We need to re-shape food markets for the benefit and health of the poor
We need to decide what kind of food and nutrition systems we want to build, and then talk about how to use policy and programmes to build them. A number of other contributors have asked about real world examples and cases. This post refers to several, from IDS’s work on markets and nutritious food.
First, we should recognize that food and diet are not the sole determinants of nutrition. And markets aren’t the only way people access food. Hundreds of millions of smallhold farming households grow much of their food. This household production is, in some cases, an important source of nutritious diets; it’s also where the majority of ‘nutrition-sensitive agriculture’ programmes have focused.
But we can’t ignore markets. The majority of the world is already buying their food, and this will increase in the short or medium term. Yet, at present, most markets are failing colossally to provide access to healthy foods for poor populations (in both North and South), and we see the growing ‘double burden’ of over/undernutrition.
I want to highlight 3 challenges facing efforts to promote the role of the private sector in nutritious foods:
Food markets are usually not efficient
The starting point is that the vast majority of markets for food don’t function well; they are riddled with market failures. There’s lots of debate about the effects of financial speculation on global food markets. But in most countries, even domestic markets have huge problems. Especially common is the so-called ‘credence problem’. This happens when consumers can’t distinguish between a nutritious form of food, and a nutrient-poor alternative. The result is that food producers (whether large or small) have no incentive to make healthier foods. (A good example is infant weaning foods in many countries.)
The implication is that, so long as people are buying food, we need various forms of regulation and other mechanisms to address these problems.
Formal businesses – when they sell nutritious food – don’t sell it to the poor
We don’t have the numbers to generalize, but based on a number of case studies, it appears that most of the businesses explicitly making nutritious food products are selling them to middle- and upper-income consumers. This is true both of medium-size domestic companies and multinationals. There are examples where ventures have set out to sell products to ‘bottom of the pyramid’ populations, but we’ve seen in a number of cases that they have had to shift strategy and focus on the wealthy, in order to recover costs (this was case for Grameen Danone Foods in Bangladesh). Again, this calls for attention to the policy environment and the structure of incentives.
The exceptions are products sold to public agencies, such as WFP, which distribute them to vulnerable populations. The best-known example is Plumpy’Nut, a Ready-to-Use Therapeutic Food. But when you take the same (or very similar) products and try to sell them in consumer markets, things are radically different, and it’s unclear whether consumers will be willing to pay for them, and whether companies will be able to fend off competition from non-nutritious competitors. (For an excellent review of this issue, see Lybbert 2011, UNSCN News 39)
Informal markets are crucial providers for the poor
In an earlier contribution, Aliya Bakry (and others) point out that the huge range of actors contained within the ‘private sector’. Much of the discussion about how to encourage businesses to produce nutritious foods focus is on multinational corporations, or large domestic companies. But the potential of these actors has only been proven in a few areas (most notably, in national-level fortification of staple foods like flour). Yet, most of the world’s poor already rely on informal food markets. (OECD data indicate that informal markets are growing in all regions.) These markets produce, transport and provide foods at low cost, and they are especially dominant for nutrient dense and fresh foods. Informal markets also face important problems (including the problem of credence goods described above). They involve large numbers of individuals and small businesses, and are difficult for policy to coordinate.
Are there models we can learn from about what might improve food markets for the poor? There are interesting cases to look at. For example, in Ghana, UNICEF and the government helped spark a large number of informal businesses selling weaning foods aimed at infants. This market expanded rapidly and organically, but it also lacks transparency for consumers to know what they are paying for. In Mozambique, donor-funded projects tried to build local markets for orange-fleshed sweet potato, aiming to convince consumers it was worth paying slightly more for the more nutritious orange variety, and to convince traders to buy and promote them.
We need serious debates about what kind of food system can deliver nutritious foods to the people who currently don’t have access. For this foreseeable future, this means we need to address problems with markets. We need more positive cases of ways to do this. What businesses will do depends on the structures and incentives embedded in markets. Improving food markets for the poor needs to be a central issue for policy in this debate.
We need to re-shape food markets for the benefit and health of the poor
We need to decide what kind of food and nutrition systems we want to build, and then talk about how to use policy and programmes to build them. A number of other contributors have asked about real world examples and cases. This post refers to several, from IDS’s work on markets and nutritious food.
First, we should recognize that food and diet are not the sole determinants of nutrition. And markets aren’t the only way people access food. Hundreds of millions of smallhold farming households grow much of their food. This household production is, in some cases, an important source of nutritious diets; it’s also where the majority of ‘nutrition-sensitive agriculture’ programmes have focused.
But we can’t ignore markets. The majority of the world is already buying their food, and this will increase in the short or medium term. Yet, at present, most markets are failing colossally to provide access to healthy foods for poor populations (in both North and South), and we see the growing ‘double burden’ of over/undernutrition.
I want to highlight 3 challenges facing efforts to promote the role of the private sector in nutritious foods:
Food markets are usually not efficient
The starting point is that the vast majority of markets for food don’t function well; they are riddled with market failures. There’s lots of debate about the effects of financial speculation on global food markets. But in most countries, even domestic markets have huge problems. Especially common is the so-called ‘credence problem’. This happens when consumers can’t distinguish between a nutritious form of food, and a nutrient-poor alternative. The result is that food producers (whether large or small) have no incentive to make healthier foods. (A good example is infant weaning foods in many countries.)
The implication is that, so long as people are buying food, we need various forms of regulation and other mechanisms to address these problems.
Formal businesses – when they sell nutritious food – don’t sell it to the poor
We don’t have the numbers to generalize, but based on a number of case studies, it appears that most of the businesses explicitly making nutritious food products are selling them to middle- and upper-income consumers. This is true both of medium-size domestic companies and multinationals. There are examples where ventures have set out to sell products to ‘bottom of the pyramid’ populations, but we’ve seen in a number of cases that they have had to shift strategy and focus on the wealthy, in order to recover costs (this was case for Grameen Danone Foods in Bangladesh). Again, this calls for attention to the policy environment and the structure of incentives.
The exceptions are products sold to public agencies, such as WFP, which distribute them to vulnerable populations. The best-known example is Plumpy’Nut, a Ready-to-Use Therapeutic Food. But when you take the same (or very similar) products and try to sell them in consumer markets, things are radically different, and it’s unclear whether consumers will be willing to pay for them, and whether companies will be able to fend off competition from non-nutritious competitors. (For an excellent review of this issue, see Lybbert 2011, UNSCN News 39)
Informal markets are crucial providers for the poor
In an earlier contribution, Aliya Bakry (and others) point out that the huge range of actors contained within the ‘private sector’. Much of the discussion about how to encourage businesses to produce nutritious foods focus is on multinational corporations, or large domestic companies. But the potential of these actors has only been proven in a few areas (most notably, in national-level fortification of staple foods like flour). Yet, most of the world’s poor already rely on informal food markets. (OECD data indicate that informal markets are growing in all regions.) These markets produce, transport and provide foods at low cost, and they are especially dominant for nutrient dense and fresh foods. Informal markets also face important problems (including the problem of credence goods described above). They involve large numbers of individuals and small businesses, and are difficult for policy to coordinate.
Are there models we can learn from about what might improve food markets for the poor? There are interesting cases to look at. For example, in Ghana, UNICEF and the government helped spark a large number of informal businesses selling weaning foods aimed at infants. This market expanded rapidly and organically, but it also lacks transparency for consumers to know what they are paying for. In Mozambique, donor-funded projects tried to build local markets for orange-fleshed sweet potato, aiming to convince consumers it was worth paying slightly more for the more nutritious orange variety, and to convince traders to buy and promote them.
We need serious debates about what kind of food system can deliver nutritious foods to the people who currently don’t have access. For this foreseeable future, this means we need to address problems with markets. We need more positive cases of ways to do this. What businesses will do depends on the structures and incentives embedded in markets. Improving food markets for the poor needs to be a central issue for policy in this debate.