objectives of some of the large corporations surveyed, making it easier to identify, in a structured way, a series of planned actions: concern with overweight, healthier eating habits, optimization the nutritional profile of their products and the development of more nutritious products targeted for BOP markets. Of the six multinationals interviewed, five stated to have active strategies for the base of the pyramid and four reported to have strategies regarding nutrition. As shall be discussed later, this picture is very different for local companies. Examples of how the arguments underlying these strategies are structured can be seen in the presentation of multinational companies such as Nestle and Danone to investors and to the press, and also on data available on their websites. This information is presented in Box 3 and 4, below.
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Box 3: NestlĂŠ nutrition and BOP positioning
Source: www.nestle.com Box 4: Danone nutrition and BOP positioning
Source: www.danone.com
Regardless of whether there are differences between intentions and actual practice, most multinational companies interviewed state that they have incorporated or wish to incorporate issues of nutrition and BOP as part of their core concerns and acknowledge the existence of challenges to their success in these fields. In this process, the search for new solutions and alternatives has already entered the operational agenda of several of these organizations.
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On the other hand, this does not appear to be happening in the medium and small sized regional companies. Even though these companies have an empirical knowledge of the subject, the way nutritional issues and base of the pyramid market are handled is quite different from that of the multinationals, which have accumulated systematic knowledge on the subject. Of the twelve regional companies interviewed, only four claimed to have a clear strategy for the BOP market, although all claim to have at least one product that serves the consumers in this segment. Only one of them claims to have a clearly defined policy in the field of child nutrition and only one of them says it has a relevant commercial product for this segment. It is worthy of mention that these companies have recently undergone processes of professionalization, but these changes are still very centered around the administration and finance issues. Aspects of nutrition and / or bottom of the pyramid do not form part of more structured actions, or are not organically integrate the strategies of these companies. One example which can illustrate this picture is given by a regional company (Box 5). Box 5: Summary of F6 Company Public Strategy Supply Chain: Build up a competitive position of very low cost throughout the chain: • Supplies • Industrial Production • Logistics Sales and Distribution: Build an optimal commercial matrix that allows: • Optimize the distribution channels • Increase profitably the distribution of flour, pasta and mixtures Brand and pricing: Build up strong brands through: • Increase of their equity through investment • Increase the portfolio of higher added value • Valuing the strength of the brands Source: Company web site. Extracted from presentation to investors
Originally from a quite poor region the company operates in the flour segment, achieved a turnover of more than US$ 500 million in 2008 and has shares listed on the Brazilian stock exchange (Bovespa). At present, this company does not define itself as one which operates in the nutrition and or BOP, as evidenced by the institutional presentation provided by the company on its website.
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F6 Company is one of the regional companies with a (junior) nutritionist as part of its technical staff, responsible for analysis and implementation of regulatory procedures of the federal agency Anvisa. However, this professional is dedicated only to bureaucratic procedures, and is not involved with product development. Whenever the regional companies have nutritionists involved in product development, these professionals are not focused on the development of products associated with supplementary nutrition, given that most regional companies surveyed do not foresee the development of such new products in the near future. A summary of the main differences identified between regional and multinational companies is shown in Box 6 below. Some of the themes presented in this table are further discussed in the following sections. Box 6: Summary of the differences between regional and multinational companies
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4.3. THE BASE OF THE PYRAMID MARKET FOR THE FOOD INDUSTRY
For multinational corporations, the segment at the base of the pyramid is already a reality. Although there are variations in the number of projects and developed products or business models adopted, there is a clear and specific focus on their part to increase their participation within this audience. As mentioned, of the six companies interviewed, five claimed to have clear strategies for this market segment, most of which have already implemented these strategies. The action of multinational corporations at the base of the pyramid is not only restricted to the supply of final products. All companies interviewed (multinational and regional) offer products that reach in some way this type of consumer. But in the case of multinationals, we also observe other relevant strategic actions, such as the attempt to introduce important changes to the portfolio of brands, expanding the offer of products to the base of the pyramid, efforts associated with developing new business models and the investment in changing the culture of the company, making it more sensitive and targeted to that customer profile. This argument is illustrated in a phrase mentioned by one of the interviewees: "In 2006, directors of various business units got involved to discuss and understand this segment. They even had an experience of spending days spending time with the consumer to understand their reality." Multinational Company However, these multinationals do not necessarily have the right mindset and they are accustomed to products with high contribution margins, good profitability, massive volumes and unified distribution centers. This operational logic is not always consistent with the development of products suited to the "new" consumers at the base of the pyramid or consistent with their specific demands. Thus, the effort to serve this market should be understood as an ongoing process, more or less advanced according to the profile of the company surveyed. Multinational companies more engaged in the effort to reach the BOP markets, are searching to review their whole supply chain and identify opportunities for cost reductions without compromising the nutritional quality of their products. Some were able to produce new cheaper products than the previous ones, managing to consider the nutritional needs of the segment.
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One good public example is the case of Nestle's milk powder Ideal, discussed in Chapter 5. The list of the major products for the BOP market is shown in Table 8 below.
Table 8: Major BOP products mentioned by the companies interviewed Company Major BOP products Regional companies F1 F2
F4 F6 F7
F9 F11 F14 F15
Corn based cereals Soy bean oil Tomato sauce Composed oil of olive oil and soybean oil Chocolate milk modifier Pasta Wheat flour UHT milk Yogurt Cheese Wheat flour Milk powder Cereals Fruit juices Fruit Juices and honey
Soups Milk modifier F17 Fruit Juice UHT chocolate drinks F18 Noodles UHT chocolate drinks Breakfast Cereal Multinational companies F16
F3
F5 F7 F10 F12 F13
Margarine Soy bean oil Wheat flour Vitamins for food enhancement (vitamin A, vitamins of the B complex, vitamin C) Powder fruit juices
Powder milk Cereals UHT Milk Yogurt Poultry 47
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It should be noted that the effort of multinational companies toward the BOP market is made in a context of important limitations. Even if they manage to reduce costs in some ingredients or processes, the structure of these companies remains the same when there is no extensive effort to review the overall business model. Royalties, professionals earning high salaries and other costs make the margin and/or cost efficiency on these products lower. In some cases, the company continues to pursue the goal to operate properly in the BOP market only due to stimulation by headquarters and senior management. It is worth mentioning here that in some cases there is a long-term strategic guideline that deserves to be acknowledged: while recognizing the difficulties of operating in this segment, some of the largest companies surveyed believe that their major projects will include actions for the base of the pyramid in the near future. In the regional companies, given their evolution mentioned before, their actions toward the market at the base of the pyramid are an almost natural consequence of the company's operational format. Strictly speaking, these regional companies BOP action is often a natural consequence of their location and distribution channels. Another parameter is the price charged and the type of products they sell. According to these criteria, they are aware that BOP clients can be their primary markets due to the profile of the most important retailers that distribute their products. This type of approach is clearly expressed by some respondents: "Unlike other companies, we do not have a specific strategy for classes CDE. The company's strategy is to grow, but extensively." Large regional company
"No, we don't have a specific policy as such (for the base of the pyramid); we are working hard on the small retail channels. In fact, the small retail channel caters for these people (the base of the pyramid), but we are working to get better margins. As you know, large supermarkets donâ&#x20AC;&#x2122;t offer large margins (...) so it makes it much more difficult, the cash flow is more complicated, whereas in small retail you can get a better selling price, a greater margin, and a better cash flow as well. We'll work on this, but very focused on seeking to increase sales and profitability too." Medium sized company
Regarding BOP issues, the regional companies regard them as a rising market, in virtue of the processes of economic growth and income distribution, and therefore an important segment for strategies to increase their market share. However, these companies do not have a clear picture of the various strata that make up the BOP 48
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market, and have no specific information able to help them target their action toward this market: "Base of the Pyramid ... I don't know it well, but it is noticeable that sales have increased substantially in areas where the CDE classes are concentrated (...) even the CD public is becoming more and more demanding with regard to the presentation [of products](...) previously one could find poorly designed products on the market, not anymore." Region medium sized company25
"Base of the Pyramid ... I don't have a very accurate knowledge of it (...), but all the products serve this class [CDE], even if they are consumed by the higher classes too. For example, a UHT milk you serves class AB and classes CDE too." Medium sized company Because they are geographically closer to this market, or in virtue of the social background of company directors and their proximity to blue collar workers, regional companies have an accurate empirical knowledge of the BOP market, even if it is not particularly elaborated. Their offer of products tries to meet two crucial aspects to low-income consumers: products with low disbursement and available at points of sale which are more accessible to this consumer, that is the small retail outlets located in small towns and suburbs of the main urban areas. The procedures vary from company to company. Some of the regional companies interviewed do not have their own distribution network, outsourcing this process, which greatly reduces the costs of the operation. Other companies focus on public tenders, operating high volumes, with guaranteed payment and long term contracts. In the latter case, the companies tend to be very focused on products that meet the nutritional requirements defined as important by the public agent in charge of the bidding. Considering the analysis of risk of this type of business, it is clear that the focus on public contracts can be important for middle sized companies. "Today, we regard classes CDE as a strategic market segment (...), but we have no prospect of developing new products in the coming years, just really maintain our current formulations." Regional medium-sized company
25
Often, BOP groups in Brazil are called â&#x20AC;&#x153;CDE classesâ&#x20AC;?. 49
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"Class C is very important [for us], because often the classes A and B end up buying the leading brands, (...) so class C is very important because they are who will often choose brands number two or number three." Regional smallsized company
In the face of this scenario, it is possible to classify the actions of most regional companies as being positioned from an "emergent strategy", i.e., they were taken by circumstances to act at the base of the pyramid simply because their products were already present in the shopping basket of these consumers. On the other hand, most of the multinational companies interviewed use what we may call a "deliberate" strategy, built from intentions and initiatives that have been fully designed (Mintzberg, Lampel and Ahlstrand, 1998). In some cases, this deliberate strategy is still intent (intended deliberate strategy) whereas in others, it has been met to some degree (deliberate strategy achieved). A summary of the strategies presented by the companies interviewed is shown in Table 9. Table 9: Type of BOP strategy adopted by the company interviewed Company Regional F1 F2 F4 F6 F8 F9 F11 F14 F15 F16 F17 F18 Multinational F3 F5 F7 F10 F12 F13
Type of strategy
Sensitivity to BOP and/or Nutrition for BOP
Deliberate intended Undefined Undefined Deliberate intended Emergent Emergent Undefined Emergent Undefined Deliberate intended Emergent Deliberate intended
+++ + +++ + + +++ ++ +++
Undefined Deliberate reached Deliberate reached Deliberate reached Deliberate intended Deliberate intended
+++ ++ +++ + +++
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Even under different perspectives, the challenges identified by both multinational and regional companies in order to develop nutritional initiatives aimed at the base of the pyramid are about the same, although some significant variations can be observed when comparing regional and multinational organizations: • Adequate final prices. The final price to the BOP consumer has to be low and significantly cheaper vis-à-vis the leading brands aimed at the high income markets. These products must be affordable within a very tight budget, but must guarantee a margin and sustainable profitability for the company in the short, medium and long terms; • Product Development. All companies, regardless of size, acknowledge that product development is key challenge inherent to their field of action. However, as their aim is to develop nutritious products at a low cost, the challenge is significantly greater for regional organizations. While multinational companies are engaged in this process, this effort is less often seen in domestic ones; • Certification of products. Given the difficulties associated with the approval of new products by the regulatory bodies, this is an important issue for most companies interviewed. This difficulty is more prominent among the regional companies when they decide to launch an innovative product development; • Distribution. This is a very important issue, especially for products with a short shelf life, given that food products must reach small towns, remote communities or distant neighborhoods. This is also a crucial aspect due to the costs involved in distribution that have a high impact on final prices. In this case, regional companies have an important competitive advantage as compared to the multinationals, as usually they are located closer to final markets. Multinational companies realize this ability of regional companies as their main weakness in the BOP arena; • Taxation. Taxes are considered a significant barrier, pointed out only by the regional companies. They perceive taxation as a factor that reduces their competitive advantage, especially in a context of increased inspection and the emergence of institutional innovations such as the so-called "tax substitution" (in São Paulo state), which reduces the scope for evasion strategies; 26
26
The "tax substitution" requires the industry to collect the ICMS (VAT) (which was traditionally collected by the retailer) before the product is marketed directly to the final consumer. This mechanism already comprises several sub-segments of the food industry. 51
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â&#x20AC;˘ Corporate culture. The difficulty in changing the team's mindset and to convince the staff in all departments of the corporation is a particular difficulty pointed out by multinational companies. The teams of these organizations are usually more educated and come from families of the economic elite, usually less willing to understand low-income consumers.
4.4. COMPANIES' PERSPECTIVE ON NUTRITION FOR THE BASE OF THE PYRAMID
In this section, different aspects mentioned by the executives interviewed will be addressed. Firstly, we will consider company knowledge of nutritional issues, either by companies or by consumers. Secondly, we will address development of fortified products, as seen both by domestic and multinational companies.
4.4.1 KNOWLEDGE ABOUT NUTRITION Most respondents make it clear that in addition to issues related to technical knowledge about nutrition, the companies surveyed also need to consider the degree of knowledge and needs and desires of consumers. Regarding nutrition, regional companies appear to have less technical knowledge on the issue of micro-nutrients. The more commonly observed mix which they add to their products includes vitamins A, B, C, iron and calcium, but the actions of these companies differ in terms of quantities adopted and on specific technical aspects. For example, the simultaneous addition of iron and calcium requires a specific technology, because their chemical properties are incompatible when mixed. There are also other relevant technical matters, such as ensuring that the micro-nutrients remain active after cooking, a concern not often addressed by regional companies, even when they carry out food enrichment. On the other hand, low-income consumers have little knowledge about nutrition, in virtue of the low average degree of education of this group. In Brazil, the average schooling period of the adult population is of seven years and higher education covers less than 15%, according to the national household surveys (PNAD-2008, IBGE). Generally speaking, the main nutritional concepts are perceived by consumers as being relatively "esoteric", as they mix technical categories, difficult to understand even for the most educated, with aspects associated with cultural dimensions and everyday practices quite ingrained.
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In face of this, companies have different perceptions about the limitations and behavior of the BOP market, ranging from pre-conceptions without supporting empirical data to a more realistic understanding of their consumption behavior, as evidenced by the following statements: "Their primary worry is to satisfy their hunger." Regional small-sized company; "Amends [peanut butter] is something children love... you can see that the packaging is not a package for children, but children consume it a lot. My daughter is two years old and 'oh God', how she eats it!" Regional small-sized company; turnover US$ 5 million a year "He is malnourished, at first, of information!" Regional small-sized company; "... and the less informed public, if they don't like something, they simply don't eat it, nor do they think whether it is good or bad for them." Regional mediumsized company; The issue of nutritional deficiencies, and particularly, of lack of micro-nutrients seems even more obscure to the consumer, in view of the companies interviewed. For some companies, the main concern of the BOP consumer is access to products in general, without any reference to nutritional aspects. For others, elements such as the presence of vitamins in their formulations are valued, but the consumer does not understand the significance of this type of micro-nutrient: "The barrier to the base of the pyramid child is usually access to it... the problem is the distribution and people's awareness." Regional small-sized company; "Today, we carry out research with the consumer - if you tell him that it contains vitamins and minerals, it is already a differential [for him]. Now, of course if you ask him what it is for, he doesn't know. What moves the base of the pyramid is still sheer indulgence (...). We must deliver these nutrients (vitamins and minerals) because he doesnâ&#x20AC;&#x2122;t get them through other foods." Multinational Company The smaller the company interviewed, or the more limited its scope of action, the 53
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more often its knowledge about nutrition is mixed with myths about the nutritional conditions and practices of the consumer. For example, an executive of a small regional company said that in Maranh達o state one third of the children suffer from malnourishment. The source of this information was a news report mentioned by the respondent. Although Maranh達o is indeed one of the poorest states in Brazil, the statistics of low weight at five years of age are much less serious than those mentioned by the respondent, according to data from the Ministry of Health (see Chapter 3)27. Thus, be it because industries are not yet as familiar with nutritional issues or because consumers themselves have a limited understanding of these issues, the nutritional actions by the regional companies interviewed usually boil down to the addition of the micro-nutrients required by law. In this context of poorly informed producers and consumers, the mandatory fortification by the government (in the case of iron, folic acid and iodine) could to play an important social role if properly enforced. Moreover, competition from multinationals also exerts some influence over regional companies. Multinationals are always looking for innovative initiatives in product differentiation and consider addition of micro-nutrients as one relevant differentiation strategy. As a consequence, some executives from local companies mentioned the need to try to follow the innovations introduced by leading brands, offering as much as possible the same nutritional benefits as the main brand. These aspects are detailed below.
4.4.2 DEVELOPMENT OF NUTRITIONAL BOP PRODUCTS Although the BOP market has grown significantly, this does not mean that it did not exist previously. Thus, some products fortified with micro-nutrients now widely consumed by the base of the pyramid were not originally planned for this market. Others were adapted from previously existing products. Less frequently, some companies have developed specific products for that segment, based on specific needs and manage to adapt various aspects of the operation in order to make it feasible. This allows us to identify three scenarios in terms of the nutritional products consumed by the base of the pyramid. First, there are products that have been nutritionally adapted from previously existing ones. Usually, these changes have maintained the price point, with minor adjustments in the marketing mix and distribution strategies (packaging, logistics, etc.). These products deliver nutrition, are accessible to the consumers and tend to be profitable
27
The main exception among of regional companies will be discussed below. 54
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for the industry. In this group, we have an example of milk powder and one infant cereal. These products are already widely consumed by low-income families and they belong to markets in which the company does have a large market share. While they have not undergone strategic changes in their price positioning, their formulas have been adapted to contribute to increased iron absorption and, consequently, trying to contribute to reductions in anemia among their BOP consumers. The product new version of the same milk powder, for example, has a formula designed to enhance the absorption of iron via a milk product. The infant cereal, on the other hand, has in its formulation an active ingredient that facilitates a higher and quicker absorption of iron and calcium. These products, in addition to having their nutritional formulation adapted, are offered in a cheaper sachet version, available for purchase in the typical base of the pyramid channels such as small retail outlets. Even with occasional changes in the marketing mix, these products aim to offer relevant new nutritional benefits to this group, who already consumed them in another type of packaging. Secondly, it is worth mentioning the emergence of new products, with complete adaptation in the marketing mix, logistics, production and nutritional aspects. These products were developed with specific focus on meeting the needs of the base of the pyramid. Usually, they resulted from a review of the entire supply chain and the development of a new business model. Among multinational corporations, an example of this type of product comes also from NestlĂŠ with is the milk Ideal, designed as a milk powder to be consumed by all BOP family members, with not a specific focus on young children. Its composition was designed to offer a relevant mix of micro-nutrients (it contains iron, zinc, calcium, vitamins A and E) and have a lower price point than other main brand. This product is also manufactured in a new plant located in northeastern Brazil, where there is a large concentration of low income population. Among the regional companies, three have developed specific products to meet the nutritional needs of the base of the pyramid market. F18, a regional company of Parana with two plants located in the Northeast (Pernambuco and Bahia), has about 230 products such as noodles, instant drinks, breakfast cereal and products in the basic food basket (commodities). All products were developed considering the nutritional characteristics of the target social group, such as income and age, as well as method of preparation, to ensure the nutritional properties of their products. The latest product in the portfolio is breakfast cereal aimed at for children in classes DE. They realize that the diet is limited, with low consumption of fruits and vegetables, with few vitamins, fibers and minerals. Therefore, the product was developed with 4 types of grains (soybeans, wheat, corn,
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oats and rice flour), and 12 vitamins and minerals. The company also has projects focused on the base of the pyramid for children aged 6 to 24 months. F16, in turn, has a portfolio and a business model based on the government school food program (school lunches), offering dehydrated products such as gelatin, soups, mixture for milk drinks, cake mix, among others. It has a production line that allows the adaptation and customization of its products according to the orders placed. They do not have the knowledge to develop nutritional products, but they are able to meet the customer's different demands, be it for products for school meals or for private brands of major retailers. Because of their focus on school meals, they do reach the consumer at the base of the pyramid. As for F1, they have developed a nutritious multi-mix â&#x20AC;&#x201C; a flour mix enriched with nutrients â&#x20AC;&#x201C; which aims to meet a specific need of BOP children. Being a product with neutral taste, it can be easily included in the daily menu of that market. This is a personal project of the company's marketing director and a charitable action by the company's owners. As it uses the company's industrial machinery, the product has stability and is standardized. In addition, the company focuses its business on breakfast cereals which, although being a product category more commonly present in the higher income segments, it is also consumed by the base of the pyramid as "indulgence" or in school meals. An important aspect of both F16 and F1 is the fact that these companies trade their products through the brands of large retail chains such as Wal-Mart and Carrefour. This demonstrates their ability to produce products within the minimum standards of quality and scale. Also worth mentioning is the fact that these companies have a concern to provide vitamins and minerals in their product portfolio - including those with high sugar and / or fat content. These two initiatives will be commented in more detail in Chapter 5. Thirdly, it is worth mentioning the general attempt to offer products at a fair price and adapted to the limited size of the budget of the BOP consumer. These products are the most commonly found in the market, and not always nutritionally enhanced in a scientific way. The focus of the regional companies is on gaining larger market share (including BOP consumers) and on competing with large companies. With this goal, these companies added vitamins and minerals to their products for competitive reasons without adapting them to meet the specific deficiencies and, moreover, keeping low-price strategies. Interviewed executives usually believe that consumers (including low-income ones) regard the addition of vitamins and minerals as a product differential (even without understanding its significance). As a consequence, this addition becomes an industry 56
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standard when adopted by the leading company. So even if all the regional companies do not have a clearly defined project to serve the population at the base of the pyramid on the nutritional issue, many of them usually have at least one product that meets this demand. Most respondents seem to understand the development of food products as a process that should be thought of as linked to the themes of the family's life cycle. Generally, the destination of the family budget in each family varies according to the stage of life of its members, especially the children. When children are still small (up to approx. 36 months) there is a great effort on the part of the mothers â&#x20AC;&#x201C; that are responsible for housekeeping and the family budget - to ensure high quality products that are not harmful to the child's health. As soon as the baby grows and turns 2 or 3 years old and starts to share the same food with other family members, the mother changes her focus and searches for food that can serve the whole family. The sentence below illustrates an interviewees' understanding of the role of the products in the family's life cycle: "An adult has already developed defenses; if they eat something bad they can get ill, but they'll hardly die. But a baby? A baby could die! So we have to be very careful when developing and manufacturing any product that serves this age range." Multinational company Finally, the actors in this market are also aware of the nibbles or "indulgences" as they are referred to in the business language. The consumer is concerned to offer something special, a treat for the children, a concern which can last until their late adolescence. Far from being a necessity, the indulgence is seen as a treat that is made possible through an extra financial gain, even if just a little. This behavior explains the high growth of some categories of this type. These categories are not included in the basic food basket and vary significantly in face of any changes in employment and income at the base of the pyramid.
"I don't have any products specifically designed for this population group, but I have to follow and understand it very closely, because they account for the great mass, and they drive the growth of my categories (in volume)." Multinational company that offers also "indulgence products"
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4.5 NUTRITION IN INFANCY AT THE BASE OF THE PYRAMID The companies interviewed believe that action focused on the very small children (6 to 24 months) requires a relatively complex specific knowledge. Everyone sees this subsegment as quite specific and with particular problems for corporate action. At regulatory level, specific restrictions were mentioned related to the action in this market niche. These products go through a special process of accreditation, as discussed in section 3. Moreover, the law substantially restricts the possibilities of communication of food for children younger than two years, so as not to discourage breastfeeding. Products such as porridge for children, for example, can be advertised provided that the dialogue in the advertising piece takes place between mothers and not among children. The use of animations and gimmicks is prohibited and the actors cannot be children of a similar age to that of the product's target. A second aspect is that most companies understand that the basic food for this group should be milk, which greatly restricts opportunities for action, particularly for the companies not specialized in this product. There are also mentions made to the efforts of public legislation to encourage breastfeeding until 24 months of the child's life:
"... even by the legislation, some products are not recommended for consumption by children under 2 years (...) the only recommended thing is breast milk and sometimes modified milk, those fortified milks from Danone (Aptamil) and Nestle (Nan and Nestogeno)". Regional medium sized company
"A 6 month old child is still breastfeeding, so that food must be similar to breast milk (...) as natural as possible, and it cannot cause allergies, intolerances that tend to increase in this age group because of early weaning." Regional medium sized company
"They recommend 2 to 3 servings of dairy products a day. This is a basic category." Multinational company
Given the complexity of the issue, to be able to simultaneously reach the population at the base of the pyramid in nutritional issues and particularly among children in early childhood, implies holding great technical knowledge, institutional capacity and anticipating trends. Another point which complicates the development of these projects is the question of distribution of specialized information and communication
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in this segment, because this work often involves contact with the health system, and pediatrics in particular. In brief, the regional companies interviewed did not seem interested in leading business initiatives targeted at the children. Many know and even admire the performance of multinational companies such as Nestlé and Danone, recognized as the key operational benchmarks in this market segment. However, in virtue of the complexity of the field, many regional companies avoid officially entering this area that is, with products focused on the age range from 06 to 24 months. When they operate in this market, they do it in a kind of gray zone, because they offer products for children of other age groups that also end up being consumed by children aged 6 to 24 months in the ambit of the family universe. So, even when companies are not very focused on products for first childhood and nutritional enrichment, many of the companies interviewed do have a product that is consumed by younger children, although in many cases these products are not formally targeted at this market. Some of these products are nutritionally fortified, be it for legal reasons or for reasons of competitive nature. The main products with specifications of this kind that we managed to find in the companies interviewed are presented in Table 10 below. Table 10: Main products for children mentioned by the companies interviewed Company
Main products (not necessarily in the range 6 - 24 months)
Differentials
Regional companies F1
Breakfast cereal
Vitamins
F2
Iron
F6
Corn flour for baby food (porridge) Gelatin Cake mix Biscuits/ cookies
F8
Instant drinks Petit Suisse cheese
F11
Vitamins and minerals
F17
Porridge type foods Milk powder Dehidrated fruit Dehydrated foods (savory or sweet) Mixed drink
F16
Additives and artificial colorings (gelatin) Vitamins and minerals (cake mix) Vitamins (instant drinks) Vitamins, zinc, calcium and iron Vitamins
No sugar added
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Multinational companies F5
Omega 3 Arachidonic acid
Provides micro-nutrients for other industries
F10
Milk powder Porridge
Iron and calcium Iron, calcium, vitamins A and E
4.5.1 BARRIERS TO THE DEVELOPMENT OF FORTIFIED FOODS AIMED AT BOP YOUNG CHILDREN Throughout this chapter we identified a number of barriers and difficulties faced by multinational and regional companies in offering fortified food products for young children. Generally speaking, excluding regulatory and technological issues, the problems associated to the development of products for this segment does not differ substantially from problems associated with launching new products to the base of the pyramid. As mentioned before, we understand that the greatest difficulties of multinational companies on BOP issues are distribution and corporate culture, while regional companies face various barriers in the areas of certification, product development, pricing and taxation. However, in the case of fortified foods the difficulties regarding product development and certification tends to increase significantly, particularly for regional companies. A summary of these barriers is given in Box 10 below. Box 10: Summary of the difficulties faced by companies in developing enhanced food products for children of the base of the pyramid
With respect to issues of price and product development, it is worth noting that the main problem is how to ensure low prices without reducing the nutritional properties 60
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of the products under development. The addition of micro-nutrients may involve significant costs, not only due to the addition itself, but also because of the regulatory burdens associated. This is an important tradeoff, which often requires a review of the different stages of the production chain and the search for innovations of greater scope. In the absence of these elements, the offer of products with low disbursement in the form of sachets is the most frequently used palliative, although it can increase companyâ&#x20AC;&#x2122;s environmental impact. In terms of product certification, the companies interviewed, regardless of size, acknowledge that the function of Anvisa is particularly necessary and legitimate in its purpose of protecting consumers from deception. However, they consider that the policy is too rigid and the bureaucratic machinery too slow, which lays significant barriers in the development of new products (see chapter 3). Multinational companies seem to resent particularly the restrictions associated with communicating the benefits of nutritional supplements. And, in general, the fortified products or those with bioavailability demand more attention (and tension) from the part of companies in dealing with regulatory agencies. Some quotes presented below clearly illustrate this point:
"In order to defend the population against profiteers, they [Anvisa] have imposed certain conditions that have gone out of control and thus one can't advertise certain things." Regional small-sized company;
"In Brazil, one is not allowed to advertise openly the benefits of nutrients in foods ... Brazil is one of the most restrictive countries in the world in terms of communication of benefits through food and drink. This is actually one of the greatest barriers in the evolution of this industry." Multinational company
"[Anvisa] assumes the ban because they are not able to control, there is not enough staff, and there are not enough resources." Multinational company
"We can easily see the obstacles imposed on us by the government bodies ... For example, we had to face the regulations of the Ministry of Agriculture, the MAPA. It took us from 08 to 10 months to get their expert report stating that apple with collagen would not be possible, requesting additional information, etc. This process lasted almost one year... that is, by the time you have developed a product, and the market already presents a different reactionâ&#x20AC;Ś" Medium-sized regional company 61
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Besides the bureaucracy during the process of product development, some of these products require continuous technical monitoring to ensure that the content of ingredients is correct. The cost of this procedure is seen as an aggravating factor. Today there is few public laboratories available and private laboratories charge around R$ 500 (approximately 270 US dollars) per sample. Since in some cases each batch of the product must have at least one sample evaluated, the procedure may become particularly complex and expensive. Finally, the distribution problems are also fairly recurrent. As the shelf life of food products is short in many cases, the distribution may play a critical role in the operational strategies and have significant impacts in terms of final price to the consumer. Due to the size of Brazil, few companies are able to develop their own distribution logistic throughout the country. Most companies have to use distributors or wholesalers' networks, which can limit their access to BOP consumers. The question of distribution is also greatly influenced by the preference of lower income consumers for local retail outlets, which do not require car journeys. This often makes the distribution more expensive and difficult, and in this sense is considered the major challenge by some of the multinational companies interviewed.
4.6 OPPORTUNITIES FOR ACTION BY IDB AND GAIN
The nutritional enrichment of food products besides being a government policy, established in different regulatory arrangements (discussed in section 3), is also perceived as a necessity by many of the private companies interviewed, especially those who were exposed to the wider nutritional debate, such as the multinational companies. This perspective is evident in the quote below: "There are three ways to deliver adequate nutrition to the population: the first is to change the culture, which takes a long time and is much more difficult, the other is supplementation, which only has a very short term impact and is not sustainable (e.g. donation of capsules Vitamin A by UNICEF) and the third, which is the ideal, is food fortification. Through fortification of the food people will be consumed every day, you ensure consistency, frequency, and sustainability." Multinational company
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This suggests that the perception about the need for nutritional enrichment is not only a perspective of the State. While enterprises are critical of the government, this criticism does not concern the existence of policies for nutritional deficiencies, but their effectiveness to actually solve these problems. In theory, these elements suggest that despite the fact that there is little public-private cooperation in Brazil today (see Chapter 6) there might be scope for a more active cooperation in this field. Among the concerns expressed by businesses, there were doubts about the efficacy of the enrichment of wheat flour and corn (with iron and folic acid), doubts about the population's access to dairy products and comments about the complexity and variety of different approaches of local institutions, as can be seen in the quotes below.
"The results demonstrate that flour fortified with iron and folic acid does not decrease anemia, first because the mix is poor - we know that iron and folic acid alone do not give the expected benefit - and second, there is a no inspection control, of the whole chain to ensure that fortification is being done correctly. (...) You must have specific feeders, the formulation must be done well, and to be absorbed the ingredients must be bio-available..." Multinational Company
"Milk, oddly enough, is not readily available to everyone." Regional medium sized company
"Each local government has its particular demands, but they are basic requirements in terms of company registration, different nutritional issues feature in each tender. It is a reactive market; it differs from city to city." Regional small-sized company These factors suggest that the low number of public-private initiatives has more to do with cultural and political-institutional aspects, than the reactive attitudes of private companies per se. In fact, there are several areas where such cooperation could exist and agencies like the IDB and GAIN could play a significant role by serving as intermediaries in this relationship, helping to reduce the degree of mutual suspicion and establishing an honest and fruitful dialogue. The analysis presented in this chapter has shown that there is a large gap between the nutritional knowledge of regional companies and multinational companies. Support for local businesses is also justified because many of them are located in areas with a large number of poor people and because they often mainly serve the base of the pyramid markets, though not necessarily intentionally, as discussed earlier. Among the topics 63
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that deserve the attention of potential strategies of the IDB and GAIN, we stress the importance of nutritional knowledge, food product development and cross-sector dialogue. We highlight below these three key aspects:
• Disseminate knowledge and know-how on the use of micro-nutrients, on general aspects of food product enrichment and the extension of the shelf-life of products sold; • Assist local companies to expand their knowledge about issues related to the base of the pyramid and nutrition through exchanges of experiences and dissemination of international benchmarks; • Support initiatives in companies to change the organizational mindset, for example, through training initiatives within the organization. Secondly, it is worth drawing attention to the difficulties in the area of product development. Some companies interviewed explicitly mentioned this point as a possible area of action of the IDB and GAIN. In fact, even when companies recognize the importance of providing enriched products, the difficulties associated with this development are not small, not only because of the costs involved (including regulatory) are high, but because there are substantive difficulties of simultaneously improving the supply quality of the product and offer it at lower prices. Accordingly, we believe that such support should include, first, helping companies to enhance those products that are already part of their existing portfolio and are primarily offered to low-income consumers. Second, it is important to assist these organizations to identify processes and initiatives that reduce the costs of development of relevant nutritional and/or BOP projects and increase their chances of advancing them along the development pipeline of new projects. Thirdly, there are several other opportunities to advance the dialogue between companies and government. At present, the quality of that dialogue is low. In addition to the certification of products by the regulatory agency, other relevant nutritional issues regarding the relationship between government and companies interviewed were also mentioned as possible agendas for public-private dialogue. The most important are: • Fortifications required by law, such as the addition of iron and folic acid to wheat flour, fluoride to water and iodine to salt; • Reductions required by law, for example, of Trans fat, that currently must be less than 1% per serving; 64
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• Reductions recommended by the government and / or WHO, such as reduction of amount of sodium, saturated fats; • Participation in public tenders for supplying food and drinks for school meals; • Participation in public welfare actions (NGOs or government programs such as "Fome Zero"). Unfortunately, the overall relationship of companies interviewed with the public sector is one of fear and distrust. The idea or attempt to carry out some sort of public-private partnership was not mentioned by any company, and the existence of relevant initiatives in this field seems to be almost unknown to the actors of the food industry in Brazil. We further develop this topic in chapter 6.
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5. STRATEGIC ASPECTS OF THE DEVELOPMENT OF SUSTAINABLE AND REPLICABLE BUSINESS MODELS IN NUTRITION This section provides an evaluation and understanding of different business cases in the food and beverage industry, which target base of the pyramid consumers. These cases will be evaluated focusing on key success factors and their challenges, in order to draw a preliminary check list of best practice and initiatives that should be considered by managers and executives when developing commercial projects for the improvement of nutrition products offered to BOP consumers. The food industry has an important role in improving the quality of life not least because food is consumed by all human beings and is also critical to health. By working together with local providers (in the areas of agriculture, food processing, distribution and marketing activities) businesses could contribute to economic stability and opportunities for millions. In creating inclusive business models, they can help strengthen human and physical capital of the poor who participate in different value chains, and work to overcome the adverse institutional and policy factors that prevent them from participating more effectively in the market economy. A closer look at the cases we have identified here will show that most of them are in the early stages and still do not have a clear picture of their social and economic impact. However, these initiatives are burgeoning and, with the learning they generate from both successes and failures, they may breed and give guidance to a whole new generation of sustainable business models that bring nutrition to the BOP debate. Firstly, we will discuss some benchmark international cases that will be used as models for analyzing the most important Brazilian initiatives identified by this project. Currently, there are several different initiatives throughout the world. We selected a small number of these in order to evaluate their key success factors and to point to the main challenges, thus developing a preliminary checklist of key factors that should be taken into account in building a sustainable and successful BOP project. Later, we try to interpret the most relevant Brazilian cases using the international references. At the end of this section we present a brief conclusion highlighting possible areas for IDB and GAIN actions.
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5.1 INTERNATIONAL BENCHMARK BUSINESS CASES
When it comes to business cases related to nutrition, those being developed in the Brazilian market do not seem to be as innovative, integrated or having as high an impact as some initiatives being rolled out in other regions of the world. In this sense, this report will try to bring both international and national business cases together in order to try to trace a parallel between them and to propose ways through which Brazilian initiatives could improve their reach and impact in improving nutrition to poor areas and communities throughout the country. In order to produce such an analysis, we consider three relevant international cases: Grameen Danone (Yunus and Moingeon, 2007 and 2009), Ultra Rice (PATH, 2010), and Project Shakti (RAJAN, 2005). The criteria to select these cases were based on innovation in terms of the areas of product development and/or distribution and its possible nutritional impact. These cases are discussed in the international literature and provide a good starting point for the discussion of the Brazilian ones. Grameen Danone is probably the most innovative initiative within the food industry in the area of nutritional solutions for BOP families, although it is still a pilot project. It also has significant potential impact on the communities it serves. This initiative is promoted by Grameen Group, founded by Mohammad Yunus and originated from the Grameen Bank microcredit initiative. Grameen entered into a joint venture with Group Danone to create this new social business enterprise in rural Bangladesh. Generally speaking, the project has created a kind of yoghurt specifically intended to deliver key nutrients that BOP children in that area were lacking. The initiative proposes to increase its impact by generating jobs, since the sourcing of most of the yoghurtâ&#x20AC;&#x2122;s ingredients is local producers, especially the milk and molasses. The manufacturing uses a novel process that emphasizes labor over technology, increasing the number of jobs created without jeopardizing product quality. The supply chain articulates local milk producers and uses strategies of door-to-door distribution. There is also an attempt to achieve significant involvement of the local communities to get them involved in the marketing strategies developed by the company. Finally, in order to advertise the nutritional benefits of its product, Grameen Danone also offers grass-roots nutritional education to the communities. The technology package adopted allowed the initiative to address the key issue of affordable prices, which is essential because local consumers are typically very poor. The distribution is based on a door-to-door model (direct sales), allowing for the reduction of final prices and the increase on the impact of the project in terms of its income generation. Finally, Grameen Danone is also concerned about its environmental impacts. It has adapted its plants to operate by solar and biogas energy. It also uses recyclable yoghurt packages. 67
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The joint venture is currently offering low price yoghurts in Dhaka, Bangladesh, but the volume sold is still small. The project is expected to break-even by 2011. Not surprisingly, the most important question regarding this model is its capacity to reach a scale large enough to gain importance within Danone’s and Grameen’s business portfolio. This experience is still in its infancy, but what is notable as a benchmark is the comprehensive approach adopted by addressing different business dimensions simultaneously (product, supply chain, distribution, etc.). However, since this project is not a fully profitable initiative, it remains to be seen whether it is going to reach all the conditions to take off. Ultra Rice is a product made of rice grains fortified with micro-nutrients, developed to combat nutritional deficiencies in countries where rice is the major source of food for BOP population. The product aims to provide fortified rice to vulnerable riceconsuming communities. The project's approach is to fortify a primary food source giving the population more nutritional value from the food they already eat in order to alleviate malnutrition. The final product is a manufactured grain that can be mixed with rice to provide nutrients which the local diet may lack. It is a simple and straight forward approach to food enhancement. In this sense, Ultra Rice is quite innovative in terms of product development. Considering its major social objective, the project aims at solving a crucial nutritional problem in developing countries: malnutrition, anemia and other health issues caused by the deficiency of important food nutrients, such as iron, calcium and vitamins. The project was structured around a strong partnership amongst the different sectors: public, private and NGOs in strategic regions. The most important institutions supporting the project are the following:
Private sector – DSM Nutritional Products and Bon Dente International; Public Sector – Governments of Costa Rica, Colombia, India and China; Multilateral Organization – FAO and WHO; Third sector – PATH and GAIN.
A significant issue regarding Ultra Rice is that, as with Grameen Danone it is not yet a fully commercial enterprise, so issues of scale remain to be addressed. For example, significant participation of the large rice brands is an important objective not yet accomplished as far as we were able to ascertain. It is also important to note that although DSM Brazil is one of the original promoters of the project, an interview with a 68
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company executive in Brazil indicated that they did not encourage any commercial initiatives in the country due to regulatory difficulties and also because of the size of Brazil and the corresponding logistics and operational difficulties. Project Shakti was developed by the Indian subsidiary of the Anglo-Dutch multinational Unilever, Hindustan Lever. The project uses innovative distribution methods that allow products to reach rural consumers in remote regions within India. The venture selected entrepreneurial women from small villages that were not reached by traditional distributors. The women were trained as distributors, providing education, advice and access to products. Currently, Project Shakti uses a network of over 27,000 women entrepreneurs and involves 82,000 villages in India. In doing so, the project generates income for BOP women by providing them with a sustainable micro-enterprise opportunity. It has a partnership with ICICI Bank, specialized in microcredit, and helps groups of women to become entrepreneurs, bringing additional income to their rural households. According to Rajan (2005), each Shakti entrepreneur earns enough each month to approximately double their previous household income, making a significant difference to family living standards. The company also contributes to improving the quality of rural life by spreading awareness of good nutrition and hygiene practices thus preventing and combating diseases. The rural communities are also empowered by receiving access to key information through an IT-based information service. Working in conjunction with the local district authorities, Hindustan Lever provides free training on the basics of business management and selling techniques. Unlike the previous cases, Shakti is purely a distribution project, targeting low income families as consumers. No new products are involved but it is quite innovative in the ways it expands its reach. It is also a fully commercial project which has accomplished significant impact in its operations. The nutrition dimension is addressed only through educational initiatives, but the existing distribution platform may, in the future, be used to promote the distribution of enhanced nutritional products yet to be developed.
5.1.1 SUCCESS FACTORS
As seen in the cases above, there are a number of factors that must be considered when developing a broad and commercially sustainable business model to bring nutritional products to the low income population. All the business cases presented in 69
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the previous section tackle one or more of these aspects. In order to be more instructive, we divided these factors into three main dimensions: demand generation, supply chain and enabling environment. We understand that these categories overlap and do not cover all business aspects, but they help the understanding of what is important and give some preliminary guidance on what managers and executives should focus on when developing BOP projects.
5.1.1.1 DEMAND GENERATION
This area addresses the issue of how to create considerable demand among the BOP consumers for the project to be commercially viable. This issue is crucial in terms of guaranteeing adequate revenues and profits. This effort must contemplate at least two specific aspects normally summarized in marketing manuals as “pricing” and “product”: a. Developing appropriately priced products to reach BOP consumers. Clearly initiatives targeted at low income consumers must take into account their limited disbursement capacity. This can be tackled by offering smaller pack sizes, as Nestlé Ideal is doing in Brazil (see discussion bellow) or by developing a different approach to the value chain, as Grameen Danone is doing in Bangladesh. Another element which could be used, but which, as seen from these cases, seems to be under explored, is credit; b. Creating specific products to meet local needs and preferences. Low income consumers, especially those located in small and distant villages and in specific areas within large cities have different needs and preferences. These differences usually derive from their cultural identities, buying capacity and/or specific nutritional handicaps. Clearly these differences must be considered in products aimed at this population. For example, Grameen Danone and Ultra Rice are working with the idea of developing specific food products addressing particular BOP needs. In summary, demand generation is intrinsically associated with the issues of product development and pricing. Since price is also influenced by the physical characteristics of the product, its supply chain and distribution channels, these issues cannot be
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considered in isolation. All these dimensions contribute to one particular business model. The problems regarding supply chain and distribution are discussed below.
5.1.1.2 SUPPLY AND DISTRIBUTION CHAINS
In developing supply and distribution chains, it is not only a matter of logistics, but also of developing providers, distributors and retailers. Overall, adequate supply and distribution chains can produce crucial impacts in terms of product availability and pricing. There are three different aspects which need to be discussed:
a) Finding adequate sourcing. Sourcing has significant impact on product price and quality. Some projects (such as Grameen Danone) rely on local sourcing (from local income producers). This may generate income to the surrounding community, improving their quality of life. It may also make it easier to develop products that are suited to local preferences and culture. Finally, it may reduce the costs of sourcing raw materials and of the overall value chain. However, when local sourcing does not contribute to the reduction of product prices or when the quality is not adequate, it may even jeopardize the demand generation objectives; b) Developing products with a longer shelf-life. Longer shelf-life means lower distribution costs, fewer losses and a smoother relationship with distributors and retailers. It is also important to note that since most low income communities in rural areas are difficult to reach, and refrigeration facilities are not always available, logistic and packaging solutions that allow for a longer shelf-live can deliver a significant nutritional impact. One issue to bear in mind is that the adopted solution must be able to deliver the full nutritional benefits expected by a particular project. Among the projects examined here, only Ultra Rice seems to have dealt with shelf-life issues; c) Broadening reach. In order to access consumers in distant and/or difficult-to-reach areas, most companies have to develop new and innovative ways of distributing its products. Traditional distribution channels that rely on wholesalers and retailers may be too expensive, since markups will be added at every step. Depending on the tax system, initial factory prices can be more than doubled along the chain. One interesting alternative distribution being used by some projects is 71
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the door-to-door, direct sales model. Besides contributing to income distribution, it can significantly reduce the final price to the consumer. Shakti initiative in India seems to adequately address this important dimension.
Supply and distribution chains have significant consequences for project success. However, depending on the design of the project, different forms of partnership with small suppliers, distributors or door-to-door retailers are involved. Often, such partnerships have to be developed with the support of local governments, associations and/or NGOs. That is why partnerships are not only an accessory dimension of BOP nutritional projects but they also make a difference to project success. This issue is discussed further below.
5.1.1.3 ENABLING ENVIRONMENT
Most BOP nutritional projects address specific social groups living in particular settings. Each different circumstance may influence a project's viability or, in other words, the environment around the project may significantly contribute to or undermine its potential. To enhance the chances of success of nutritional projects and create a favorable environment, the involvement of many different organizations is often required. Activities that fall under this category include:
a. Deep collaboration. Collaboration is a must. The organization that is developing any given project has to engage in partnerships and deals with different players for different reasons. It may include local suppliers, local distributors or vendors, government officials, NGOs, community leaders, churches and other stakeholders. This collaboration can be deeper than just basic agreements or simple meetings as demonstrated in the Grameen Danone case. A process of common learning and co-development of knowledge and local solutions can also be established (Brugmann and Prahalad, 2007); b. Co-creation. The BOP population can be represented during the development of the business models. Representatives from the low income communities could be brought to the table at an early phase in order to provide guidance on the development of the solutions and to bring their perspective and their advice on how the program could work best (Hart, 2007). This factor could
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provide critical credibility and acceptance and improve the chances of the project's success; c. Education of the Consumer. A successful and effective education program can address critical issues in the BOP nutritional field. Particularly in cases where changes in the habits and attitudes of this population are intended, delivering essential information to aid improvement in nutritional habits will probably be necessary. Other educational initiatives, such as training of distributors and vendors on nutritional issues and the preparation of information material to be distributed through them (i.e. in locations such as schools, churches and health care facilities) are among the education initiatives undertaken by some of the analyzed cases. The issue of the enabling environment is always case specific, but it appears to be a frequent feature of both the international and local nutritional initiatives considered in this study.
5.2. BRAZILIAN BUSINESS CASES
This section presents the most relevant business cases. Although the number and breadth of these cases may seem quite frustrating from an international perspective, it reflects the general landscape of BOP initiatives in Brazil, where the most interesting cases address medium income groups (such as the so called Class C), but not necessarily very poor families. As mentioned above, the complexity of the regulatory environment also limits the possibilities of the emergence of highly significant cases in the BOP nutritional arena in Brazil. Notwithstanding, we present here six different initiatives, three of them from regional companies and three from Multinational companies. Most initiatives are not yet fully commercial or have not gained full scale, but they point to possible areas in which more interesting developments could spread. These elements are detailed below.
5.2.1 REGIONAL COMPANIES
As discussed in chapter 4, most regional companies interviewed are not engaged in relevant nutrition projects, although most of them operate in BOP markets. The identified cases among regional companies are not as comprehensive as the 73
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international ones, but they may be the basis for further development. The cases considered here are Propam (from Moinho Cearense), Sustentare and Alca Foods. Moinho Cearense is a Brazilian company that sells wheat flour to industries, bakeries and other commercial enterprises in the bread business. Together with other food companies and business organizations, Moinho Cearense has developed a program called Propam, which supports bakeries with training, and consultancy services with the aim of increasing the profitability and competitiveness of small entrepreneurs and of the whole wheat value chain in Brazil28. The logic behind the educational concept adopted by Propam is based in the idea of improving the overall relationship between Moinho Cearense and bakery owners. This kind of initiative may also allow Moinho Cearense to distribute other products and services to bakeries (such as credit and insurance, for instance). This market is highly competitive and Moinho Cearense faces huge competitors such as Bunge and M. Dias Branco. Currently, Propam is supporting over 5,000 bakeries and the goal is to reach 10,000 in the near future. A key success factor of this model is that the courses take place within the bakery, so the entrepreneurs feel more comfortable and at home. However, this initiative does not have a nutritional focus, since there is no effort to measure and to improve the nutritional value of the bread produced by these bakeries. Even if not targeted specifically at nutrition issues, this program may provide a relevant platform to achieve this in the future. Sustentare is a regional company that develops enhanced food products tailored to different processes of food acquisition via the government school food program. With the guarantee of minimum purchases, the company is quite flexible and capable of delivering a variety of enhanced products, including milk, soup and powder juices. Sustentare is the only regional company that sees enhanced food products as part of its core business, although not specifically targeted at children from 6 to 18 months. Product enhancement is often specified as a requirement for government purchases due to the low nutritional level of public-school students in certain regions. The typical age group is up to 4 years old. Sustentare do not have a commercial brand sold through retail chains, but it is responsible for producing different food products sold in large supermarket chains under the umbrella of large supermarket brands such as Wal Mart and Dia %. The large scale of large supermarket chains means that cooperation between Sustentare and
28
http://www.propan.com.br/ 74
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those supermarkets could allow them to distribute enhanced nutritional products to a larger public. However, this kind of venture would have to surpass regulatory barriers. Alca Foods is also a company that develop products to be sold under the brand of large supermarket chains. Their most interesting nutritional project is the development of a mix of flours (rice, corn, soya and egg shell powder) enriched with vitamins and minerals. This project can be considered an innovation in the area of product development, since the product can be added to any savory or sweet dish without changing the flavor of the food. However, the product is still part of an experimental social responsibility project, and has yet to be distributed on a commercial scale. Alca Foods do not see this project as a significant commercial activity, and the marketing potential of this innovation has yet to be tested in the traditional markets. (All info are available on companies website and/or presented in public presentations)
5.2.2 MULTINATIONAL COMPANIES
This section is based on the lessons provided by Nestlé Brazil in many different articles (magazines, newspaper), which currently is the food company best positioned in the Brazilian BOP nutritional markets. Nestlé is also a very large player in different food markets and is considered by many of their smaller competitors as an important benchmark. Nestlé has a series of initiatives targeting improved distribution of their products within low income communities and increased nutritional awareness. Three Nestlé initiatives are discussed here: Nestlé Até Você, Ideal and Nutrir. Nestlé Até Você is a door-to-door operation focused on low-income population areas. The objective of the project is to create a business model to generate sales for the company and income to BOP micro-entrepreneurs. This model is quite similar to Project Shakti’s and already has over 6,000 representatives, with the objective of reaching up to 10,000 representatives by the end of 2010. Similarly to Shakti, the main innovation here is associated with the development of a new distribution chain. There is no product innovation, although the company has produced some adaptations to pricing. The key success factor of this project is the proximity between the representative and the consumer, since they live in the same community. This factor makes the selling much more personal, enabling even informal credit. All the representatives receive nutritional and commercial training prior to selling Nestlé’s products. Nestlé also developed nutrition educational materials to be used by their sales representatives 75
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and clients. With the growth of the project, this business platform can be used to distribute different nutritionally enhanced products. The second important initiative is called Ideal. It is a new product line aiming at bringing less expensive and nutritionally adequate solutions for the base of the pyramid and more specifically, in the North and Northeast regions of Brazil. The first product launched was Leite Ideal, powder milk with additions of Vitamin A, Iron and Zinc. The product also comes in a smaller package than its traditional competitors, which enables a smaller disbursement per purchase. Leite Ideal is a product that has already achieved significant scale and is probably providing important nutritional support. Probably, the extension of the product line (into yogurts, for example) would provide additional opportunities in the nutritional field. Finally, Nestlé Brazil also has a social responsibility program, called Nutrir. Nutrir is focused on bringing education on nutritional facts and on eating habits. It is a worldwide effort by Nestlé and reaches over one million children around the globe. However, it is still quite modest in Brazil, but the company has being insisting in the field of nutrition education through different venues. Although Nestlé Brazil has an extensive array of initiatives bringing enhanced food products and nutritional information to the BOP, their programs seem quite unrelated to each other, as opposed to Hindustan Lever’s Project Shakti, which bundles every effort under the umbrella of one larger initiative, thus gaining synergies and increasing reach. A more integrated and focused BOP nutritional initiative could help Nestlé Brazil to go even further with their already successful efforts to reach the low income population.
5.3 COMPARISON BETWEEN BRAZILIAN AND BENCHMARK INTERNATIONAL CASES
After reviewing some business cases and considering the factors that could make them successful, it is possible to produce a check list of success factors of each business case considered in this section. This information is presented in box 11, below. Looking at all the cases together, we are able to identify some interesting patterns amongst the Brazilian cases. Firstly, it is important to note that international benchmarked cases generally cover a variety of dimensions. Some of these projects really try to reinvent their business models by simultaneously addressing demand generation, supply and distribution chains. Most of the Brazilian cases intend to address only one of these dimensions. 76
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Secondly, education initiatives are present in the majority of the projects outlined. Although such initiatives are often seen as part of the social responsibility activities of companies, but not integrated into their core business, some experiences such as the one led by one company indicates that providing education opportunities can be successfully linked to overall marketing strategies. The companiesâ&#x20AC;&#x2122; nutritional education initiatives will be discussed further in chapter 6.
Box 11: Check list of success factors per business case
Third, improved supply chain initiatives are quite important for the international cases but less common in Brazilian cases. The only significant exception is one sales business model from a multinational company. It is somehow surprising considering the large size of the country and the complexity of the logistics. Considering the centrality of distribution issues is certainly a point that deserves further investigation. Finally, cooperation and partnerships seem to be much less common in Brazilian cases. We are going to argue in chapter 6 that this is a general feature of the food arena in Brazil. Public-private cooperation is insignificant according to the interviews undertaken for this study. NGOs usually cooperate either with government or with companies, but few of them bridge the gaps between the two. Since cooperation can be a crucial part of many BOP projects, it is important to bear this issue in mind. The checklist of success factors presented here can be used as a tool for observing other business cases in the nutrition BOP arena. We have only a few elements to allow us to understand which factors are the most relevant, although the issues regarding 77
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demand generation and supply and distribution chains are typically referred to in the BOP literature (Prahalad, 2005). The strengthening of the information provided here could also be used to develop a more detailed protocol of collaboration between different practitioners in the field29.
5.4 POSSIBLE AREAS FOR IDB AND GAIN ACTIONS
Some areas of possible action by IBD and GAIN are quite straight forward. For example, it would be quite appropriate to support existing relevant projects, helping them to expand their reach, scope of action and impact. This kind of project could also be associated with nutritional education initiatives. Another possible initiative already mentioned in chapter 4 is related to the dissemination and diffusion of relevant business models among key stakeholders, particularly those from national food companies. It is most likely that even the companies that are really interested in nutrition issues for example some interviewed companies have many doubts on how to develop new projects, how to advance the projects they already have within the regulatory pipeline, and what has worked, or not, in other countries and/or business experiences. In the field of nutrition, there is the opportunity to develop a protocol of education that would be a reference for companies interested in promoting initiatives. These initiatives are quite uneven, and practitioners do not necessarily have reliable information on what works and what doesn't. Often, nutritional educational initiatives are mixed with marketing proposals, which would generate credibility issues. Helping companies reach an adequate balance between providing education and marketing their products is a complex but important task30. Finally, it is quite clear that IDB and GAIN could contribute to partnership development and to establish a social and cultural basis that may both create and expand the demand for enhanced food products among low-income families. For example, many companies already have small scale social responsibility projects. Some of them could be reviewed to be considered as possible full commercial initiatives. Others could be
29
In order to produce that, we would need a larger number of cases as well as a deeper understanding of each case. At this point in time, we had neither the time nor the resources to further develop this topic. 30
This point is further discussed in chapter 6. 78
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expanded in their current form, gaining larger scale with little additional investment. In other words, the issue of partnerships may be critical for many initiatives. We develop this issue further in chapter 6.
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6. DEVELOPMENT OF PARTNERSHIPS IN THE FIELD OF NUTRITION IN BRAZIL
In this section we will try to get a better understanding of the possibilities and difficulties associated with the development of public-private partnerships in the field of nutrition in Brazil. The majority of respondents in our interviews with company executives reported that their company does not have any such partnerships and/or does not consider them relevant (Chapter 4). From the government perspective, the interviews with public officials, although very small in number, also demonstrated that such partnerships are viewed with considerable reserve. By public-private partnership we understand one which combines public sector initiatives on the one hand and, on the other, private company's initiatives with no direct commercial interest31. There are important partnerships between NGOs and the federal public sector focused on nutrition (particularly as deliverers of projects), as is clear in the discussion about the Ministry of Social Development activities in the field of nutrition, presented in Chapter 3. There are also meaningful partnerships between private companies and NGOs, confirmed by the interviews with business executives. But we did not observe any partnerships which involved the government and private companies. In other words, the data available indicate that the current degree of public-private cooperation in Brazil in the field of nutrition is very low. Since we did not identify any real initiatives on which to report, we will seek to interpret the current state of the debate on cooperation for nutritional enrichment in Brazil (section 6.1). In section 6.2, we address more systematically the factors that characterize some degree of consensus among the players from the different organizations we interviewed. In section 6.3, we also seek to identify the major arguments of dissent and how they could be alleviated if each others' positions were better understood. Finally, we discuss how all these factors could inform different strategies of action for GAIN and the IDB in Brazil.
31
We do not regard the sale of food products to the public sector as a partnership 80
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6.1. THE CURRENT STAGE OF THE DEBATE ON COOPERATION FOR NUTRITIONAL ENRICHMENT
Establishing strategies for public-private cooperation for nutritional enrichment appears to be quite complex in contemporary Brazil. Firstly, there is a still high degree of mistrust amongst the different players in the public sector about the industry's true intentions, as discussed in chapter 3. Secondly, private firms resent excessive regulation, excessive taxation and do not see that there is potential for solutions working in conjunction with public officials, as was also shown in Chapter 4. The two interviews with NGOs showed that these organizations are rarely able to act as mediators between the public and private sector, i.e., by building bridges to facilitate the establishment of processes for public-private cooperation which have social objectives as their axis. Apparently the views of the public and private agents on nutrition are quite diverse, and this polarization is reflected in the action of NGOs: some NGOs are strongly linked to the public sector, from which they get most of their resources, whereas some NGOs are funded primarily by the private sector. As far as we were able to ascertain, these different views, or even bias, also appear among professionals of nutrition in Brazil. Firstly, we identified that some respondents were clearly guided by an analytical model that emphasizes the use of natural (and organic) ingredients and prolonged breastfeeding (up to 24 months). This approach was more frequently found among professionals in the public sector and in one of the NGOs interviewed, the one most dependent on public resources. This group has a high degree of mistrust of industrial food products and has doubts about the sincerity of the food industry's commitment to nutrition. Some of these professionals besides doubting the nutritional commitment by private companies even question the relevance of the argument in favor of nutritional enrichment. This is the case, for example, of a nutritionist interviewed in one of the NGOs: "We can even see it, when the industry is playing their social role, they try to develop it in some way, but it is more or less the same as what I told you about the fortified food: there's some illusion in what they are trying to convey; they put it as it is the salvation, as something miraculous, and we know that it is notâ&#x20AC;Ś" Brazilian NGO However, we also interviewed professionals who have a pragmatic approach to the field of nutrition, viewing it as a set of practices strongly dependent on the lifestyles of the population. These professionals tend to view the consumption of processed food products more favorably. They see processed food as part of a contemporary lifestyle 81
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in which women work for long periods, have a relatively short maternity leave and have little time for preparation of food. The professionals of this kind appear to work more often as consultants to industry or directly within the industrial sector. They acknowledge the relevance of the arguments in favor of natural nutrition and extended breastfeeding, but point out that there is a practical reality to be considered. In other words, in today's world, the nutritional enrichment of industrial products makes perfect sense if done efficiently, but it is not as widespread as it could be within the private sector due to the cumbersome of regulatory framework. Within the scope of this debate, there may be intermediate positions which were not identified in this set of interviews. As our contact with agents outside the private sector was quite limited, we cannot present a complete mapping of the perspectives of the different groups operating in the nutritional field in Brazil. Such mapping would require interviewing organizations as varied as the Brazilian Society of Pediatrics (SBP), Brazilian Association of Nutrition (ASBRAN), Federal Board of Nutritionists (CFC), and Brazilian Association of Food Industries (ABIA), academic leaders in the area of nutrition and other organizations and professionals in the field. Nonetheless, the interviews in this study showed that this polarization is quite significant and seems to be divided clearly between the players in the federal public sector and those in industry. Most participants in the nutritional field refer more or less explicitly to the existing antagonistic positions and are critical, sometimes of the role of the state and sometimes of the role of the market, according to their position in the nutrition debate. In a way, these positions also reflect more general debates in Brazilian society, where greater participation of the State in the economy and its greater "social control" over private organizations is typically part of the agenda of political parties on the left of the political spectrum. Criticisms of the excessive involvement of the State, although expressed less forcibly, are a position which tends to be taken by players on the right of the political spectrum.32 If the arguments presented here about the existence of a polarization within the nutritional field in Brazil are correct, one of the main challenges for organizations such as GAIN and the IDB in Brazil to establish an active role in the nutritional sector, is how to act without clearly being identified with one or other group on the different poles of
32
This debate reemerged with relative strength due to the presidential campaign of 2010. The new program of the Labor Party (currently in power) published as part of its manifesto sets forth emphatically arguments in defence of greater social control of the private sector. See: www.pt.org.br. 82
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this debate. They also need to try to deconstruct this kind of bias, particularly with respect to its most destructive and paralyzing consequences. Often, international organizations can adopt independent positions in debates of this nature, contributing to a new type of consensus. There is always a risk, however, that such organizations take categorical positions, alienating certain groups that are engaged in the process. We will further detail these arguments below.
6.2 MAJOR POINTS OF CONSENSUS IDENTIFIED
Often in the context of such polarization, the participating agents tend to generalize, simplify and mischaracterize the position of others, without realizing that it can be close to their own in many respects. In fact, despite the bias identified, in the interviews with the different players there were some reasonably well established points of consensus, which could be starting points for public-private dialogues. The main points of consensus identified are discussed below. First, exclusive breastfeeding until six months of age is recognized as highly desirable by all the respondents, even among those from multinational companies that sell complementary foods for children in this age group. There was no substantive disagreement on this point, and more cooperation could exist in this area if prejudices on both sides could be overcome. Often, there is a perception among public officials that the industry is opposed to exclusive breastfeeding. This may even have been the position of some relevant entrepreneurial players in the past, but we did not identify any in our interviews. It would appear then, that there is a general consensus regarding exclusive breastfeeding up to six months. Secondly, the enrichment of food products by means of micro-nutrients is seen by almost all of the respondents as very relevant for some specific nutritional deficiencies, particularly iodine and iron deficiencies. Despite some isolated mistrust among some of the professionals interviewed (as discussed above), the technical documentation of the Ministry of Health clearly emphasizes the importance of food fortification and the Ministry has also established a national policy targeted at this issue. Different aspects of legislation also emphasize the importance of enrichment, as discussed in chapter 3. Another element of consensus regarding food enrichment is the fact that several players of the public and private sectors interviewed agree that nutritional fortification tends to be more effective when it does not alter existing eating habits and when it can be adapted to the economic conditions of the lower income 83
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population. In other words, the industry does not necessarily see enrichment as an opportunity to sell new product categories or exotic products, alien to the reality of the lower income public. Thirdly, regular family meals that include fresh fruit and vegetables, is seen as desirable by most respondents. Many of them refer to this as "colorful food". Contrary to what some in the public sector imagine, the industry does not seem to project a future scenario in which diet would be composed exclusively of industrial food products. The strength and importance of the trends associated with healthy eating and with natural ingredients were recognized unanimously. Obviously, many entrepreneurs state that their company would like to have their products as part of all family meals, but this could be (and already is) in the form of complementary or associated items such as spices, drinks, soups, milk and cereals. In this context there are indeed opportunities for cooperative action to encourage the consumption of fresh produce. Forth, all respondents recognize the importance and legitimacy of the regulatory role of the State. The main doubts within the private sector in this regard relate to efficiency and appropriateness. Does the current state intervention actually bring about improvement of the nutritional status of the population, the guarantee of sanitary conditions and increased capacity for choice? The evidence presented in sections 3 and 4 suggest that this may not necessarily be taken as a given. In fact, for the dialogue about regulation to flow more freely, it is important that several state officials acknowledge that state action, even if legitimate, should not be construed as an end in itself, and that it can and should be criticized given its ability or not to meet its social objectives. It would be necessary, for instance, to admit that the current regulatory system produces paradoxical situations. For example, although the sale of industrial products is highly regulated, there is virtually no effective regulation of products donated by NGOs, private companies or the government itself. In other words, the very foods destined for the most poor and vulnerable, in day care centers, shelters, and nursing homes and popular restaurants, are the least subject to health surveillance. Some industries, whose commercial products are highly regulated, process and donate food through NGOs, without being subject to the technical and sanitary criteria of the industrial products33.
33
In chapter 3 we mention other paradoxes of the regulatory system. 84
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Another doubt raised by different respondents from industry was the universality of procedures and equal treatment given to different industries within the regulatory process. The literature in the field of economic development, reflected, for example, in the work of North (1990), shows very convincingly that the existence of variations in the rules of the game and the existence of doubts on the degree of fairness of the regulatory process tends to discourage investments and ends up actually harming society and the final consumer, who could benefit from increased competition and more frequent innovation. Finally, all respondents also agree that in general people are not aware of nutritional issues and the impact of poor nutrition. The issue of obesity, for example, is a growing concern of most public and private sector individuals interviewed. In this sense, there is a clear consensus on the importance of the topic of nutritional education. This is an area that could mobilize different initiatives and cooperative practices. The Ministry of Health has major initiatives in this field, whether in schools or through the public health system. Some of the private companies interviewed also have projects in this area, although many of these projects are relatively small. Partnerships of different kinds with universities, schools and professional associations have been reported. NestlĂŠ stands out in this scenario, providing structured nutritional education for their professionals and employees. The company also has initiatives through a radio program (supported by associations in the area of nutrition) and a program on cable TV. The difficulty of producing cooperative projects relates mainly to the acceptability by the State, of the exposure of private companies' logos in the material used, for example, on nutritional education and in public institutions such as schools and health equipment. From the companies' perspective, even when providing support for projects of a social nature, there is a natural expectation that their logo will be exposed to some degree. In short, there are several fields in which the public-private dialogue can bear fruit. One of the barriers is that such points of consensus are not always fully acknowledged by all parties. At the same time, the obstacles to dialogue are also important and deserve to be better understood. We detail these below.
6.3 MAIN AREAS OF DISSENT The areas of dissent are also significant and ultimately relate to quite heterogeneous views regarding the role of the State and the private sector. On the one hand, public 85
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agents interviewed (and some members of NGOs) tend to see companies primarily as opportunistic organizations, with little commitment to society and/or social goals of any kind. This view is probably part of a broader cultural context, very common in Latin America, where different shades of what might be called an anti-business bias exist. Of course this kind of bias is more extreme in some places like the Venezuela of today, and is certainly more subtle in Brazil. However, the interviews performed indicate that this perspective is a frame of reference among the current generation of civil servants and professionals in decision-making positions within the federal government and NGOs in Brazil. Business executives, on the other hand, tend to see the State as a hyper-regulator, disorganized, inefficient and, ultimately, corrupt. For some of these players, dialogue with public officials tends to be seen as useless and, under certain circumstances, dangerous and expensive. In this sense, it is also plausible that an 'anti-state bias' exists, i.e. the failure to recognize that the State can often play a decisive social role, be it by addressing market failures of different kinds, or by providing opportunities to population groups traditionally excluded from the consumer market. Although the difficulties identified here may seem alien to international observers, the degree of polarization observed in Brazil tends to be relatively common in societies with a recent radical political history and military coups. The possibility of building public-private partnerships depends, in this sense, on a more mature recognition of the potential and limitations of the performance of each segment, and of the legitimacy of their action. This is not necessarily easy to accomplish. Alongside these substantive issues, there are also specific aspects of the question of nutritional enrichment where dissent was made more or less explicit. First, the position of the various organizations in relation to the nutrition of children from 6 to 24 months of age is relatively ambiguous. The public sector encourages continued breastfeeding, but sees other foods as "complementary" at this stage, regarded as a kind of necessary evil. They tend to accept the currently breastfeeding practices of the majority of women, although considering them inadequate and potential harmful. In other words, alongside an idealized vision of how nutrition should be, there is an implicit acceptance of "inappropriate" habits within the family. Thus public policy ends up assuming an ambiguous perspective. Mothers, in turn, are seen as passive agents in the process. Their needs, aspirations, occupational status and world views are not taken into account by this purist approach. Most of the executives interviewed from industry do not see the point of targeting the consumer in this age group because, somehow, many products aimed at higher age groups end up, in one way or another, being consumed by small children. The few companies that actually address this segment face a particularly hostile regulatory 86
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environment, resulting in a huge onus for the development of products. At the same time, however, the number of competitors is low, because barriers to entry to the market are considerable. One way to contribute to the dialogue would be to demonstrate to all participants that the existing situation is unsatisfactory from all points of view. The public sector cannot ensure the supposedly desirable breastfeeding between 6 and 24 months. The industry does not adequately invest in this segment due to the restrictions placed upon it by the regulatory system. Consumers with practical barriers to breastfeeding (even when they want to) have few options of products and brands that meet their children's needs properly. Against the background of all this discord, the levels of deficiency of some important micro-nutrients, particularly vitamin A and iron are still quite worrying, as evidenced in chapter 3. Secondly, although there is consensus about the value of some micro-nutrients (for example, iodine in table salt), there is by no means universal agreement about the importance of enrichment with other micro-nutrients mentioned in the literature. The enrichment with vitamins, for example, is seen by some of the public agents interviewed as a mere marketing strategy of the industry which could ultimately lead to the replacement of naturally nutritious foods present in every day diet, for food of industrial origin. Other micro-nutrients, such as zinc and calcium, are not covered under Brazilian law and, consequently, are not considered as potentially beneficial by some of the public agents interviewed. It is also true (as discussed in Chapter 4) that some of the companies interviewed only enrich their products with vitamins and minerals on a voluntary basis, after the leading brands have done so thus setting a standard for the market. In some cases, it is plausible to imagine â&#x20AC;&#x201C; not least due to the low level of enforcement - that the enrichment advertised on the package is limited, or even non-existent. This could be addressed by a stricter code of conduct by the industry, including strategies of selfregulation, and significantly contribute to an increased confidence level of the different players present in this arena. As we have seen, the reasons for dissent have rather deep roots, associated with more general views on the role of the State and the nature and scope of the operation of private organizations. If we admit that the State could be more open to the possibility of constructive cooperation with the private sector, we must also understand that private companies - and especially some important regional players who are not interested in the topic of nutrition - need to demonstrate more systematically, to public officials and society in general, that they can be socially responsible and that nutritional enrichment is not only a marketing strategy. It would also be necessary to
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demonstrate that partnerships with these organizations can be truly built with the purpose of improving the nutritional status of consumers. In the context of this prevailing mutual suspicion, any partnership arrangements would stand greater chance of success in projects of a practical nature rather than entering into long debate. As results appear (which can be evaluated and shared among interested parties) more joint projects would be made feasible. The legitimacy of these initiatives should be built step by step.
6.4 OPPORTUNITIES FOR ACTION BY IDB AND GAIN At first glance, the conditions for public-private partnerships in the field of nutrition described above appear to be quite limiting. Given the polarization and distrust, the willingness of the players to enter into such partnerships is quite low. No partnership of this kind was identified. However, despite the anti-business bias identified within the public sector, some relevant public-private initiatives managed to emerge in other areas of the federal government. One example is the project Minha Casa Minha Vida (My Home My Life), a housing program which combines partial public subsidies for active private sector participation in the construction and sale of housing units for lowincome families. This suggests that this attitude of bias against the private sector does not result in an absolute block across the whole government. Rather it is a diffuse ideological attitude, more or less widespread in different departments of the administration and among some professional groups. In polarized environments, as seems to be the case in the nutritional field, perhaps a first step to be considered relates to building conditions more suited to an honest and respectful dialogue. International organizations such as the IDB have the standing to bring about such dialogue, because they are well respected within their own right and are not seen as directly driven by either pole of the argument. In this context, professional organizations, universities and NGOs of international renown, such as GAIN, may also contribute to a significant extent. One of the main ways to build confidence would be to give initial support to some existing less controversial initiatives. Topics such as nutritional education, especially those on which there is consensus (importance of exclusive breastfeeding until six months, importance of fresh vegetables and fruits, etc..), and which have the approval of key stakeholders recognized by the IDB and/or GAIN, could be used as strategies not only to promote nutritional education but as ways of building more fruitful partnerships and dialogue in the long term.
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A major difficulty here is to build fully funded strategies for nutritional education that truly contribute to changing eating habits, especially if they resort to the mass media through so-called social marketing strategies. The use of "best initiatives" awards (where the public sector appears as one of the organizations co-promoting this type of event) could be another powerful way to positively mobilize the private sector at a relatively low cost. Several possible themes could be proposed, such as "the best nutritional enrichment of baby food project" or "the best private initiative in the area of nutritional education". Of course, after the selection process, the projects identified in this way could swell the pipeline of initiatives to be financed by the IDB and/or GAIN in the future. Another area that could be explored is enterprise certification, much used in Brazil by various business organizations and in projects of the Sao Paulo Stock Exchange (Bovespa). For example, the Abrinq Foundation, an NGO linked to the Brazilian Association of Toy Manufacturers has launched, in conjunction with other organizations, a label named "Child Friendly Company", which is used by companies certified by the foundation as evidence that the organization is guided by certain criteria of social responsibility targeted towards children. There are other seals used by other Brazilian businesses in the areas of corporate social responsibility, environmental sustainability and to protect the rights of shareholders, among others. Whatever the criteria adopted by their promoters, business seals can have huge public success and directly contribute to the promotion of relevant social issues. This was achieved for example by the Abrinq seal in its efforts to combat child labor and promote the "right to play." When such projects are successful, several brands want to use the seal in their communication and packaging, and the certification process, if well conducted, probably generates a degree of social impact and revenue for the organization. There is no reason why similar strategies could not be established for the certification of companies which adopt appropriate practices in the use of micronutrients and contribute to the policy of exclusive breastfeeding up to 6 months, for example, or which embrace other nutritional issues perceived as relevant by organizations promoting the project. However, there is also the risk of this kind of initiative increase the barriers for entry. Regardless of the nature of the strategy to be adopted, the main argument presented here is that in an environment of polarization such as that of the nutritional field, the use of voluntary and non-coercive engagement strategies is very important in the sense of promoting adhesion. In other words, a number of possible goals for the IDB and GAIN strategies in Brazil, discussed in the conclusion of chapters 3, 4 and 5, may be best attained if they are structured as part of innovative cooperative practices which contribute to the deconstruction of polarization. 89
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7. PROTOCOL FOR COMPANIES INVESTING IN BOP FOOD ENHANCEMENT PROJECTS Throughout this document, the reader was able to identify a variety of barriers existing in Brazil for companies aiming at addressing the nutritional needs of low-income children. Of the barriers mentioned above, the most important ones are associated to nutritional and BOP knowledge, business model development (including product, pricing, promotion and distribution), product certification within the regulatory pipeline, and corporate culture (chapter 4). Considering those elements, the aim of this chapter is to propose a more detailed protocol of action for those companies wishing to invest in enhanced nutritional products for low-income children. In order to develop this protocol, we divided companies according to their previous experiences with BOP markets and with food enhancement. A summary of this approach is presented in Box 12 below. Box 12: Companies classified according to their experience with BOP markets and food enhancement strategies Experience with BOP markets Yes
Experience regarding food enhancement Yes
No, but willing to
Type 1: Companies intentionally working with BOP markets and food enhancement
Type 2: Companies intentionally working with BOP markets but not with food enhancement
Information on how to strengthen Information on how to structure a their pipeline of products, how to nutrition unit (and/or subcontract move along the regulatory process, one) and on the key issues of the and how to distribute, sell and market process products Type 3: Companies intentionally working with Type 4: Companies willing to work with both food enhancement and willing to work with food enhancement and BOP markets BOP markets Information on how to simultaneously Information on the key aspects develop BOP and nutrition projects required to develop BOP projects Type 5: Companies unintentionally working Type 6: Companies unintentionally working with BOP markets, but working with food with BOP markets, and willing to work with enhancement food enhancement
No, but willing to
Sells to BOP markets but is not concerned about them
Information on the relevance and opportunities of BOP markets
Information on the relevance and opportunities of BOP and food enhancement
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First, it is important to notice that this protocol includes neither food companies not engaged in the BOP markets, nor those uninterested in the nutritional field. That said, albeit not considered in our sample, this group of food companies is probably quite large. Secondly, it is also necessary to observe that each different type of company requires a different set of tools to prepare for an upgrade of their BOP & nutrition product portfolio. Some of them have well structured BOP and/or nutrition units, while others have yet to start implementing basic initiatives in the field. We further develop this issue below.
7.1 ELEMENTS OF THE PROTOCOL The protocol for each type of company is presented below, according to the typology of companies presented in Box 12.
Type 1: More often large multinational organizations with an established corporate agenda that aim at addressing both BOP and nutritional issues. They tend to already have some BOP nutritional products in their product portfolio and/or may have some other projects of this kind in their pipeline for future product launching. This group of companies faces two key issues: how to develop adequate products regarding all their marketing aspects (company pipeline), and how to approve them vis-à-vis the rationale of the national regulatory agencies (regulatory pipeline). Regarding company pipeline, the most important issues are the following:
Develop a preliminary product concept and/or associated business model. Cocreation and deep collaboration strategies can be considered here as mentioned in chapter 5; Produce a basic analysis of the company-specific requirements for product launch – i.e., expected market share, EBTDA, contribution margin and sales volume. In other words, the company will need to assess basic operational and financial information on the proposed project including costs, timing and probability of success; Run a feasibility analysis for product and/or business model. It may depend on the identification of internal and external resources to support the project, including required technological improvements such as machinery and technical processes; 91
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Identify or develop locally required supporting data: marketing studies and preclinical studies. According to some of our informants, the most common studies made by multinational companies at this stage of product development are the following: • Product performance evaluation. It may include a deep understanding of consumer preferences regarding product features; • Marketing mix evaluation. It includes the study of proposed packaging, labeling, claims, and communication materials; • Volumetric studies (including different alternatives of distribution and pricing); • Regulatory scientific pre-testing. It may include the analysis of productsupporting/scientific data and a preliminary dialogue with the regulatory agencies. Gather further information from different sources on how to strengthen the proposed project, how to advance it along the regulatory process and how to distribute, sell and market the product.
Once it has decided to further a particular product concept along the regulatory process, the company may need to address complex regulatory and scientific issues depending on the type of enhancement and nutritional claims in place (see chapter 3). The stage focused on the regulatory pipeline may require the following:
Gather further information on product claims supported by scientific data; Generate clinical studies. The Brazilian regulatory agency demands exclusive clinical trials conducted in Brazil for products with particular nutritional claims clinical trials performed outside the country, regardless of their focus, are often not accepted in Brazil; Analyze the regulatory framework (which changes frequently in Brazil) and develop a strategy for regulatory endorsement; If necessary, develop strategies for a scientific backing of the claims, and prepare consensus-building strategies; Develop and submit the regulatory dossier; Follow up on dossier status vis-à-vis the local regulatory agency internal process and, if necessary, reply to questions and further requests.
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All the dimensions involved in advancing an enhanced food project along a given company and the regulatory agencies’ pipelines are quite costly and time consuming. According to one informant, some product developments may take up to three years to go through both pipelines, with timeframes dependent upon project complexity. As a consequence, interesting concepts often do not move forward due to the significant difficulties and many veto points in place. It is important to notice that such veto points can be exercised both within and outside the company at different moments of the development process. Furthermore, some steps of the project may be particularly costly due to aspects of the Brazilian regulatory framework, such as the clinical trials. IDB and GAIN could help this type of companies by attempting to streamline the product development process in different ways. For example, the probability of increasing the number of successful projects could be enhanced if the risk of some particular key product developments could be shared by either credit strategies or direct investment initiatives. Since the risks at stake are quite high, most companies avoid incurring in debt to fund them in their early stages. When this is the case, other forms of risk sharing initiatives could be more accepted. A second aspect regards influencing the regulatory agency in terms of certain scientific contents associated to particular nutritional claims – i.e., reducing the demands for further clinical trials. A third aspect may be helping companies review their innovation process vis-à-vis enhanced nutritional foods, contributing to reduce the number of veto points and to shorten the time frame for project development. Finally, it should be noticed that any other group of companies – i.e., without previous BOP or nutrition experience, but willing to develop enhanced nutritional foods for BOP children in Brazil – will also have to somehow consider the elements pertaining to type 1 companies. Although starting from scratch seems to be quite difficult, there are some private consulting companies specialized in helping companies develop this kind of project, including its regulatory dimensions.34 We further develop this argument below.
Type 2: While less common, type 2 companies may be either multinationals or larger regional companies with an established corporate agenda that aim at addressing BOP issues but do not invest in enhanced foods. They often have some BOP products in
34
One interesting example is Sprim. See www.sprim.com . 93
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their product portfolio and/or may have some other BOP projects in their pipeline for future product launching. They may want to invest in enhanced nutritional products but are not adequate structured to do so. Before getting started, those companies may need to develop some basic nutrition capabilities, such as:
Accessing some basic information on how to develop a nutrition unit within the organization and/or how to incorporate nutritional knowledge into their product development processes; Establishing a dialogue with relevant stakeholders in the nutrition field, including regulatory agencies, universities and NGOs; Understanding some key technological issues regarding food enhancement that may imply changes in the company production lines and supply chain; Reviewing its product portfolio in order to identify possible quick wins – i.e., products that could be more easily be enhanced and approved by the regulatory agency; Identifying partners that could help the company move forward in the process of food enhancement, including consulting companies, micro-nutrient developers and other relevant international organizations; Participating in different private or public partnerships capable of creating a fruitful environment for the development of enhanced foods and improving the nutrition field.
Most of these capabilities have to be in place before moving toward enhanced food developments, which should be probably easier for larger companies that already have well organized processes for product innovation. In any case, once the decision to launch enhanced food products is taken and some basic resources to move forward are already in place, the company should follow the protocol proposed for type 1 companies. In the case of type 2 companies, most of the opportunities for IDB or GAIN action seem to be related to the concept of improving company capabilities in the nutrition field and in the development of adequate partnerships that will support companies during the product development process. Once the company is convinced to move forward in the nutritional field, further financial support could be provided to help it expedite its development process and increase its success rate.
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Type 3: Type 3 companies are those that were able to develop significant skills in the nutrition field but have yet to invest in BOP markets. They have in-house nutritional capabilities, but have so far addressed high-end markets only. In the analyzed sample, only Nutrimental – a mid-sized regional company (from Paraná) – fits this profile, having developed nutrition skills but remaining loosely connected to BOP markets. Although out of our sample, one company that probably belongs to this profile in Brazil is Unilever. In the case of type 3 companies, the protocol to be adopted is primarily the same as the one to be used by any company wishing to access BOP markets. The most important issues here are as follows: Convincing top managers of the relevance of BOP markets; Identifying internal resources that could be used for the development of BOP solutions and starting to organize a BOP group in the company, preferably within the marketing/sales unit. If the BOP initiative is not associated to key business areas of the company – for example, being otherwise associated to non-core initiatives such as social responsibility ones – the probability of a larger number of significant projects is much smaller; Identifying external partnerships that could contribute to the development of BOP solutions, including consulting companies, financial institutions (such as IDB), universities and NGOs; As part of a training process, reviewing relevant BOP data and business cases and using them to convince middle managers of the relevance of BOP markets;
Reviewing company product portfolio in order to identify possible quick wins, i.e. products that could be more easily adapted to BOP consumers, making existing products more accessible and affordable. In the early stages of the process, strategies most often employed are associated to smaller packages and revisions of the general communication practices and distribution chains;
Integrating BOP issues into product development strategies, particularly those associated to enhanced nutritional foods already in place. More in-depth approaches could be adopted, such as a significant revision of the value chain and the development of alternative solutions related to close collaboration and co-creation (see section 5).
When the company has reached the basic conditions to move on in BOP markets and decided to organize a systematic process for development of enhanced nutritional 95
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products for low-income families, the protocol for type 1 companies may help them strengthen the process. Regarding IDB and GAIN, besides the opportunities associated to information, training and technical support on BOP issues, there could be opportunities regarding funding particular initiatives when companies move forward. Those related to new physical investments required by the new BOP initiatives (i.e., new equipment, industrial plants) or the development of alternative supply and distribution chains are some examples.
Type 4: This group is not present in our sample of interviewed companies, since they have not yet developed any significant skills in either BOP issues or the nutrition field. When companies from this group become interested in moving towards enhanced nutritional foods for low-income groups, most likely they will need to follow the protocol for both type 2 and type 3 companies. Therefore, GAIN and IDB should not consider companies from this group a priority since they have a longer, more complex road ahead of them â&#x20AC;&#x201C; that is, incorporate two new dimensions (BOP and nutrition) into their business processes. When they are really committed to do so, the option should be to promote either protocol 2 or 3, according to each companyâ&#x20AC;&#x2122;s preferences. However, depending on company size and resources, it would be unwise to push both protocols together.
Type 5: This group is also less common, since it is represented by companies that already sell to BOP markets, albeit unintended, but have developed significant skills in the nutrition field. Those companies could theoretically move forward quickly within the BOP nutrition markets since they are somewhat in place. Most likely, they will need some variations of type 3 protocol â&#x20AC;&#x201C; particularly convincing top managers of the opportunities presented by the BOP markets in which they already operate, and the internalization of a more structured process for product development. Although few, companies in this group should be considered a priority for GAIN and IDB, since they theoretically have better conditions to combine nutrition and BOP dimensions within their business operations, providing adequate resources are made available for such a move. When they become capable of improving their knowledge about the BOP markets in which they operate, as well as improve their product development process, those companies should be stimulated to move forward the protocol type 1.
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Type 6: Composed of companies that are already unintentionally selling to BOP markets, but have not yet developed any relevant skills in the nutrition field, this is the most common group among regional companies. It is probably quite meaningful in terms of both number of companies and cross-country spatial distribution. Some representatives of this group are also connected to the commodities business â&#x20AC;&#x201C; i.e., wheat flour and rice, an activity developed by large regional and multinational players. Type 6 companies will need to first follow type 2 protocols to strengthen their nutrition capabilities, and then move to some variation of type 3 protocols to further develop its BOP skills. And although this group is likely to prove difficult to be convinced due to its typically conservative and empirical managerial style (see chapter 4), it is very relevant in view of the number and the size of companies it encompasses. Therefore, any approach from IDB and GAIN to this group should be based on a pragmatic agenda. Management teams of those organizations are focused on improving sales force and distribution capabilities, which means they will tend to be less willing to discuss concepts that, albeit socially relevant, will be perceived as either time consuming or likely to drain significant company resources (or both). It should be pointed out that some of the types presented above, albeit being less significant in our sample, such as Type 3 and 4, may be quite expressive in terms of revenue and/or market share. Among them, companies of type 3 should receive special attention. These companies have already overcome the most important barriers to develop enhanced products. Moreover, they can easily create BOP nutritional products if they are convinced of the relevance of this market and find strategic partners that could help them approach this segment. There are probably important multinational companies among them, with all the skills to develop adequate BOP nutritional products. Some of them may also have developed successful BOP projects in other markets, but not in Brazil, such as Unilever, Danone, and Kelloggs, among others. Finally, it should be pointed out that the typology presented above, like any other typology, is a somewhat artificial description of reality. Companies can be internally heterogeneous, and even within a mainly conservative company, interesting opportunities can arise in the BOP & nutrition fields depending on the leadership in place. At the same time, the food business is a fast-changing, highly competitive arena, which means some nutrition innovations promoted by multinationals are quickly followed by regional companies trying to leverage their game in this field.
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REFERENCES Arretche, Marta (2004). Federalismo e Políticas Sociais no Brasil: problemas de coordenação e autonomia. São Paulo em Perspectiva, São Paulo, v. 18, n. 2, p. 1726. Auleta, N. and Puente, R. (2009). Innovación y Mercadeo: un mapa de utilidad para las mayorías. In: Debates IESA, vol. 16, n. 1, pp. 25-30. Bartels, C. (2010). Panorama regulatório. Sao Paulo: Plano CDE (background paper for the nutrition mapping project). BCG - The Boston Consulting Group (2009). The Next Billions: Business Strategies to Enhance Food Value Chains and Empower the Poor. Davos: The Boston Consulting Group and World Economic Forum. Bill and Melinda Gates Foundation (2009). Fortifying the Market: Broadening the Commercial Availability of Low-Cost Fortified Complementary Foods and Related Products for Infants and Young Children in Developing Countries. Seattle: Bill and Melinda Gates Foundation. Brugmann J. and Prahalad C K. (2007). Cocreating business's new social compact. In: Harvard business review, 85(2):80-90, 156. Caballero, B. and Popkin, B.M., eds. (2002). The nutrition transition: diet and disease in developing world. London: Academic Press. Castro, M.C.J. and Silva, A.P.S. (2007). Monitoramento dos Moinhos do Município de São Paulo: Avaliação da Farinha de Trigo enriquecida com Ferro e Ácido Fólico. São Paulo: Coordenação da Vigilância em Saúde da Prefeitura de São Paulo (mimeo). FAO (2000). Nutrition Country Profiles: Brazil. Rome: FAO. Ferreira, F. H., Leite, P. G. and Ravallion, M. (2007) Poverty reduction without economic growth? explaining Brazil's poverty dynamics, 1985-2004. In: Policy Research Working Paper 4431. Washington: World Bank. Garcia, R.W.D. (2003). Reflexos da globalização na cultura alimentar: considerações sobre as mudanças na alimentação urbana. In: Revista Nutrição, Campinas, 16(4):483-492, out./dez., 2003 Exame (2009): Melhores & Maiores: as 1000 maiores empresas do Brasil. São Paulo: Editora Abril. Hart, S. L. (2007). Capitalism at the crossroads: aligning business, earth, and humanity. New Jersey: Wharton School Publishing. Horton, S. F. B., Greig, A. and Lakshman, A. (2009). Micronutrient Supplements for Child Survival (Vitamin A and Zinc). Copenhagen: Copenhagen Consensus Best Practice Paper: New Advice From CC08.
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Hughes, N. and Lonie, S. (2007). M_PESA: mobile banking for the “unbanked”: turning cellphones into 24-hour tellers in Kenya. In: Innovations, winter & spring 2007, pp. 63-81. IBGE, 2007. Censo Agropecuário. Rio de Janeiro: Instituto Brasileiro de Geografia e Estatística (IBGE). www.ibge.gov.br Kandachar, P. and Halme M. (Eds) (2008). Sustainability, challenges and solutions at the base of the pyramid. London: Greenleaf Publishing. Kennedy, G. Nantel, G, and Shetty, P. (2003) The scourge of “hidden hunger”: global dimensions of micronutrient deficiencies. In: Food, Nutrition and Agriculture, n. 32, pp. 8-18. Kunreuzher, H. (1973). Why the Poor May Pay More for Food: Theoretical and Empirical Evidence. Journal of Business, Jul73, Vol. 46 Issue 3, p368. Mello, E.D et al. (2004) Obesidade infantil. In: Jornal de Pediatria - Vol. 80, Nº3. Ministry of Health/Cebrap (2009). Pesquisa Nacional de Demografia e Saúde da Criança e da Mulher – PNDS 2006. Brasília: Ministry of Health/Cebrap, http://bvsms.saude.gov.br/bvs/pnds/index.php. Ministry of Health (2009). Vigitel Brasil 2008 – Vigilância de fatores de risco e proteção para doenças crônicas por inquérito telefônico. Brasília, Ministry of Health. Ministry of Health (2007). Carência de Micronutrientes. In: Cadernos de atenção básica, n. 20. Brasília: Ministry of Health/Unicef. Ministry of Health (2006). Guia alimentar para a população brasileira: promovendo a alimentação saudável Brasília: Ministry of Health. Ministry of Health (2002) Guia alimentar para crianças menores de dois anos. Brasília: Ministry of Health. Mintzberg, H., Lampel, J. , Ahlstrand, B. (1998) Strategy Safari: A Guided Tour Through The Wilds of Strategic Management. New York: The Free Press. North (1990). Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press, 1990 Organização Pan-Americana da Saúde (2000). Brasil Informativo 13 de Novembro de 2000. PATH (2010). An invisible bounty http://www.path.org/projects/ultra_rice.php/ )
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Prahalad CK (2005). The Fortune at the bottom of the pyramid: eradicating poverty through profits. New York: Wharton School Publishing. Pfitzer, M. and Krishnaswamy R. (2007). The Role of the Food & Beverage Sector in Expanding Economic Opportunity. In: John F. Kennedy School of Government, FSG Social Impact Advisors. Rajan, V. K. (2005) Unilever in India: Hindustan Lever's Project Shakti-Marketing FMCG to the Rural. Cambridge: Harvard Business School Publishing. 99
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Ramalho, R.A. & Saunders, C. (2000). O papel da educação nutricional no combate às carências nutricionais. In: Revista Nutrição, Campinas, 13(1): 11-16, jan./abr. Rinaldi, A. E. M. et al. (2008) Contribuições das práticas alimentares e inatividade física para o excesso de peso infantil. In: Revista Paulista de Pediatria, 26(3):271-7. SNV (2008). A Firm-Level Approach to Majority Market Business: Private Sector Mapping. Whashington: SNV/IDB. Tendler, J. (1998). Good government in the tropics. Baltimore: John Hopkins University Press. UNICEF (2009). Tracking Progress on Child and Maternal Nutrition: A survival and development priority. New York: Unicef. United Nations System Standing Committee on Nutrition (2004). 5th Report on the World Nutrition Situation: Nutrition for Improved Development Outcomes. New York: United Nations System Standing Committee on Nutrition (SCN). Valor (2009). 1000 maiores empresas brasileiras. São Paulo: Valor Econômico S.A. Veigas, C.A.S. (2006). Recent changes in the supply and demand of the Brazilian food and beverage industry. São Paulo: FIPE/USP (doctorate thesis). WHO (2009). Global prevalence of vitamin A deficiency in populations at risk 1995– 2005. WHO Global Database on Vitamin A Deficiency. Geneva, World Health Organization. Yunus, M. and Moingeon, B. (2007). Grameen Danone Foods Limited: A Unique Model of Social Business Enterprise. Asian Development Bank Institute Conference an Seminar Papers (retrieved from http://www.adbi.org/conf-seminarpapers/2007/07/03/2311.microfinance) Yunus, M. and Moingeon, B. (2009). Building Social Business Models: Lessons From The Grameen Experience. In: Hec Paris: working paper 913
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ANNEX 1: BASIC REGULATORY INFORMATION
Ministry of Agriculture Resolução No 1, de 05 de Julho de 1991 Lei No 8.918, de 14 de Julho de 1994 Instrução Normativa No 22, de 24 de novembro de 2005
Anvisa Portaria SVS/MS nº 29, de 13 de janeiro de 1998 (Versão Republicada 30.03.1998) Portaria nº 31, de 13 de janeiro de 1998 Portaria nº 34, de 13 de janeiro de 1998 (*) - em revisão Portaria nº 36, de 13 de janeiro de 1998 Lei nº 9.782, de 26 de janeiro de 1999 Resolução nº 18, de 30 de abril de 1999 Resolução nº 19, de 30 de abril de 1999 Resolução No 23, de 15 de Março de 2000 Resolução-RDC No 360, de 23 de dezembro de 2003 RDC No 269, de 22 de setembro de 2005 RDC No 278, de 22 de Setembro de 2005 Portaria nº 386, de 26 de setembro de 2005 Lei No 11.265, de 3 de janeiro de 2006 Lei no 11.265, de 3 janeiro de 2006 NBCAL – Norma Brasileira de Comercialização de Alimentos para Lactentes e Crianças de 1ª Infância, bicos, Chupetas e Mamadeiras.
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ANNEX 2: COUNTRY DATA 1.1
Population (distribution by age range)
AGE RANGE Total 0 - 4 yrs 5 - 9 yrs 10 - 14 yrs 15 - 19 yrs 20 - 24 yrs 25 - 39 yrs 40 - 59 yrs 60 yrs or more
1.2
People (thousand) 188 029 13 743 16 463 17 698 17 084 16 739 43 967 42 589 19 745
Gross national product
Gross national product according to parity criterion of purchasing power 2007: 1.848.833,45 (US$ million) 2008: 1.984.696,43 (US$ million) Source: Worldbank Factbook, 2009
Source: IBGE PNAD 2008
1.3
Human Development Index
0,807 in 2006 – 70th in the ranking 0,802 in 2005
Source: PNUD, 2009
1.4
Type of government and political system Federalist State, with direct elections for president, state governors and city mayors. Bicameral system of elected federal representatives (Senate and Chamber of Deputies) and unicameral in states and municipalities (Legislative Assembly and Chamber of City Counselors).
1.5. Reflect on the degree of political decentralization and its relevance to define policies to improve nutrition in the country Brazil is a country with tradition of decentralized policies, which has been reinforced since the 1988 constitution. For example, although largely financed by the federal government, health and education policies are executed by state and municipal governments. Other social policies also adopted this decentralized model, which is currently also observed in the areas of housing and income transference. In terms of regulatory structure, although the majority of legislation originates in the federal government agency – ANVISA – some states, particularly São Paulo and Rio Grande do Sul also have a tradition in regulation in the nutritional field.
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2. Condition of nutrition in the country and social indicators 2.1. Eating and dietary habits of the country Brazil is a country with significant regional differences in eating habits, according to the degree of the Native Indian, European and African influence. The more general aspects of eating habits in Brazil common to the various regions are as follows:
• The consumption of at least two hot meals on week days - lunch and dinner. Lunch is considered the main meal, the one providing the largest portion of nutrition and which must not be skipped. Dinner is seen as the meal that complements daily intake, playing an important role in the sociability of the family; • The daily menu consists of different dishes prepared in different ways, and it is common to mix different foods on the plate • Consumption of rice and beans is the basic main food, common in all regions. The consumption of rice is above 90% in all social groups, the same with beans. • The main variation occurs in foods that accompany rice and beans which is the main source of protein, it may be red meat (69% of consumption), also present on the table of class E (40% of people in this social class), chicken (42%). Among the poorest, these products are replaced by eggs (35.7% in class E) or sausages. Fish consumption is low (12%) and occurs more frequently in coastal areas of the North and Northeast. • The consumption of manioc flour associated with other foods and dishes, which serves as an important source of food, particularly amongst lower income families, is common; • In the North and Northeast, areas of strong influence of indigenous and African cultures, manioc and corn flour are included in every meal; commonly in the form of porridge and paps, widely consumed by children and adults. • Due to the influence of European culture, the consumption of bread is significant (76%), throughout the country, especially at breakfast, accompanied by coffee (85%) and milk (73%). Source: Barbosa, L. (2007). Feijão com arroz e arroz com feijão: O Brasil no prato dos Brasileiros. In: Horizontes Antropológicos, n.28, PP.87-116.
2.2. Food products originating from the country and characteristics The main foods of the country are of imported origin, particularly rice and bread. The main product of local origin is manioc flour, which is consumed a lot by low-income families in different combinations: mixed with beans, milk or water, as an accompaniment to meat and eggs, or in the form of 'farofa' (with meat , eggs or vegetables such as cabbage). One of the problems with manioc flour is its low nutritional content;: it is a source of carbohydrates, but with low protein and other micro-nutrients content. The production of manioc flour is highly decentralized, often informally in small rural communities. Unlike wheat and corn flour, Brazilian law does not require the enrichment of manioc flour with iron and folic acid. 2.3. Underweight new-born (%) 8, 23% Source: Datasus 2006 (MS/SVS)
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2.4. Percentage of breast fed children (20–23 months of age) 25% MOH, PNDS 2006 – APUD: http://www.childinfo.org/breastfeeding_iycf.php
2.5. Percentage of breast fed children given supplementary foods (6–9 months of age)
70% MOH, PNDS 2006 – APUD: http://www.childinfo.org/breastfeeding_iycf.php
2.6. Percentage of homes that consume iodized salt 96% MOH, PNDS 2006 – APUD: http://www.childinfo.org/idd_profiles.php 2.7. Mortality rate of children under 5 24,8 per thousand Source: Datasus 2006 (MS/SVS)
2.8. Children's mortality rate 20,7 per thousand Source: Datasus 2006 (MS/SVS)
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2.9. Ante-natal care Percentage of live-born per region according to number of consultations - Period: 2006 Number of consultations TOTAL
North region
Northeast region
Southeast region
South region
Central West region
Total
100,00
100,00
100,00
100,00
100,00
100,00
7 consultations or more
30,18
39,33
68,69
70,79
60,38
55,38
4 to 6 consultations
47,73
45,90
24,80
23,03
31,23
33,85
1 to 3 consultations
16,61
12,01
5,21
5,07
6,91
8,59
5,48
2,77
1,30
1,11
1,48
2,18
None
Source: Ministério da Saúde/SVS - Sistema de Informações sobre Nascidos Vivos (SINASC)
2.10. Unmet needs in family planning 32,2% of women from 15 to 49 yrs do not use contraception PNSN, 2006 2.11. Percentage of under-fives underweight 5.7% with ponderal deficit (defined as body weight less than minus two standard deviations from the median weight-for-height, compared to the reference parameter) Benfam, PNDS, 1996 2.12. Percentage of under-fives with height-deficit
35,3 per 100 thousand (height-for-age below percentil 3) – equivalent to 4.857 notifications in 2007 Source: Ministério da Saúde, registro de informações do estado nutricional das famílias no SISVAN - módulo de gestão municipal.
2.13. Rate of coverage of Vitamin A supplements from 6 to 59 months There is no data available. There is free distribution in low income health care units in poor regions.
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% 23,7
D (607 to 1213 reais)
28,1
C (1214 to 3033 reais)
33,2
B (3034 to 6066 reais)
10,1 5,0
A (6066 reais and more) Total
100,0
Source: IBGE, PNAD 2008 3.2. Expenditure of the CDE population on food (rural X urban) The annual expenditure of the low-income population (CDE) reached 130 billion dollars in 2007, according to the estimate presented below. We do not have specific data for rural areas which house only 17% of the population, with high concentration of households of groups D and E. Estimate annual expense per group of household income E (0 to 606 D (607 to 1213 C (1214 to 3033 Type of expense reais) reais) reais) Total expense
61.099.736.969 165.288.715.714
Food
18.181.019.608
42.055.995.550
29,8%
25,4%
Relative share
B (3034 to 6066 reais)
333.632.945.863 231.794.352.521 69.728.441.791 20,9%
37.648.311.113 16,2%
(in reais) A (6066 reais and more)
TOTAL
304.606.086.530 1.096.421.837.597 35.889.335.777 11,8%
203.503.103.839 18,6%
Sources: IBGE, POF 2003 e PNAD 2007 Note: Structure of consumption of 2003, with structure of expenses updated to PNAD 2007 3.3. Percentage of expenditure on food in classes CDE X family expenses This expense varies as follows: - Group E (0 a 606 reais) – 30% - Group D (607 a 1213 reais) – 25,4% - Group C (1213 a 3033 reais) – 21% Groups CDE (0 a 3033 reais) – 23% Sources: IBGE, POF 2003 e PNAD 2007 (see table in section 3.2) 3.4. Percentage of expenditure on food in classes CDE X national expense in the sector This expense varies as follows: - Group E (0 a 606 reais) – 9% - Group D (607 a 1213 reais) – 21% - Group C (1213 a 3033 reais) – 34% - Groups CDE (0 a 3033 reais) – 64% Sources: IBGE, POF 2003 e PNAD 2007 (see table in section 3.2)
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Typical eating habits of CDE population
The eating habits of the CDE population are similar to those of the whole population, with strong presence of rice, beans and manioc flour (see section 2.1). However, the lower the income, the lower the presence of proteins, particularly of animal origin, such as meat and dairy products.
3.6.
Nutritional problems typical of the CDE population
The main nutritional problems recognized by the Ministry of Health in the field of micro-nutrients are: a) Vitamin A deficiency b) Iron deficiency c) Folic acid deficiency d) Iodine deficiency For each of these deficiencies there are public health initiatives (see section 4.) There are no general policies for other micronutrients such as vitamins B, C, D and E. Source: Ministério da Saúde. Cadernos de atenção básica: Carência de Micronutrientes. Brasília: MS, 2007
4.
Public policies and status of nutrition
4.1. List of regulations devised and approved regarding child nutrition The main policies adopted by the Ministry of Health (Federal Government) in the field of micronutrients concern the distribution of free doses of vitamin A to children aged 12 to 59 months and to mothers in areas of high incidence of avitaminosis, the policy of mandatory enrichment of wheat and corn flour with iron and folic acid and the policy of mandatory enrichment of salt with iodine. We detail the history of this legislation below. a) Deficiencies of vitamin A "To prevent and control vitamin A deficiency, since 1983, the Ministry of Health has distributed 100,000 IU of vitamin A capsules to infants aged 6 to 11 months and 200,000 IU for children aged 12 to 59 months in the states of Northeast Region and in Minas Gerais (Jequitinhonha Valley and Mucuri Valley). This distribution is undertaken along with routine vaccination campaigns in health care units or home visits made by the Community Health workers. In 2001, the program was expanded to provide care to expectant mothers, through supplementation with 200,000 IU capsules in the maternity hospital during the immediate postpartum period; in northeastern Brazil more than 95% of deliveries are performed in general or specialized hospitals. This is a strategy to ensure the adequacy of maternal body reserves. Thus, the intake of vitamin A through breast milk will ensure a sufficient supply of the vitamin among children younger than 6 months who are being breastfed. In 2004, the program was restructured in order to promote wider dissemination and mobilization of health professionals to a wider population, with the creation of the advertising logo: "VITAMINA A MAIS". In 2005, Order No. 729 of 13/5/2005 was issued, which defined the guidelines for the supplementation program and the responsibilities of the three levels of government. There are many strategies to prevent vitamin A deficiency, each with its own advantages and limitations, but always highly effective when applied in a complementary fashion. These strategies include: 1. Nutrition education with emphasis on a varied diet and increased consumption of foods rich in vitamin A. Encouraging the consumption of foods enriched and/or fortified with vitamin A, by checking 107
PLANO CDE for its presence on food labels; 2. Supplementation with vitamin A in children aged from 6 to 59 months and among women in the immediate postpartum period residing in endemic regions; 3. Stimulation of intake of food containing vitamin A, which can be secured by encouraging the production and cultivation of these foods, taking into account the regional diversity of Brazil and considering, among other options, home, community or school gardens." b) Deficiencies of Iron and Folic Acid "Brazil has adopted universal fortification of wheat and corn flour with iron and folic acid. The fortification of salt for human consumption with iodine has been adopted since 1953. (...) Specifically with respect to iron, the "Social Commitment for the Reduction of Iron Deficiency Anemia" was established in Brazil in 1999, in which partnerships were formed among government agencies, international organizations, industry representatives and civil society. In order to reduce anemia and iron deficiency in preschool and school children by 1/3 by the year 2003, actions were planned to promote healthy eating, instruction of the population to diversify the diet at low cost, supplementation of iron to specific groups and voluntary enrichment of the Brazilian production of wheat and corn flour with iron. In August 2001, the Ministry of Health decided to make iron fortification of all wheat flour and corn available for sale on the market mandatory, with a value equal to 30% of RDI of iron, representing 4.2 mg of iron in 100 g of flour. The National Health Surveillance Agency (Anvisa), in order to standardize the fortification of flour, opened public consultation in August 2001. In this consultation the inclusion of folic acid in the mandatory fortification of wheat and corn flour was suggested, a measure aimed at reducing neural tube defects. As folic acid is important to the health of the population, the Ministry of Health decided to adopt this proposal. A new public consultation was then undertaken with regard to fortification of wheat and corn flour, suggesting 4.2 mg/100g for iron and 150Îźg for folic acid. In 2002, the public consultation was consolidated and the fortification of wheat and corn flour with iron and folic acid was approved, through Anvisa's RDC 344, of 13/12/2002, giving companies eighteen months to comply. That period expired in June 2004, by which date all wheat and corn flour available for sale in Brazil came to be fortified with iron and folic acid. In addition to the fortification of wheat and corn flour and educational actions, the Ministry of Health developed the Iron Supplementation National Program. This program aims to provide preventive supplementation for all children aged 6 to 18 months with iron; expectant women from the 20th week of pregnancy with iron and folic acid and women until the third month postpartum and post-abortion with iron." c) Iodine Deficiencies "In Brazil, several initiatives have been developed to control iodine deficiency. On 14 August 1953, Law No. 1944 was issued, which called for mandatory iodization of salt for human consumption in areas of endemic goiter. Decree No. 39,814 of 17 August 1956, demarcating the areas of endemic goiter, determined the extent of iodization for many Brazilian states where goiter was endemic and in all other regions where new cases were reported, and made the Ministry of Health responsible for the import of iodate. Law No. 6150 of 3 December 1974, ordered the mandatory iodization of all salt for human and animal consumption produced in the country. Under this law, each kilogram of salt should contain 10 to 30mg of metalloid iodine; industries were expected to purchase iodine and the equipment necessary for salt iodization directly, and they assumed responsibility for the iodination; the supervisory responsibility lay with states and municipalities. Decree No. 75697, of 6 May 1975, established quality standards and salt iodization (human use). In 1983, the Ministry of Health, through the National Institute of Nutrition (INAN) established the Program to Combat Endemic Goiter (PCBE), with emphasis on salt iodization. In this context, the Ministry of Health and the National Health Foundation began to bear the costs of iodization of the salt produced in the country, acquiring and distributing potassium iodide (KIO3). The decision to buy and distribute the iodine required for all salt for human and animal consumption produced in the country was taken because most companies in this industry, ignoring the law, did not add iodine to the salt they produced, and in addition to this, surveillance, the responsibility of the government, was still weak. In 1994, the PCBE was redesigned and restructured to widen its scope. The National Program of Control 108
PLANO CDE of Iodine Deficiency Disorders (PNCDDI) was then created, made official through Decree No. 2165 of the Ministry of Health. That same year, the Ministerial Decree 1806 of 24 October 1994, increased the content of iodine in salt for human consumption to 40-60 mg / kg. In March 1999, through Decree No. 218, the Ministry of Health established salt with not less than 40 mg up to a limit of 100 mg of iodine per kg as fit for human consumption. In May 2003, this Decree was revoked, and Sanitary Resolution RDC No. 130 took effect, which decreased the levels of iodine in salt to 20 to 60 milligrams per kg. Rule No. 1814-2 of 22 was issued on April 1999, releasing the government from the obligation to provide potassium iodite, and the responsibility to purchase salt was transferred to the industry. Also in 1999, Decree MS / GM n º 1328 of November 11, was issued establishing the Interagency Commission for Control of Iodine Deficiency Disorders under the Ministry of Health. With the publication of Decree No. 520 of 6 April 2005, new members were appointed to the committee in order to improve the monitoring of prevention and control of Iodine Deficiency Disorders. Source: Ministério da Saúde. Cadernos de atenção básica: Carência de Micronutrientes. Brasília: MS, 2007
4.2. Degree of implementation of approved rules There is no systematic data. It probably presents significant regional variation. 4.3. Government initiatives to improve nutrition among the population The main activity takes place in the field of mandatory enrichment of foods and in specific programs such as: School meals (Ministry of Education) Program of workers food (Basic food basket) – Ministry of Labor Programs of popular restaurants and food banks – Ministry of Social Development There are few programs aimed at children aged 6-24 months who supposedly should be receiving continued breastfeeding.
4.4. Inter-sectoral alliances directed to improving the nutrition of the population. Define: Type of organization. The alliances identified were between NGOs and government through the transfer of public resources to implement nutrition activities. NGOs implement policies for food distribution and health care with public funds from the Ministry of Health and Social Development. Objectives: Improving the nutritional status of the population Implementation level: These programs are implemented according to the availability of public budget.
NOTE: No relevant public-private alliances were identified.
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PLANO CDE 4.5. Define whether there is interest from public entities to develop public-private alliances in order to improve nutrition in the country and explore the reason We identified low interest on the part of public agencies.
4.6. Specific proposals of public entities to work jointly with the IDB to improve the state of nutrition through inclusive business
There were no proposals.
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