United Nations Standing Committee on Nutrition (New York)
Hybrid public-private delivery of preventative lipid-based nutrient supplement products: Key- challenges,opportunities and players in an emerging product space
INTRODUCTION
In the past decade, Plumpy’Nut® has seen remarkable success as a means of treating severe acute malnutrition (SAM) among young children. This product triggered a revolution in the treatment of SAM by (i) inspiring a range of Ready-to-Use Therapeutic Foods (RUTFs) and (ii) enabling communities and even households instead of clinics or hospitals to treat SAM. Because of this widespread success and the interest it attracted from the humanitarian community, the structure of the RUTF product space emerged quickly and quite organically. Specifically, the structuring of this product space – which in-cludes legal, regulatory, commercial, and distributional dimensions – was led primarily by the three major distributors: United Nations Children's Fund (UNICEF), Médecins Sans Frontières (MSF) and the World Food Programme (WFP). This structure now provides a valuable framework within which RUTF supply chains can continue to evolve in response to changing producers, purchasers and products. It also illustrates effective inter-action between key nutrition stakeholders in the public, non-profit and private sectors united by a shared nutrition priority.
The recent success of RUTFs in treating SAM has sparked the development of an ever-expanding continuum of LNS products1. Large-quantity RUTFs (e.g., Plumpy’Nut®) designed to supply all of an individual’s daily food energy requirements and treat SAM anchor one end of this continuum. Medium-quantity LNS products (e.g., Plumpy’Doz®, Plumpy’Sup®) – often called Ready-to-Use Supple-mentary Foods (RUSFs) – designed to supply more than half of daily food energy requirements and treat Moderate Acute Malnutrition (MAM) or prevent seasonal wasting occupy the middle of the LNS continuum. Small-quantity LNS products (e.g., Nutributter®) designed to supply less than half of daily food energy requirements and prevent undernutrition anchor the other end of the continuum. These preventative LNS (LNS-P) products specifically aim to prevent undernutrition among pregnant/lactating women and young children who have access to sufficient calories, but lack essential micronutrients and fatty acids.
While the effectiveness of RUTFs is well established, RUSFs and LNS-P products are still under clinical trial. As a technical matter, starting with RUTFs on one end and sliding across this LNS continuum implies modified micronutrient levels and formulations, calorie content and dosage rates. As a practical matter, however, sliding across this continuum also involves major changes to their delivery, consumption and prospective benefits. Many of these important changes and challenges stem from differences in intended usage across the LNS continuum. While RUTFs are designed as a short-term emergency treatment to be consumed intensively as part of a short-term treatment regimen, LNS-P products are designed to be consumed daily (or at least regularly) to compensate for the lack of essential micronutrients and fatty acids, and thereby protect against malnutrition.
Differences between RUTFs, RUSFs and LNS-P products have important implications for their respective supply and distribution chains. The es-sential nutritional, legal and economic aspects of these products, while similar on the surface, are distinct in ways that raise unique challenges (and possibly opportunities) for the development, production and distribution of products along the LNS continuum, including how public, non-profit and private stakeholders interact.
In this paper, I explore how seemingly minor differences along this continuum of LNS products may translate into major differences in the structure of these “product spaces” – that is, in how RUSF and LNS-P products are likely to be produced, regulated, distributed and consumed differently than their RUTF cousins. These differences imply new challenges for effectively engaging and coordinating the interests and actions of different stakeholders. To simplify this exploration, I specifically contrast the established RUTF product space with the emerging LNS-P product space and acknowledge that the RUSF product space shares some features of both2.
LNS-P PRODUCTS WILL REQUIRE DISTRIBUTION THROUGH BOTH PUBLIC CHANNELS AND PRIVATE MARKETS
Many important differences between RUTFs and LNS-P products stem from the fact that the former are therapeutic while the latter are preventative. The donor community - always more reactive than proactive - has long prioritized the treatment of SAM over the prevention of malnutrition. Although some new initiatives allocate public funds to preventative interventions (e.g., the Scaling Up Nutrition (SUN) Movement, some recent Maternal Child Health and Nutrition (MCHN) programs at the United States Agency for International Development (USAID) that distribute fortified corn soya blends to prevent malnutrition, etc.), widespread distribution of LNS-P products in the urban and rural communities that face malnutrition risks will require a departure from business as usual. Specifically, if LNS-P products are shown to be efficacious, providing vulnerable populations with consistent and sustainable access to these complementary feeding supplements, while continuing to address the underlying causes of these malnutrition risks, will require either an unprecedented and unlikely expansion in donor funding or an alternative distribution model that includes both programmatic and private market channels.
While private market involvement in LNS-P product distribution3 can help close the gap between the vast need for malnutrition prevention and the limited public funds available to finance programmatic distribution, a few observations may shed additional light on the potential role of private market distribution.
First, in many developing countries, the need for nutritional supplementation of pregnant/lactating women and young children may extend well beyond households below the poverty line since the provision of public investments in public health typically lag behind increases in private incomes. This means that a seemingly small move along the LNS continuum towards LNS-P may dramatically expand the pool of potential beneficiaries. International organizations will likely take the lead in setting standards, financing and distributing LNS-P to a vulnerable core of this pool, the rest – perhaps the majority – will depend on private market access.
Second, involving private markets in RUSF distribution means more than requiring people to pay for these products. While the undernutrition problem is unique in its complexity, experiences from other health products illustrate this point. A decade of research into the private demand for health products such as bed nets, deworming medicines and water disinfectant has shown that charging even small prices for these goods can quickly eliminate any private demand for them (Abdul Latif Jameel Poverty Action Lab 2011). Yet, many poor households regularly buy products such as soaps, shampoos and snacks that are actively marketed by the private sector. We certainly have more to learn about effectively marketing nutritional and health products, but it is important at this stage to realize that distribution through private markets involves much more than charging a price for goods. The private sector’s real comparative advantage comes in the rewards it provides to those who understand and effectively shape and meet consumer preferences, in the incentives provided to each participant in efficient and functional supply chains, and in the innovation it spurs among competitors to devise new and better ways of delivering products (e.g. in new packages or sizes, bundled with complementary products, etc.). Obviously, the private sector brings its own limitations, but it is important to keep in mind that it differs from public channel distribution in more ways than just putting a price on goods and services.
Lastly, we still do not know how effectively LNS-P products prevent undernutrition, and what we learn from ongoing efficacy trials such as those in the International Lipid-Based Nutritional Supplements (iLiNS) project (iLiNS 2011) and concurrent effectiveness studies will shape both public and private distribution of these products. In the case of RUTFs, the early Plumpy’Nut® evidence was stunning enough to induce both a reallocation of budgets towards RUTFs and a general expansion of support for nutrition interventions.
Dramatic evidence of long-run benefits in the case of LNS-P products could similarly encourage the donor community to expand their funding of preventative supplementation for young children. Note, however, that any evidence that impresses UNICEF will also impress multinational firms like Pepsico and Nestlé. These firms clearly have an interest in this market. For example, Pepsico recently announced Enterprise EthioPEA, a major public-private venture with WFP and USAID to build domestic RUSF production capacity in Ethiopia that includes production contracts and technical training of farmers to expand chickpea production (PepsiCo 2011). With decades of experience marketing products in Africa and Asia, these multinational firms will heavily shape private markets for LNS-P products – if they decide this is a viable market.
MIXED PUBLIC-PRIVATE DISTRIBUTION OF LNS-P PRODUCTS WILL STRONGLY INFLUENCE THE STRUCTURE OF THIS PRODUCT SPACE
The mix of public channels and private markets that is likely to emerge in the coming years has profound implications for the legal and economic structure of the LNS-P product space and for the interaction between public and private players. This mix of distribution approaches will force players to seriously consider consumers’ perspectives, often neglected, and truly engage them as key stakeholders.
Who is the consumer? What do they want? How much are they willing to pay? In the case of programmatic distribution of RUTFs, international organizations or non governmental organizations (NGOs) stand between the private producers and the beneficiaries, which dilutes the incentive for producers to treat beneficiaries as consumers. As an example of this effect, when recipient mothers recently expressed dissatisfaction with the taste of a particular RUTF product and requested a brand with a better taste, UNICEF considered requiring their suppliers to remove branded labels from the RUTF products they procure in an attempt to eliminate this problem by making different RUTF products indistinguishable from each other4 – a move that treats clinical and other field staff rather than mothers as the consumers whose consumption ‘experience’ matters. In the case of private market distribution, private producers must carefully incorporate these consumers’ perspectives into the design of both their products and supply chains.
The importance of the consumer perspective in the development of private markets for LNS-P products raises a critical feature of the use of these products: LNS-P products must be consumed consistently – perhaps, daily – to provide potential physical or cognitive benefits to children, but any such benefits are only apparent years after these investments are made when the child grows to be stronger and more able both physically and cognitively.
Furthermore, as with many health investments, even if such benefits ultimately come, it may be very difficult for caregivers, family members and neighbors to identify these as LNS-P benefits, as opposed to the benefits associated with a host of possible educational, healthcare or other investments or explanations.
With these observations in mind, five dimensions of the potential structure of the LNS-P space merit careful consideration. While each dimension is unique in important ways and sheds a different light on how the public, non-profit and private sectors interact, they are clearly interrelated.
Regulatory Status
What legal options exist for regulating the production, distribution and marketing of LNS-P products?
The Codex Alimentarius presents concerns, threats and (possibly) opportunities related to the structure of this product space, but changes in this domain move at a glacial pace. In a more rapid, recent development, the 2010 World Health Assembly (WHA) issued a resolution that totally precludes health or nutrition claims for products designed for infants and young children, except “where specifically provided for, in relevant Codex Alimentarius standards or national legislation” (WHO 2010). If this resolution were accepted and enforced strictly, it would dramatically impair the development of any private markets for LNS-P products5.
Producer & Supply Chain Coordination
International organizations will likely coordinate the production and distribution of LNS-P products through public channels. While private firms will be responsible for building and maintaining their own supply chains in private markets, these private supply chains will likely be influenced by the structure of public distribution channels. Precisely how the public and private channels influence each other will depend largely on which and how private firms decide to enter the fray.
If the composition of firms involved in LNS-P production mirrors the current industrial structure for RUTFs, these specialized and relatively small producers will continue to be influenced directly by the public channel organizations. With such an industrial structure, there will also be good reasons for producers to coordinate amongst themselves – perhaps by forming a producers’ association.
If instead a few large multinational firms such as Nestlé and Pepsico ramp up and dominate LNS-P production and marketing, the private market may be less influenced by public channels. These firms would independently create and coordinate their supply chains based on their extensive experience distributing and marketing consumer goods to poor consumers in places near and far.
Product Safety, Quality Control & Marketing
In the past decade, the international organizations have developed their own auditing and certification processes to ensure the safety (e.g. sanitation, input quality) and quality (e.g. formulation, shelf life) of RUTFs they procure through public channels. These processes assess both facilities and products based on International Organization for Standardization (ISO) and other standards. While this quality control continues to be done internally and separately by UNICEF, WFP and MSF, a set of shared standards and protocols have emerged as a de facto certification process. To date, these organizations have coordinated their audits somewhat, but have not integrated their efforts as collaborating procurement players. Even though smaller NGOs would like to piggyback on these auditing and certification efforts, large organizations are understandably resistant to assuming the role of third party certifiers.
These experiences with RUTF quality control will shape quality control options in the case of LNS-P products. The existing “in house” RUTF auditing procedures that certify production facilities could quite easily extend to LNS-P products since many current RUTF producers will likely produce LNS-P products as well. While extending the RUTF certification in this way may occur to some extent, the auditing organizations will almost surely insist that their certification not be used in private markets.
In many ways, certification in private markets will be more challenging and more important than in public channels. Private supply chains will have to find a way to ensure product quality and to transmit this information effectively to consumers. This will require effective branding on the part of LNS-P distributors as a way to build trust and provide quality information to consumers. Given the nature of LNS-P products, any branding and marketing effort must be based on credible and verifiable commitments to social responsibility. If multinationals choose to enter the LNS-P market, they will no doubt leverage their established brands in this effort. While smaller, specialized RUTF producers such as Nutriset may have recognized brands in some locations (e.g., Plum-py’Nut®), developing the necessary marketing expertise to effectively and broadly connect with consumers will require massive new investments, a departure from business as usual and great care to avoid mishaps. Whether multinational firms or specialized producers enter this fray, any campaign to brand LNS-P products and communicate with consumers could be significantly constrained by the 2010 World Health Assembly resolution mentioned above.
Branding alone will not, however, be sufficient. If private demand for LNS-P products emerges, the threat of low quality and cheaper knock-off products with less or no nutritional value may present a real threat. Consumers may be unable to discern any differences between these knock-off products and high quality LNS-P products because long-term preventative benefits are extremely difficult for consumers to see and to attribute. Proper certification of LNS-P product quality, though complicated, may therefore be critical to these markets. Again the industrial structure matters in this regard. If major multinationals with established brands begin producing and distributing LNS-P products, third party certification may not be essential. If many specialized producers wish to survive in private markets, however, they will likely have to collaborate as a producers’ association and rely on third party certification based on standards set by an authoritative institution (e.g. the World Health Organization (WHO)). While such a certification for high quality and “recommended” LNS-P products could be pivotal to private markets in such a case, it would also entail additional costs. If borne by the private sector, these costs would squeeze inevitably tight profit margins for LNS-P products. If borne by the public sector as part of a general campaign to ensure food quality and safety, these costs may make public health trade-offs yet more difficult.
Product Space “Neighbors”
Even if LNS-P products are novel in their formulation, have important impacts on early childhood nutrition, and are cost effective, consumers will not see them as unique. In many contexts they will be surrounded by neighboring products that similarly aim to improve childhood nutrition such as micronutrient powders6 (recently recommended by WHO [WHO 2011]) and fortified cereals and blends. Nutritionally, these neighboring products may not substitute for LNS-P products, but they may appear to be near-perfect substitutes to consumers faced with a growing variety of supplements and other nutritional products. These competing products and their regulatory, legal and commercial structure will shape the evolution of private markets for LNS-P products.
Consumer Behaviour
In programmatic distribution, international organizations try to select the most cost-effective and sustainable intervention to treat or prevent malnutrition given local preferences and then work through local partners to implement this intervention. Al-though compliance of recipients can be a concern in such a programmatic approach, consumers in private LNS-P markets will have substantially greater latitude in deciding whether, when and how frequently to use LNS-P products in complementary feeding. We do not know whether daily supplementation is necessary to reap the full benefits of LNS-P products, but periodic or infrequent usage may deliver far fewer benefits.
LNS-P distribution, whether through public or private channels, must therefore include careful training and education to ensure it is used properly as a complementary feeding supplement. Ensuring proper consumption will demand an effective communications campaign to succeed where many similar efforts have failed. Compared to handwashing campaigns that use ultraviolet light to show the immediate effect of washing hands, for example, campaigns to motivate mothers to use LNS-P products in complementary feeding may be more challenging since inherently long-run benefits are difficult to showcase in the short-run.
The 2010 World Health Assembly resolution charges governments with the responsibility to provide this training and education and virtually bans any private sector involvement. Such restrictions would require genuine public-private partnerships: instead of public channels and private markets operating in parallel, they would have to be carefully integrated, which can be challenging in practice.
In most settings, even relatively poor households have some discretionary income, which is often spent on small candies or other snacks. This may mean that purchasing power per se will not be a major constraint on LNS-P markets, but consistent or daily consumption of LNS-P products could nonetheless strain many households in poor areas. For those choosing to purchase a steady supply of LNS-P, it is important to understand how they would finance these purchases. Would they purchase and consume less of other foods? If so, what is the net nutritional effect of these reallo-cated household budgets?
Similarly, it will be important to consider what households perceive as viable alternative investments to LNS-P products. For example, an informed mother in a poor household might reasonably wonder how the benefits of mixing LNS-P in her young child’s food compare to instead giving her an egg and a mango each day. While it may be challenging or impossible and expensive7 for even an ambitious and informed mother to perfectly replicate the nutritional profile of LNS-P products using local foods alone, it is not hard to see how she might see cheaper alternatives as close enough – particularly given the competing demands for her attention and resources. Clearly, nutritional campaigns should strive to provide such a mother with adequate and accurate information to improve these dietary decisions, but the broader set of constraints she faces fundamentally shapes the value of this information to her. To wit, this mother faces other important tradeoffs between any of these nutritional investments in her child’s health and educational or other investments in her child’s future. These broader investment alternatives may influence (and be influenced by) households’ responses to LNS-P products appearing in pri-vate markets.
Table 1 summarizes each of these five dimensions of the LNS-P product space with several key questions. This is by no means an exhaustive list of considerations. Instead, these questions aim to illustrate each dimension and initiate useful dialogue.
THE STRUCTURE OF OTHER NUTRITIONAL AND HEALTH PRODUCT SPACES CAN PROVIDE A USEFUL COMPARISON
A similar intriguing mix of direct and indirect influences of public channels and nascent private markets is apparent with other products that aim to improve health and nutritional outcomes. Contrasting the structure of these product spaces with the emerging LNS-P product space yields several insights. Based on similarities, parallels can suggest lessons for navigating the challenges described above. Differences indicate unique features of LNS-P products. First, consider Insecticide-Treated Nets (ITNs), which share some features with LNS-P products. Concerns about the viability of pure public channel distribution of ITNs have motivated efforts to expand private markets. As with LNS-P products, the benefits of ITN usage are not always immediately apparent, and the quality of the insecticide treatment is often unobservable. Although ITNs are intended to be used nightly, they are not purchased for daily consumption like LNS-P products. In the absence of subscription-type service, the fact that LNS-P products are supposed to be consumed regularly poses a real challenge to private market development.
Through the Bed Net Dialogue, coordinated by GBCHealth, several private companies coordinate the production and distribution of quality bed nets and rely on a certification process to streamline public procurement processes (GBCHealth 2009). The coordination of private suppliers around a set of WHO standards could be a useful model for LNS-P producers. Given the challenges outlined above, however, such a coordinated effort may need to reach further than the Bed Net Dialogue currently does and include the coordination of private marketing activities. Moreover, establishing standards may be more difficult in the case of LNS-P products.
Next, consider crop biofortification, which shares product space similarities with LNS-P products even if their respective nutritional approaches and target beneficiaries are quite different. Crops that are biofortified to produce micronutrients can provide health benefits. Although Golden-Rice, the highest profile biofortifed crop, is genetically modified, Harvest-Plus uses primarily conventional plant breeding techniques to biofortify crops such as beans, maize, sweet potato, cassava, millet and wheat with iron, vitamin A, and zinc. As with LNS-P products, any health benefits associated with eating these biofortified crops are unobservable in the short term. For some of these crops, especially open pollinated varieties, private markets may not play much of a role, but for others a mix of public channels and private markets is envisioned.
As a parallel to a mother’s decision to use LNS-P for complementary feeding, consider a farmer’s decision to grow a biofortified crop. The fact that biofortification traits are bred into existing and familiar crops makes the farmer’s decision easier. Instead of confronting a completely new purchasing decision and facing the prospect of making the decision regularly or even daily, the farmer purchases or otherwise procures seeds or vines as they always have and does so relatively infrequently. Whereas the LNS-P decision is akin to establishing a good habit, which can be challenging, the biofortified crop decision involves a slight modification to an existing decision, which – although easier – may still constrain adoption in some contexts. As for the integration of public and private channels, the fact that biofortification adds micronutrients directly into a staple crop simplifies the design of hybrid distribution channels. To the extent that farmers access seeds through private channels, the small marginal cost of adding a biofortified trait could be subsidized as part of a public channel. Since LNS-P products are not bundled with the foods with which they are ultimately mixed, no similar hybrid distribution approach is apparent for LNS-P products.
Finally, regulatory dimensions of biofortified crops may be informative. In cases where crops are biofortified through genetic modification (e.g. GoldenRice), a host of biosafety regulations obviously apply. Yet the presence of biofortified traits alone has not triggered much discussion or concern about regulation of vitamin content because by design the vitamin concentration is fixed at levels that make overdoses very unlikely. Whereas certification and labeling are critical aspects of the LNS-P product space as a whole and of some biofortified crops, these regulatory dimensions are less critical in the case of biofortified crops that are easy to distinguish from their non-biofortified cousins by an observable feature such as color (orange in the case of beta-carotene enriched crops).
CONCLUSIONS
In the past decade, the success of Plumpy’Nut® in treating SAM has triggered widespread changes in public programmatic delivery of emergency food aid and has unleashed a productive public-private interaction that lead to the development of dozens of other RUTFs and, more recently, a range of other LNS-type products. Whereas the structure of the RUTF product space – including various legal and economic aspects – emerged quickly due to the direct interests of and management by UNICEF, WFP, and MSF, the structuring of the preventative LNS (LNS-P) product space is complicated by the fact that LNS-P products will likely require distribution through both public channels and private markets that, in turn, will lead to new ways of engagement for public, non-profit and private players. As always, new interactions between the public and private sectors bring both new opportunities and new risks. This paper highlights five dimensions of this emerging product space that will influence its eventual structure and, ultimately, to the success of LNS-P products in preventing malnutrition among vulnerable populations: regulation; producer and supply chain coordination; product safety, quality control and marketing; neighboring products; and consumer behaviour. Although the continuum of LNS products – from RUTFs to RUSFs to LNS-P products – shares several common features, the specific formulations and intended usage of these products are distinct and the challenges and opportunities facing their respective product spaces are often unique. In this paper, I have focused on considerations that are relevant to the LNS-P product space, while acknowledging that the RUSF product space shares some features but differs in other important ways.
Given the product space dimensions described above, there is one as-yet-unknown feature of the LNS-P product space that will most influence the structure it takes on in the coming years. The RUTF product space emerged through the direct guidance of the major international organizations that have a direct stake in the public procurement and distribution of these products. These organizations are likely to assume a less influential role in the emerging RUSF and LNS-P product spaces due to the greater importance private market production and delivery will play with these products. If large multinational corporations see an opportunity with these LNS products, the structure of these respective product spaces will inevitably reflect their involvement and interests. If instead relatively small, specialized producers continue to develop and market RUSF and LNS-P products, their influence on these emerging product spaces will hinge on whether and how well these producers organize themselves (e.g. as a producers’ association) and agree on norms and standards, and on the types and amounts of branding and marketing quantities investments. At this point, it is unclear which of these routes is more probable. While important legal and economic dimensions to RUSF and LNS-P products will almost surely emerge in the near future, the exact structure of these product spaces is therefore genuinely uncertain.
As LNS products shift from pure public distribution through programmatic channels to hybrid channels with more private market involvement, appreciating and responding to the perspectives of consumers by truly considering and engaging consumers in this public-private interaction as key stakeholders will be essential. In public channels, the preferences of the mothers who are generally the targeted beneficiaries can be muted or muddled by the dominant perception of beneficiaries as patients following prescriptions rather than as consumers making choices. In private market distribution, understanding the preferences of these mothers and the constraints and trade-offs that convert these preferences into observed choices is essential to any viable delivery model. As the product space for RUSF and LNS-P products emerges and evolves in the coming years, it will be increasingly important for key players in both the private and public sectors to build their strategies around the question, “Who is the customer here and what does she want?”
Acknowledgements
This paper was inspired by my participation in the International Lipid-Based Nutrient (iLiNS) project and at a roundtable event hosted by Nutriset in October 2011 in a session entitled, “Quel statut pour les biens essentiels de santé publique?” I thank several participants at that event for their insights, including Jean-Hervé Bradol, Isabelle and Michel Lescanne, and Omar Taha. I also thank Katie Adams, Mary Arimond, Kathryn Dewey, Susan Horton, Jennifer James, and Stephen Vosti for sharing their expertise and perspectives on these topics and providing feedback on early versions of this paper. Three anonymous reviewers provided helpful suggestions and comments, for which I am also grateful.
article écrit par Travis J. Lybbert, Associate Professor, Agricultural & Resource Economics, University of California, Davis & Member, Giannini Foundation of Agricultural Economics
