NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

As I discussed in Tuesday’s post, there are an increasing number of businesses producing health-improving consumer products that are affordable to customers at the base of the pyramid. Today, I will highlight a few more examples, including specialized food items meant to improve nutrition, and inexpensive filters that reduce water-borne illnesses.

Nutrition

More than 350 million children and adults worldwide are suffering from malnutrition, a problem which accounts for more than half of child mortality in low-income countries. In addition to making a person more susceptible to illness in general, a diet bereft of proper nutrients can result in otherwise easily preventable diseases. For example, a lack of iodine and iron – normally found in foods like meat that are often too expensive for the poor to buy – severely impacts child growth and intellectual development. Vitamin A deficiency is also the main cause of preventable blindness.

Seeing a market opportunity, two of the world’s largest consumer goods companies have developed products aimed at combating poor nutrition. Proctor & Gamble (P&G) has created NutriStar, a powdered health drink designed to help kids grow better while also boosting their mental alertness and performance, while Hindustan Lever Limited (HLL) has developed a more stable iodine for salt that is effective in preventing iodine deficiency disorder.

The NutriStar roll-out is an excellent example of how a multinational can iteratively develop a strategy for succeeding in markets at the base of the pyramid (BOP). The product was originally marketed as NutriDelight in the Philippines, where P&G tried unsuccessfully to both educate the public on the health benefits of micronutrients as well as manufacture and distribute the product – all on its own. The company did not possess the local knowledge and reach to deliver NutriDelight to the poorest communities, and affordable price-points were never attained because money that would have been better spent creating demand was diverted to public education campaigns. Eventually, a lack of intellectual property rights allowed local competitors to market a similar looking but less expensive product that claimed to have the same health benefits.

Undeterred, P&G then launched the re-branded NutriStar drink in Venezuela. Rather than going it alone again, this time the company began to build a network of partnerships with NGOs, multilaterals, and local pediatric associations in order to develop its information and product awareness. P&G also sought partners with expertise in production and distribution, or with government or NGO agencies involved in education or social marketing. Unlike the Philippines, P&G also relied on local enterprises to manufacture and distribute the product, adding additional value through regional job creation.

Despite these efforts, it proved difficult to reach the people who could benefit most from the product. Political instability impeded P&G’s ability to refine the model further, eventually leading the company to pull NutriStar out of the Venezuelan market all together. However, P&G continues to press on: through a partnership with USAID, the drink is now being marketed in Nicaragua.

In India, HLL is selling an affordable iodized salt aimed at eliminating iodine deficiency disorder (IDD), a condition that hinders the growth and intellectual development of 70 million people worldwide. Like P&G, HLL has added local partners to its value chain. By using village-based entrepreneurs to sell products in remote areas, HLL is ensuring its availability, as well as providing jobs, income, and self-respect for the poor.

The product has since been replicated in Africa, where the Unilever Africa Regional Group created a separate business unit called Popular Foods to target mass-market consumers with nutritious foods at affordable prices. Marketed under the brand name Annapurna, the salt is sold in small sachets to help preserve the iodine and keep costs low. In conjunction with NGOs and governments, Unilever also sponsors a project to educate rural populations about the health benefits of iodized salt.

Both P&G and HLL were able to get a foothold into new markets by entering into a number of unconventional partnerships. They relied on local expertise to create awareness and demand for their products, and utilized local distribution chains to penetrate rural areas they otherwise could not access. In the process, they added value to the local economy by creating a number of sustainable livelihoods. The partnerships also allowed both companies to focus on their strengths, namely product development and branding, rather than trying to do everything on their own.

Water-borne Illnesses

According to the UN, 1.3 billion people already lack access to ?safe? drinking water, and with global consumption of water currently doubling every 20 years, 48 countries are expected to face chronic water shortages by 2025. In developing countries, this means higher prices for clean water, and as a result, higher rates of diarrhea and other illnesses; at any one time, it is estimated that half of the world’s hospital beds are occupied by patients suffering from water-borne diseases.

One company, KX industries, has recognized the growing need, and seized upon the market opportunity by developing a nanotech microbiological water filter specifically for emerging market economies. The gravity-flow device known as the ?World Filter? is expected to cost as little as $6, and remove chemicals, bacteria, and viruses to provide clean and safe water for an entire family for only $ .02 / day. To keep costs low and quickly scale their operations, the US-based company is establishing local partnerships for both manufacturing and distribution, using a model similar to the beverage bottling industry. While other competing technologies do exist–such as ceramic or reverse osmosis filtration–the KX filter is one of the least expensive, due partially to the fact that it was developed explicitly for BOP markets.

Like the P&G and HLL examples above, Indian water filter manufacturer Mytry faced challenges raising awareness about the usefulness of its product to rural populations; in this case, the potential dangers of drinking water that contains high flouride levels. Developed at the IIT Kanpur, the filter technology has been proven to remove fluoride, making groundwater safe for consumption. To educate the market, Mytry developed a marketing strategy that included hiring an award-winning group of entertainers to travel to different communities and educate people about the benefits of its fluoride removal filter.

Finally, Proctor & Gamble is also producing a water filtration system for low-income households. Marketed under the brandname PuR, the company sells single serving sachets that contain the same ingredients that are found in municipal water treatment systems. Each sachet is capable of treating up to 10 liters of water. Adding one sachet to a bucket of dirty water forces all the bacteria, viruses and pollutants to aggregate at the bottom, leaving pure and safe drinking water at the top. The sachets are ideal for BOP markets; their small size makes them convenient to transport and store, and their low cost – about US$ 0.10 in the commercial model–ensure that even the poorest families can make use of them. P&G is now working in collaboration with non-governmental organizations and governments to develop a sustainable market-based approach for delivery.

Like the nutrition examples above, each water filter company relies on local partners for manufacturing and distribution. In areas where potential customers need to be educated on a product’s utility, local partnerships have also proven beneficial.