A new paradigm for food aid: Building new local food businesses

Value Chains

A new paradigm for food aid: Building new local food businesses

Girls enjoy the new cereal bars at school, and the companies that produced them are enjoying a new, popular product for commercial sale. Photo: Jennifer Hyman/Land O' Lakes International Development.

Crunch time: How a 1-year grant reshaped a Bangladesh cereal market

While figuring out how to bring nutritious food faster and cheaper to hungry kids in Bangladesh, Land O'Lakes identified a way to connect smallholder farmers with major food processors, too. 

Even better, the initiative discovered a previously unknown commercial market that now turns small farms' produce into 2.5 million low-cost cereal bars each month.

Land O'Lakes International Development, the international assistance arm of the U.S. dairy cooperative, anticipated that hiring large Bangladeshi food processors to produce a healthy cereal bar snack for school kids would make limited aid dollars go farther. Getting food to kids is an urgent, daily challenge in Bangladesh, where 41 percent of children are already stunted as a result of chronic malnutrition.

Working with a grant from the U.S. Department of Agriculture, Land O'Lakes had one year to find out if their hunch was right. The first step was to hire food processors to partner on the project, called the Bangladesh Local and Regional Procurement Pilot. Land O'Lakes chose two established local processers: PRAN, which stands for "Program for Rural Advancement Nationally," and Olympic Industries, both established local processors, to take on the task.

The second issue was sourcing ingredients for the cereal bars: puffed rice, chickpeas, peanuts, sesame seeds. Though the country has a primarily agrarian economy--it's the world's fourth largest producer of rice—those who rely on food assistance often consume commodities that are shipped in by aid agencies, and local food processors heavily rely on imported ingredients, too.

Though PRAN had relationships with some local farmers, Olympic worked largely with out-of-country wholesalers. By connecting these large companies with smallholder farmers, Land O'Lakes forged a supplier-buyer relationship for this product, which was new to Bangladesh. Motivated by the prospect of a solid relationship with a large buyer, farmers began putting effort into increasing the quality of their product.

“The companies saw a real commercial opportunity here," said Jennifer Hyman, Director of Communications for Land O’Lakes International Development, in an interview. "One of the reasons they found it hard to work with local farmers was because farmers didn't meet quality standards. We helped the companies set specifications and communicate those needs with farmers, who then understood that taking the time to remove pebbles from the bags of grain would result in a product more attractive to the processors, which was ultimately worth more money."

Seeing the commercial potential for this development partnership, the processors invested their own money to purchase the new equipment they needed to produce the cereal bars. Meanwhile, Land O’Lakes set quality and nutritional standards, and provided training on food quality, safety, plant upgrading and processing efficiency. The project also hired a third-party quality assurance firm to monitor the processors, perform random inspections and ensure that appropriate hygiene standards were maintained during food production and distribution.

The vitamin fortified cereal bar they produced cost about eight cents per bar, compared to the 20 to 26 cents cost for milk and cookie snacks Land O’Lakes provided to Bangladeshi students in previous programs, which were funded by monetizing imported commodities. The pilot program fed about 100,000 students and teachers in 441 primary schools.

The pilot was completed on schedule in 2011, but both Olympic and PRAN decided to make the cereal bars a part of their ongoing product lines. Olympic took the product a step further by improving their taste and shelf-life and trying out different in-season produce, and has begun construction of a new plant to more efficiently produce the cereal bars. The company now has six different varieties of the bars in production and sells 500,000 per month to its dedicated network of small vendors and grocery stores throughout the country. Once PRAN had the proper equipment in place, they also grew their business and saw increased profits. They now make over two million bars each month sold commercially.

"Because these companies found a local supplier and market for the cereal bars, they're producing more commercially than we ever did for development purposes," said Hyman. "We never thought they'd carry it on. And, considering the regular natural disasters the country faces, we think it would be an excellent, locally-produced product for emergency food aid needs, as well." Unlike the flattened rice with molasses that Bangladeshis typically receive as food aid during the country’s cyclical monsoons and floods, the cereal bars do not require accessing clean water prior to consumption.

The project has allowed both companies to have confidence in expanding their business relationship with local farmers. “At this point in the program, purchasing locally is no longer a constraint for us,” said Samad Miraly, executive director of Olympic Industries. “We have identified regular suppliers, and producers are stepping up quality.”

By the numbers:

  • 76 percent of parents in program areas viewed the cereal bars as the most effective incentive for their children to attend school.
  • The cereal bars created a 27 percent increase in school attendance, to reach levels of approximately 95 percent.
  • It only took 3 months from the time the grant was signed for the cereal bars to get to the school children. The typical timeline for import-based food aid in Bangladesh is 4.5 months.
  • Programs, even pilots, need more than 1 year to assess whether they've had a true impact on the local economy.

Through the pilot, Land O'Lakes International Development discovered that producing nutritious snacks for kids is indeed cheaper and faster when sourced in-country, and working with the right partners. But they also found that making connections between farmers and food processors can strengthen a once-weak value chain with incredible results.


 

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