In July 2008, Cargill India Private Ltd. publicly announced its decision to fortify its top selling edible oil brands in India with the essential vitamins A, D, and E. Oil fortification as a method to provide nutritional benefits is not a new concept, but a private company willingly and independently offering fortified products as part of its core portfolio is commendable. Most commonly, fortification efforts involve government-sponsored programs coordinated with the private sector through partnerships, grants and incentives, in order to improve levels of nutrition on a national scale. In this case, a private company committed to engage in the fight against malnutrition, by offering a healthier choice to its consumers in a country with the most significant levels of malnutrition in the world. This program was Cargills first and most significant step towards achieving the goals of Nourishing India, a set of programs designed to improve nutrition in the country. As a result of this innovative approach to community engagement, Cargill is improving brand value, setting a standard for competitors, and creating impact in a sustainable and profitable way.
In recent years, India has seen unprecedented economic growth and is one of the global leaders in agricultural production. Although the country is a selfsufficient food producer, it is still home to one quarter of the worlds hungry population, and an estimated 40 percent
In India, cooking oil is used nearly universally, with a 99 percent household penetration rate. Furthermore, oil can carry fat-soluble vitamins such as A, D, and E. Food fortification is the most efficient approach to delivering micronutrients because it is generally socially acceptable, requires minimal changes in eating habits, is low-cost, and often has a delivery system already in place. How can a large-scale producer of edible oil translate these facts into creating an impact?
was discussing how to integrate this new requirement when Mr. Chaudhry had a breakthrough: If we are already modifying our process to fortify our production for Gujarat, why not take this opportunity to fortify all of our oils across the country? Thinking back to earlier in the year, Mr. Chaudhry had attended GAIN Indias CEO forum, where he had first learned about the possibility of oil fortification. As an active Business Alliance member, Cargill India would also be attending the 2007 GAIN Business Alliance Global Forum, an annual event that brings together business leaders to learn how to apply their resources to accelerate and scale the improvement of nutrition for lowincome consumers. Here, the company would have the opportunity to learn from like-minded companies who are active in the fight against malnutrition. INDIA OIL CONSUMPTION FACTS Average oil consumption per person is about 33g per day,7 and rising gradually along with rising income levels and GDP growth. Consumption levels are widely varied according to income levels the populations richest 10 percent consume four times more than the poorest 30 percent.8 Refined oil sold in individual packages (branded oil) accounts for over one fifth of total oil consumption, and is growing 15 percent annually as consumers shift to refined oils from other cooking fats due to increasing health consciousness.9
The managers contemplated the idea of making additional investments in a competitive environment. How would this affect their market position? Their bottom line? Mr. Chaudhry emphasized the obvious fit with the companys mission and scope. Cargills oil products already reached an estimated 25 million consumers, and by including micronutrients, the company could provide a more nutritious product to those consumers relatively quickly. Management understood that the company had the opportunity to take part in the fight against malnutrition as part of its core business and came on board. Now, remaining technical details would need to be resolved. Cargill gathered scientific data regarding dosage and recommended daily allowances of vitamins A, D, and E, and prepared to modify its entire business operation to incorporate fortification.
Repackaging a large number of SKUs proved to be a challenge. Market research and product testing were conducted while the addition of micronutrients was pending approval. Consumer surveys and interviews revealed a general interest in improving health through diet, which would be a useful insight for branding and sales forecasting. In the laboratory, technicians tested fortified samples for taste and quality to prepare for the pilot launch. Operations were adjusted at the companys refinery in Kandla, Gujarat, in
order to integrate vitamin procurement, storage, mixing and labeling into the plants processes. While the mixing step was a simple add-on at the end of the refining process, storage and packaging were more complicated to modify. After about six months, however, a seamless process was achieved and ready for replication. One of the key successes of the project was winning management buy-in from global headquarters in Minnesota. Head office proved its support for Indias initiative by committing funds for a large infrastructural improvement, a portion of which would be allocated to fortification. This global backing strengthened the subsidiarys sense of purpose in carrying the initiative forward. At the time fortification went live, Cargill estimates that its edible oils were reaching about 25 million consumers per month. In a highly competitive and price-sensitive market, raising awareness among those consumers would be the next strategic step in building the fortification business model.
SHIFTING ATTITUDES
This is a competitive advantage that were happy to lose. - Siraj Chaudhry, Country Head Market studies have shown that consumers primarily value quality of oil, with added micronutrients as an extra benefit. Cargill aims to increase the perceived value of fortification to consumers while maintaining each brands reputation for quality. According to ILSI, television is the best medium for educating the Indian population, and Cargill estimates its television advertising campaigns reach about 65 percent of the population. Branding was an important vehicle used to foster demand for the fortified product. The brands were redesigned in order to emphasize the oils health benefits, with the ultimate goal to internalize the importance of consuming fortified products vs. unfortified. But since household consumers only account for one quarter of total sales, a large-scale training campaign was necessary for educating commercial distributors and sales agents. The company put a high level of priority on ensuring that its sales agents were thoroughly capable of communicating the importance and benefits of fortification to customers. Generating demand for fortified products will be a long process, but management has an optimistic outlook for the future. Both to keep the price point competitive and to emphasize the social motive behind the program, the company refuses to pass on the cost of fortification (an estimated $3-4 million) to the customer. And the business is already beginning to see results. Since fortification began, retailers have experienced a 10 to 20 percent increase in sales of Nature Fresh and Gemini, and attribute fortification as one of the reasons for the increase. These promising initial results have led to at least one competitors decision to fortify. This may detract from the fortification-brand association the company is building. However, Mr. Chaudhry believes that considering fortification as a competitive advantage would be missing the point. He sees Cargill as an example for others, with a long-term vision that every oil will eventually be fortified. The lack of government incentives and low consumer demand for fortified products discourage other companies from fortifying, and Cargill hopes its program will pave the path for them. Cargill and GAIN also engage in advocacy efforts
with the central and state governments to promote fortification, which has resulted in some positive developments with the FSSAI in creating fortification policies.
This consumer, wife and mother of two, has recently switched to buying Nature Fresh due to its additional health benefits she learned about from an advertisement on TV. The ad prompted her to speak with her doctor about how to ensure her family consumes the right amount of daily vitamins and minerals. According to Mr. Chaudhry, Cargill, in this scheme, is an enabler more than a doer an enabler to creating greater value for the Indian population
TEST
The companys ultimate challenge remains that the severely malnourished segments at the base of the pyramid (BoP) still have little to no ability to afford or access fortified products. The company sees its role in this area as a partner with government, aid organizations, and other stakeholders to improve the countrys nutritional indices. Given that Cargill is a significant producer of a basic food commodity used by all socio-economic segments, the company realizes it has an important role to play in nutrition. Fortifying its core product offering is the companys first step in fighting malnutrition more comprehensively through its Nourishing India initiatives. Through these programs, the company aims to reach Indias most disadvantaged areas in order to make a sustainable health impact.
REPLICATE
PARTNER
Leverage resources to improve nutrition through partnerships with NGOs, IOs, and government
actors across sectors must cooperate to create general awareness about meeting daily nutritional needs and strengthening existing distribution channels, and introducing financially sustainable models for fortification. What started as a purely social initiative transformed into a serious business commitment to Nourishing India. And the company is not acting alone: its partnerships with international players in the nutrition sphere such as GAIN, WFP, and others are generating initiatives NOURISHING INDIA In line with Cargills vision to be the global leader in nourishing people, the company is committed to leveraging the companys leadership in food and agriculture to tackle complex challenges of nutrition and hunger. Nourishing India is Cargills multipronged concept to carry micronutrients to the masses through collaboration, donations, advocacy and corporate engagement with government and NGOs. Cargill provides grants for research, education, and food and nutrition programs, and supports several programs aiming to make a sustainable health impact, e.g.: Collaborates with the World Food Programme (WFP) to conduct a fast track strategy to improve nutrition in Madhya Pradesh Partners with CARE in Kutch region of Gujarat to address education and livelihood issues, reaching out to more than 45,000 children and 9,000 households. Plays a leadership role in collaborating with the Global FoodBanking Network and Aidmatrix to establish the India Food Banking Network Supports the NGO Akshaya Patra via an international grant for its school feeding programs
across the country to target the neediest segments of Indias population. Cargill India has also succeeded in mobilizing its human capital behind fortification and its meaning. The internal results are clear: the staff is motivated, aware, and engaged. The sense of pride and personal ownership is tangible: employees, even the new recruits, look forward to their volunteering activities within Nourishing India. In their words, they get a different kind of feeling when interacting with the local surrounding communities. Nourishing India is about how people can fortify themselves. - Manish Mishra, Packaging Manager, Cargill India Other multinational companies in India are noticing. The US-India Business Council (USIBC), a business advocacy organization comprised of the United States and Indias top companies, highlights Cargills efforts as an example to its members. As Anku Nath, Director, Trade Policy Advocacy, points out, Cargill is one of the best examples of how a company can go beyond the regular scope of social activities: Instead of helping just one small community, Cargill India impacts millions of people, she says. Through its efforts, Cargill hopes to raise awareness among other leaders in business and politics to help win the fight against malnutrition in India. In the meantime, because the company has positioned its corporate engagement at the heart of its business model, Cargill is improving its brand value, inspiring its employees, and setting the standard for its competitors. In its own way and capacity, the company is creating a lasting impact.
In a country where informal distribution channels account for up to 90 percent of sales, word of mouth is key to success.
This case was prepared by Nisrine Danaf and Rebecca Spohrer (University of Geneva, HEC, IOMBA), and Simon Hagemann. The field research and compilation of this case was made possible by financial and logistical support from the Global Alliance for Improved Nutrition and Cargill India Private Limited. The authors would like to thank the following people for their time and invaluable contributions to their research: Siraj Chaudhry, Country Head Ishteyaque Amjad, Director, Corporate Affairs S. Viraraghavan- Sales & Marketing Director Shailesh Khurana, Head, Marketing and Regional Business Manager Ravi Parmeshwar, Head, HR Ajay Sudevan, Head Sales Development John Joseph, General Manager, Operations Cargill Cares Council members Kandla plant employees Gurgaon office employees Sumi Sood Rita Kabra Anu Malhotra Shobha Jain Gina Saini Matthew Mcilvenna, Deputy Country Director, World Food Program, India Gunjan Kohli, Donor Relations Assistant, World Food Programme, India Kuldip Nar, Managing Director, AidMatrix Angela Nar, Vice President Programmes, Aidmatrix Rekha Sinha, Executive Director, International Life Sciences Institute (ILSI), New Delhi Anku Nath, Director, Trade Policy Advocacy, USIBC Manish Agarwal Ajay Sharma Rajiv Joshi, Category Head Staples, Spencers Gurgaon Kirstin Wulczyn, Associate, Business Alliance, GAIN Ruchika Sachdeva, Partnerships Associate, GAIN India
Gragnolati, M., Shekar, M., Das Gupta, M., Bredenkamp, C., and Lee, Y. Indias Undernourished Children: A Call for Reform and Action. HNP Discussion Paper, August, 2005. 2 Gragnolati, M., Shekar, M., Das Gupta, M., Bredenkamp, C., and Lee, Y. Indias Undernourished Children: A Call for Reform and Action. HNP Discussion Paper, August, 2005. 3 Rao, V. Tackling Indias Malnutrition Problem, Economic Times Mumbai, June 18, 2009 4 Subclinical VAD, defined by a serum retinol concentration of less than 0.7 mol/L, is associated with increased vulnerability to a variety of infectious diseases and, therefore, an increased risk of mortality and morbidity among young children and pregnant women. 5 Gragnolati, M., Shekar, M., Das Gupta, M., Bredenkamp, C., and Lee, Y. Indias Undernourished Children: A Call for Reform and Action. HNP Discussion Paper, August, 2005. 6 Alok Sachan. Vitamin D Deficiency in pregnant women. Department of Endocrinology, Sri Venkateswara Institute of Medical Sciences, Tirupati) 7 Cargill Nourishing People Nourishing India write up 8 Ramesh, P. and Murughan, M. Edible Oil Consumption in India. Asia and Middle East Food Trade Journal (AMEFT), March 2008, p. 3. 9 Cargill Nourishing People, Nourishing India Power Point Presentation
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