Business Case and Intervention Summary
Intervention Summary
Title: Stimulating the global market for Ready-to-Use Therapeutic Foods (Amul - Valid
Nutrition)
What support will the UK provide?
DFID will contribute £1.5 million of a £2.9 million proposal, with the Indian private sector selffinancing the balance. DFID funds will be provided in the form of an Accountable Grant to
Valid Nutrition to increase the volume and drive down the global market cost of life-saving
products for treating Severe Acute Malnutrition.
Why is UK support required?
1. Over 20 million children worldwide suffer from the treatable condition of Severe Acute
Malnutrition (SAM), which is a significant contributor to child death, stunting, low cognitive
development, and longer term damage to national economies. SAM can be treated
effectively, including through the Community-Based Management of Acute Malnutrition
(CMAM) protocol, using Ready-to-Use Therapeutic Foods (RUTF). CMAM approaches
using RUTF have enabled the treatment of SAM on a scale that was previously
impossible, and cost half that of facility-based care for comparable results in reducing
mortality and improving weight gain, (Collins et al, 2006). However, less than 10% of
children affected by SAM receive RUTF treatment. Around 18 million additional children’s
lives could be improved or saved through better access to affordable RUTF.
2. Global demand for RUTF grew 5 times between 2000 and 2010 (UNICEF, 2010). This
trend is likely to continue as more governments adopt the CMAM protocol to address
SAM, encouraged by the global Scaling Up Nutrition (SUN) movement and the UK-led
Nutrition for Growth (N4G) process. The global RUTF market needs to respond to meet
this demand. UNICEF (the major procurer of RUTF1) highlights an urgent need to:
 boost the supply of RUTF, to extend life-saving treatment to SAM sufferers; and
 reduce the cost of RUTF products, to deliver a better deal for affected countries.
3. Greater competition in the RUTF market is needed to address market failures and improve
reliability and responsiveness during hunger emergencies. Costs rise during peak demand
periods; local manufacturers struggle to meet scale, reliability and quality standards;
reliance remains on imported product from a single French patent holder (Nutriset) and its
franchisees, which is not conducive to a competitive market.
4. Amul and Valid Nutrition have pledged under the 2013 Nutrition for Growth Compact to
work together to produce high quality RUTF and to drive down costs. Amul (India’s
biggest dairy manufacturer) is well-placed to compete on price, quality, reliability and
1
Medicins sans Frontieres (MSF) and the Clinton Health Access Initiative (CHAI) also procure RUTF but at much lower
volumes than UNICEF.
1
sustainability, with ready access to a low cost supply of high quality RUTF ingredients, and
extensive capacity to develop market-ready products. Amul’s cooperative model means
that its supply chain benefits over 3 million small dairy farmers. Valid Nutrition is a nonprofit organisation with extensive experience in making RUTF. Its sister company, Valid
International, developed the CMAM protocol, establishing the Valid family as world leaders
on nutrition. Valid will give Amul the support it needs to move into the RUTF market.
5. DFID has been approached by Valid Nutrition to help realise its partnership with Amul,
attracted by DFID’s global commitment and credibility on nutrition. DFID would provide
around 50% of the anticipated start-up costs as catalytic funding (to reduce the risk, and to
address constraints of capital availability), largely to purchase specialised machinery and
transfer Valid’s know-how on RUTF to Amul. Amul will self-finance the balance, providing
capital, expertise, and sourcing through its supply chain.
6. The catalytic support requested by Amul/Valid offers a good strategic fit with:
 UK leadership on global nutrition, e.g. the Prime Minister’s Olympic Hunger Summit,
2012 and Nutrition for Growth process, 2013; support to SUN, G8 initiatives and
DFID’s policy and programme work;
 DFID’s work to reshape global markets for the benefit of the poor, e.g. similar catalytic
support to successfully stimulate access to affordable generic medicines;
 DFID’s ‘Emerging Powers’ strategy and associated new global partnership with India,
including sharing lessons and testing Indian innovation in developing countries.
7. The Government of India has not issued guidelines for use of RUTF in India. By entering
the global RUTF market, Amul may help to inform debates on domestic use of RUTF.
What are the expected results?
8. Over a 5 year period we expect to see:
 production and sale of 19,750 MT of new Amul RUTF, permitting treatment for nearly 2
million children and saving an estimated 227,125 lives;
 catalytic downward pressure on the global market price for RUTF, stimulated by Amul’s
competitive edge. The target is 10% reduction in the average cost of RUTF in the
global market, which could save UNICEF up to $22m per year (and by association,
save DFID up to $3.1m per year) by 2017;
 enhanced competition and reshaping of the global supply chain for RUTF to drive
improved efficiencies and responsiveness, and hence lives saved;
 a new, India-based production line for RUTF that competes successfully on cost,
quality, reliability and sustainability of supply for SAM treatment in Asia and Africa;
 contribution to broader HMG objectives, including global leadership by India on
nutrition and; a stronger UK-India global partnership for development.
9. The initiative is considered to offer good Value for Money (VFM). It is highly targeted.
Rehabilitating a SAM child using RUTF is much cheaper than facility-based care. DFID’s
£1.5m initial investment is expected to stimulate a 10% reduction in the average global
price of RUTF, saving UNICEF $11-22m per year by 2017 (based on UNICEF’s demand
forecasts). As a major funder of UNICEF’s global RUTF procurement, DFID would gain
VFM savings of $2.4-3.1m per year by 2017.
2
Business Case
Strategic Case
A. Context and need for a DFID intervention
10. Malnutrition is responsible, directly or indirectly, for 45% of deaths among
children under five (Lancet Series 2013 – Taylor et al, 2013), and puts a brake on
national economic development. Severe Acute Malnutrition (SAM), which currently
affects some 20 million children worldwide, is a life threatening condition requiring
urgent treatment. WHO defines SAM by very low weight for height, by visible severe
wasting (characterised by rapid weight loss), or by the presence of nutritional oedema
(fluid build-up leading to swelling and other symptons). Both wasting and nutritional
oedema reduce the child’s resistance to disease and impair a range of body functions.
On average, 30-55% of under-5s affected by SAM will die. But this fatality rate can be
reduced by 55% by managing SAM according to WHO guidelines - either in hospital or
community settings (WHO, 2014).
11. As well as saving lives, investing in the reduction of chronic under-nutrition in
very young children is sound economics. Current childhood malnutrition is expected
to cut future earnings by 20% and cost the global economy $125bn when today’s
children grow up (Save the Children, 2013). Every dollar invested in tackling undernutrition in countries like Bangladesh generate $18 in returns; a package of good
nutrition interventions can raise incomes on average by 11% every year (Hoddinott et al,
2013). Better nourished children are less likely to be sick throughout their lives and more
likely to attain their full physical and cognitive development – they make better students
and more economically productive citizens. Economic gains encompass both reduced
direct costs associated with illness and also reduction in time spent looking after sick
children. Some benefits are intergenerational – for example, women who are better
nourished as children complete more schooling and are consequently less likely to have
undernourished children themselves.
12. Reducing under-nutrition is a UK priority. Evidence includes UK’s co-hosting in 2013
of the Nutrition For Growth process, which generated new donor commitments of £2.7
billion to tackle under-nutrition, £12.5 billion for nutrition sensitive interventions, with 15
Governments committing to increase domestic resources for scaling up nutrition, and 12
Governments announcing national stunting-reduction targets.
13. Specific, targeted interventions are needed - economic growth is insufficient for
addressing the nutritional status of the world’s poorest children. A large study of
child growth patterns in 36 developing countries found that economic growth was not
consistently correlated with declines in stunting, underweight, and wasting—all signs of
undernutrition (Vollmer et al, 2014). At best, growth is necessary but not sufficient.
14. Severe Acute Malnutrition (SAM) can be treated effectively and cheaply in
community settings using Ready-to-Use Therapeutic Foods (RUTF – Box 1).Until
recently, the recommendation was to refer children with SAM to hospital to receive
therapeutic diets along with medical care. The situation changed recently with the
advent of ready to use therapeutic foods (RUTF). These products are used within the
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rubric of the Community-Based
Management of Acute Malnutrition (CMAM)
protocol, which allows large numbers of
SAM children above the age of 6 months to
be treated effectively in the community
without medical complications (WHO,
2014).
Box 1: Ready-to-Use Therapeutic
Foods (RUTF)
RUTF products are highly fortified, oil-based,
nutrient-dense pastes specifically designed for
the treatment of malnutrition. They are made
from varying combinations of grains,
pulses and seeds, milk powder, sugar, oil,
vitamins and minerals. A range of recipes are
being developed to accommodate cultural and
dietary preferences. They are pre-cooked and
ready to eat straight from the foil sachet.
Individual packaging allows easy handling and
consumption by children from 6 months. The
paste does not need to be mixed with water,
avoiding the risk of bacterial contamination in
areas where hygiene is rarely optimal. It can be
used at home, avoiding the need for costly
treatment in medical or feeding centres. It can
be stored for three to four months without
refrigeration, even at tropical temperatures.
15. There is strong evidence that CMAM
approaches using RUTF are effective
and offer good value for money in
saving lives. A conservative assessment
is that treating SAM in the community using
RUTF costs half that of facility-based care
for comparable results in reducing mortality
and improving weight gain, (Collins et al,
2006). Other studies suggest that the
savings can be even higher, e.g:
 modelled costs of CMAM in Bangladesh
are around one sixth of facility-based care
costs for the same outcomes (Puett et al,
2012);
 a review by DFID suggests that costs can
be as low as 2-3% of in-patient care (DFID, 2009). Two studies found the cost to range
between $26-$42 per disability adjusted life year (DALY) averted, well below the
estimated $1344 for in patient care. This also compares favourably to the cost per
DALY averted for other valued health interventions like Family Planning ($117),
Universal Iron fortification ($66-70), and TB treatment $301 (DFID 2009; Wilford et al
2011).
16. Convincing evidence like this led to UN
agencies endorsing CMAM and RUTF as
scalable and cost-effective. CMAM is now
used in 61 countries to successfully
reduce mortality and improve nutrition in
cases of SAM (UNICEF, 2013).
“Ready-to-use Therapeutic Food (RUTF) has
revolutionized the treatment of severe
malnutrition – providing foods that are safe to
use at home and ensur[ing] rapid weight gain
in severely malnourished children.”
Joint statement: WHO, WFP, UN Systems
17. However, despite its proven
Standing Committee Nutrition, UNICEF
advantages, only a fraction of children
(UNICEF, 2007)
(some 10% or 1.96 million) affected by
SAM receive RUTF treatment (UNICEF,
2013). One reason is that not all countries have signed off the CMAM treatment protocol
and use of RUTF. However, global demand for RUTF grew 5 times between 2000 and
2010 (UNICEF, 2010) and this trend is likely to continue (Figure 1). The current global
RUTF market is estimated to be worth $150 million and growing. Global initiatives like
Nutrition for Growth (N4G) and the Scaling Up Nutrition2 (SUN) movement are helping to
drive new national commitments to tackling undernutrition, and further acceptance of the
Scaling Up Nutrition (SUN) is the world’s leading movement to improve nutrition. Coordinated by the UN and uniting 50
governments (including most of the world’s countries with the highest burden of under-nutrition), civil society, donors,
businesses and researchers in a collective effort.
2
4
CMAM protocol. The UK has taken a leading role – including as the convenor of N4G –
in galvanising global support for the nutrition agenda. Establishing political prioritisation
of nutrition in priority countries, and establishing the necessary political approval of
RUTF as a tool for reducing SAM are vital steps to ensure that all 20 million SAM
sufferers have the opportunity to receive this form of life-saving treatment.
Figure 1: Forecasted trends in global demand for RUTF
Key:
SD = UNICEF Supply Division (i.e. Forecast based on historical figures on RUTF orders)
PD = UNICEF Programme Division (i.e. Forecast based on reported admissions)
Data: UNICEF Supply Division, 25 November 2013
18. An associated supply response in the global market is needed to meet growing
demand with better value products. The consolidation of nutrition as a development
priority and accelerated acceptance of the CMAM protocol will continue to drive demand
for RUTF. The global RUTF supply chain will therefore need to deliver a higher volume
of more affordable products than has been achieved to date. Prices are currently high,
offering scope for funders to achieve greater value for money. In line with increasing
demand for RUTF, DFID’s funding to UNICEF to purchase RUTF more than doubled in
the last four years to nearly £9 million in 2013, offering a clear rationale to both UNICEF
and DFID to seek value for money opportunities. There is therefore a strong case for
actors like DFID to work with credible partners that can demonstrate the capacity to:
 boost the supply of RUTF, to extend access to more of the 18 million people who are
currently not receiving treatment; and
 drive down the cost of RUTF products, to improve VFM for procurers like UNICEF and
funders like DFID; and to deliver a better deal for poor countries affected by SAM3.
19. Stimulating supply and boosting competition to drive down costs could also
address a broader range of market failures. Within the overall trend of rising average
demand depicted in Figure 1, trends in a country’s annual purchase volume of RUTF is
highly variable. The global RUTF supply chain has not proved to be sufficiently robust to
3
Most experts agree that the long term vision is for RUTF to be delivered through national healthcare systems (Kouam et al,
2014)
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respond quickly enough to demand spikes arising during hunger emergencies, nor to
maintain value for money. UNICEF is the major provider of RUTF4 (buying 80% of global
products), and has identified a range of significant associated challenges with the
current global RUTF market (Komrska et al 2013):
cost - RUTF is a relatively new and expensive product that is not yet integrated into
existing national health care systems. The global RUTF supply chain therefore relies
on donor and development agency support. Costs remain high due to lack of diversity
and competition in the market, and these often rise even further during peak demand
periods when poor supplier reliability (below) leads to costly remedial strategies (e.g.
using air freight rather than sea);
quality: despite efforts to support local manufacturers to supply in-country needs,
these suppliers have struggled to deliver the required volume and quality. This low
performance means that reliance on imported product remains;
sustainability: supply remains dominated by a single French patent holder (Nutriset)
and its franchisees. In 2012, over 70% of RUTF
Box 2: Failures in RUTF Supply
purchased by UNICEF was from Nutriset and its
chains
franchisees. This lack of diversity and
In mid-2008, a hunger emergency
competition is not conducive to a competitive
affecting 8.4 million people was
market. DFID currently funds some 13% of
declared in the Horn of Africa. The
UNICEF’s total expenditure on RUTF, hence the
11,000 metric tons of RUTF ordered by
current market does not offer DFID optimal
UNICEF did not meet the peak demand.
value for money;
As a result, deliveries to country
reliability: the current supply base and supply
programs outside the Horn had to be
chain has not been able to consistently deliver a
postponed by three months, on
high level of responsiveness to spikes in
average. Meanwhile, only 27% of
demand during hunger emergencies (Box 2).
orders for the Horn of Africa arrived on
Although delays in donor funds can be a factor
time, while the remaining 73% arrived
contributing to delays in delivery of RUTF and
with an average delay of 37 days.
product stock-outs, lack of competition in the
market is a major reason for poor performance.
UNICEF data show that they do not achieve ontime delivery from existing suppliers for routine programmes, and this is exacerbated
when emergencies demand surge capacity. Reliance on Nutriset as a single producer
makes supply very vulnerable. Médicins Sans Frontières reported informally that, in
2012, Nutriset had quality control problems and could not supply for several months.
Programmes ran short of RUTF because there was no viable alternative producer.
Increasing competition and the number of suppliers would, in their view, help to secure
the pipeline.
20. Enhanced competition could help to address these global market imperfections
and extend timely treatment to more SAM-affected children at lower cost. UNICEF
holds annual supplier conferences in recognition of the ‘urgent need’ to encourage
increased market competition from qualified suppliers to address the market challenges
identified above (Komrska et al 2013). So far, the diversification achieved by UNICEF
towards more local production has seen some price reduction in both the landed cost of
imported RUTF and the cost of locally produced RUTF. However, the capacity and
performance of local in-country suppliers has been very low to date, and global market
4
Medicins sans Frontieres (MSF) and the Clinton Health Access Initiative (CHAI) also procure RUTF but at much lower
volumes than UNICEF.
6
challenges and reliance on imported product remains. There is therefore a strong case
to actively stimulate the entry of new, credible suppliers with the capacity to boost
reliable supply and introduce competition in order to drive down costs.
21. Amul and Valid Nutrition have pledged to
work together to grasp the RUTF market
opportunity. Amul - India’s largest dairy
manufacturer and biggest food product
marketing organisation (Box 3) - has joined
forces with CMAM/RUTF experts Valid
Nutrition (Box 4), linked by a common desire
to address the market challenges and
opportunities set out by UNICEF. Valid
Nutrition’s expertise in RUTF and status as
a charity with the explicit aim of providing
people with access to essential nutrients is
well aligned with Amul’s aim to support
smallholder farmers. Attending the N4G5
Summit in June 2013 at the invitation of the
UK Prime Minister, Amul and Valid Nutrition
signed the global Nutrition for Growth
Compact and pledged to:
“…commit to increasing access to high
quality, low cost, ready to use therapeutic
food for the treatment of severe acute
malnutrition in both India and beyond. We
will significantly increase competition in
the global market for specialist food to
treat under-nutrition and work to drive
down the costs of treatment.”
Box 3: Amul
Amul is a well-known brand name for the
Gujarat Cooperative Milk Marketing Federation
Ltd. (GCMMF). It is India's largest food product
marketing organisation, credited with driving the
‘white revolution’ that transformed India’s dairy
industry.
 Annual turnover: US$ 2.54 billion (2012-13)
Value of exports: £45 million
 Volume procured: 13 million litres per day
 Cooperative model: milk comes from 3.18
million milk producer members, structured
in 16914 village milk cooperative societies,
and 17 member unions covering 24
districts.
 70% of producer members are small,
marginal farmers and landless labourers,
including a sizeable population of people
belonging to tribal groups and scheduled
castes (historically marginalised groups).
 Trading House status from India’s Ministry
of Commerce.
Box 4: Valid Nutrition
Valid Nutrition is a not-for-profit company limited
by guarantee and registered as a charity in
Ireland. They manufacture a range of highly
fortified nutritional pastes for the prevention and
treatment of malnutrition. These products are
made in the countries and regions in which they
are needed, and strive to provide ‘life-saving
products at affordable prices’. Its private, forprofit sister company, Valid International is
recognised for developing the Community
based Management of Acute Malnutrition
(CMAM) protocol. This has enabled the
treatment of severe acute malnutrition (SAM) on
a scale that was previously impossible. Valid
Nutrition also has experience setting up local
manufacture of RUTF.
22. An Amul / Valid Nutrition partnership
offers promising competitive
advantages over other producers. Raw
materials (ingredients) comprise
approximately 62% of the net selling price
of RUTF and milk products are 46% of this
cost. As a large dairy cooperative, Amul
has a distinct advantage in keeping these
costs low which sets it apart from other
global producers. The second most
expensive RUTF input is foil packaging,
which is made at low cost in India6.
Accordingly, research indicates that it is
more cost-effective to produce RUTF in
India and ship it to Africa, even when
transportation and import costs are
5
Nutrition for Growth (N4G): a G8 lead-up event in June 2013, co-hosted by the Governments of the UK and Brazil and the
Children’s Investment Fund Foundation (CIFF).
6
Quality standards would need to be assured, including to maintain shelf life.
7
considered (CHAI 2013). Amul has world class expertise in dairy food processing which
has some of the highest health, safety and quality standards of any food product due to
ease of contamination and spoilage. Quality standards are also extremely important in
RUTF manufacture, particularly related to aflatoxin contamination in peanut-based
products. Amul will consider both peanut and pulse-based formulations which will
mitigate this risk and address a broader range of dietary preferences.
23. Table 1 sets out further detail on comparative strengths and advantages of the Amul /
Valid Nutrition partnership. Informal ‘market research’ discussion with UNICEF and other
procurement agents indicated that Amul had the potential to compete effectively if it
chose to enter the global market. As a complement to its competitive edge, Amul’s
cooperative business model means that business benefits its small dairy farmer supply
base, opening up scope for additional secondary development impact.
Table 1. Competitive advantage of an Amul-Valid partnership on RUTF
Amul
Core Competence / Strategic Advantage
Valid
Nutrition
RUTF Barriers to
Market Entry and
Risks
Legitimacy with
Indian civil
society and
government
X
X •
Valid Nutrition is internationally recognised for its development and
global leadership of the CMAM protocol making lifesaving treatment
available to millions of children worldwide who otherwise would not
have been reached. Amul is a cooperative which buys from and
supports the livelihoods of millions of farmers. Amul’s positive,
homegrown production model offers is favourably regarded by a range
of stakeholders and may help to inform India’s domestic debates on
CMAM and RUTF.
Donor /
government
resources for
purchase
X
X •
Amul and Valid were among the countries, donors, civil society
organisations and businesses that made commitments at the G8
Nutrition for Growth Event. The significant new global resources for
tackling global under- nutrition signal a game change in the priority
accorded to nutrition and its resourcing by governments and donors,
including for the treatment of SAM.
Patent protection
X
•
Valid is exempt from Nutriset’s patent restrictions on peanut-based
RUTF formulation in all but four countries. This gives Valid an advantage
over other potential suppliers that do not have access to this patent.
Valid has a patent for RUTF formulation which it will provide to Amul for
manufacture.
Cost of
ingredients
X •
Milk and milk products (whey) constitute 46% of the raw materials cost
of typical RUTF formulation with ground nuts adding 17%. Amul, as a
dairy cooperative is a lowest cost source of quality, reliable supply for
the most expensive RUTF raw material.
Cost of shipping
and import
X •
India has proximity to Asian markets, which can reduce time to delivery
costs of shipping. Bangladesh and Pakistan are the biggest potential
markets if an Amul-Valid product can be successfully marketed.
Cost added to Indian product imported into Africa adds between
0.22cents and 0.36 cents to each packet of RUTF; however the high costs
•
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of raw materials in Africa particularly milk products negates any savings
in transportation and import tax costs of local production. Imported
Indian RUTF can be more price-competitive in Africa than Africanproduced RUTF.
X •
Valid pioneered CMAM as a treatment protocol and is recognised by
governments, the UN and civil society as the authority in programme
development and implementation. Valid Nutrition has an operational
factory producing nutrition products in Malawi and an R&D programme
in Kenya. Valid will provide technology transfer to Amul for both the
technical, business and community expertise for RUTF manufacture
Quality
production
standards
X •
Amul’s experience as India’s preeminent dairy products brand combined
with Valid’s expertise in RUTF mean that the partnership is well
positioned to meet UNICEF’s supplier standards. In addition milk-based
food processing requires some of the most stringent hygiene and quality
controls in the food industry due to the inherent risk of contamination
and spoilage of milk based products. Traditional RUTF is peanut-based
with specific quality standards to prevent risk of aflatoxin. Amul has
existing expertise in meeting aflatoxin standards, and may also consider
non-peanut formulations including pulse-base recipes that would appeal
to a wider range of dietary preferences.
Downward
pressure on
global pricing
X •
Amul is well positioned to compete on price given its access to a dairy
supply chain through the 3.18 million milk producer members of its
unions and village milk producing societies. Milk is the highest cost raw
materials for RUTF manufacture. This means Amul will have an
advantage compared to other global and local RUTF producers to
compete on price even with downward price pressure.
Reliable and
sustainable
supply
X •
Demand for RUTF is characterised by peaks and troughs, including those
related to humanitarian and food security crises. UNICEF aims to
smooth demand somewhat by working with countries and suppliers on
forecasting. Amul’s experience in manufacture and export makes it
well-positioned to develop sophisticated demand forecasting,
production capacity and inventory management capabilities to supply
export and domestic markets cost effectively.
Technical
expertise
X
24. Despite being a large, well-resourced company, Amul is unlikely to enter the
RUTF market without the support from the right partners. Traditionally focused on
marketing conventional food products, Amul does not have experience of the highly
specialised RUTF market; does not have the incentive of a viable domestic market for
RUTF (see para 28-30); and is unlikely to take on all the risk of moving into this new
area without concrete support. Valid Nutrition has the expertise in RUTF to realise
Amul’s potential and ambition to address SAM. DFID has been approached to provide
the necessary catalytic funding to absorb some of the risk of market entry.
25. DFID has been approached by Valid Nutrition and Amul for joint funding to help
realise their partnership, attracted by DFID’s global commitment and credibility on
nutrition (para 26). DFID’s support is needed to reduce the risk, and to address a
problem of capital availability: Valid Nutrition is a very small non-profit organisation that
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cannot borrow money on the scale required, and the project is too small to get a capital
allocation from Amul’s Board. Amul will provide capital (land, buildings), expertise (dairy
production) and sourcing through its supply chain, and working capital (labour,
inventory, etc). DFID’s catalytic funding will largely be used to:
offset the cost of time and resources for development of operational plans;
purchase specialised equipment that Amul will need to begin RUTF manufacture
(around two thirds of DFID’s contribution);
support registration and compliance against necessary standards;
strengthen Amul’s capacity and know-how using Valid Nutrition’s expertise and
technical support on RUTF manufacture and marketing;
support monitoring and evaluation, plus some advocacy work to project the
partnerships to stakeholders.
26. The catalytic support requested by Amul/Valid Nutrition offers a good strategic fit
for DFID, building on:
 UK/DFID leadership on global nutrition. The Prime Minister hosted a Hunger
Summit around the London 2012 Olympics, which set up the flagship Nutrition for
Growth (N4G) event in June 2013. This galvanised new commitments from
governments, business and science communities, and generated £2.7bn of new
funding to tackle under-nutrition. The N4G process built important synergies with the
global Scaling Up Nutrition movement, relevant G8 initiatives, and DFID’s policy and
programme work; The proposal set out in this business case will directly implement the
commitment made by Amul/Valid as signatories to the the N4G Compact;
 DFID’s work to reshape global markets for the benefit of the poor. The positive
experience (DFID and others) of providing similar catalytic support to stimulate
developing country access to affordable generic medicines provides evidence that
such contributions have strong potential to stimulate transformational results and show
value for money (e.g. Results for Development, 2011; Grace, 2012; Grace and
Carasso 2012);
 DFID’s new ‘beyond aid’ relationship with India (announced by the Secretary of
State in 2012), particularly strategic pillars on private sector engagement and global
partnership work. This initiative will be supported under DFID Global Partnerships, in
support of the objective to channel affordable Indian innovation to address
development challenges in developing countries. It will complement DFID’s ongoing
technical partnership with the Government of India on the nutrition agenda, which
includes plans for a resource hub for nutrition research and evidence-building as part
of N4G follow-up. And it will generate co-benefits through Amul’s cooperative business
model that engages smallholder farmers at the ‘bottom of the pyramid’.
27. Due regard has been given to issues of gender equality:
 the target group (SAM sufferers) is considered to be gender-neutral, since there is no
evidence that SAM affects girls more than boys;
 the price reduction expected through the intervention is also considered to be gender
neutral since RUTF is procured for both women and men and accessible to both
women and men equally. There are no observed gender-related norms linked to RUTF
use in communities. A differentiated strategy is therefore not required in this case;
 enhanced use of RUTF is considered to have some net secondary positive outcomes
for women and girls. RUTF is administered through a community-based approach,
reducing the burden of care and opportunity cost for care-giving mothers, who would
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otherwise need to travel to and stay at health facilities with their malnourished children.
This frees up time and capacity for mothers to contribute to livelihood and domestic
spheres. Community-based approaches are also expected to empower women by
placing mother/carers at the centre of the therapeutic process, making them the active
agents of recovery, and improving their understanding of poor nutrition as the cause of
illness;
there is anecdotal evidence in India that girls suffering SAM are much less likely to be
taken to health services than boys, making community-based use of RUTF a potential
means of improving girls’ access to life-saving treatment. However, this may not hold
true in African countries where much of Amul’s RUTF is expected to be used;
Amul’s supply chain and cooperative members are small dairy farmers and cow
owners, 60-80% of whom in rural India are typically women. Although this initiative is
not designed to channel significant new economic returns to cooperative members, the
composition of the Amul supply chain still makes it a positive gender choice as a
manufacturer of RUTF compared with other options.
28. Amul’s entry to the global RUTF market could help to unlock the current domestic
debate on use of CMAM/RUTF in India. CMAM/RUTF has been rejected by GoI and
civil society to date, with GoI halting UNICEF pilots in Madhya Pradesh in 2009. The
GoI’s resistance to domestic use of RUTF is largely because the available sources have
been limited to foreign-owned, private sector companies, including those located in India
itself:
 Compact India a privately held Norwegian company, with 2% of the total Long Term
Arrangements with UNICEF; and
 Nutrivita India, a Nutriset franchisee with 4% of the total Long Term Arrangements with
UNICEF (UNICEF, 2012a);
Given the strong and influential resistance by Indian civil society towards foreign,
profit-making RUTF producers, it is unlikely that either of these manufacturers would
supply India’s domestic market.
29. At present, GoI has not issued guidance on domestic use of CMAM and RUTF. DFID’s
partnership remains guided by the GoI’s policy. The current absence of a credible and
‘acceptable’ source of RUTF (i.e. Indian-made, non-profit, meeting local dietary
preferences) may be the single most important barrier blocking demand for RUTF in
India and the roll-out of the CMAM model.
30. With the prompting of India’s influential Right to Food Coalition and the office of the
Commissioners of the Supreme Court for the Right to Food, Amul are prepared to make
their expertise, facilities and ingredients/working capital available to address India’s
significant SAM burden7, as set out in their N4G pledge. By operationalising a
production line for RUTF (initially for the global market) Amul would introduce a new,
viable alternative to foreign, commercial models of RUTF production that could – if
policy conditions permitted – be used to address SAM in India. Amul’s model is
expected to offer better prospects for aligning with the values and priorities of civil
society and government in India than existing alternatives. The initiative could therefore
make a useful and constructive contribution to debates and decisions on domestic use
India’s bears the world’s largest undernutrition burden (half of all under-nourished children) and 40% of all cases of SAM.
“…48% of children under age five years are stunted…which indicates that half of the country’s children are chronically
malnourished…19.8% of children under five years in the country are wasted... 43% of children under age five years are
underweight for their age (Government of India 2012)”. The minority of children who are treated receive therapeutic milk and
are cared for as in-patients in health facilities.
7
11
of RUTF in India. To date, only 0.5% of SAM cases in India affected currently receive
treatment - currently using a hospital setting rather than a CMAM approach
(Government of India, 2012).
B. Impact and Outcome that we expect to achieve
31. The expected results chain is set out in Figure 2 and Table 2 below. The impact of
activities initiated by DFID’s investment is a saving to UNICEF of some £22m by 2017,
and an estimated 227,125 lives saved and nearly 7.5m DALYs gained, associated with
new Amul RUTF provided for nearly 2 million children over 5 years.
32. The expected outcomes are better global access to affordable, high quality RUTF, and
enhanced contribution to affordable global nutrition by Indian innovators. This will be
delivered directly and immediately by Amul as a result of the funded activity; and
indirectly (with possible lag time) via a multiplier effect in the global market. The
initiative is expected to catalyse enhanced net impact on SAM through a stronger, more
competitive global supply chain, delivering:
 progressive reduction in product cost stimulated by Amul’s competitive edge;
 progressive reduction in freight costs due to geographic proximity to affected areas
compared with other current suppliers; and hence
 reduction in total landed cost of RUTF of up to 10% in affected countries, saving
UNICEF up to $22m per year by 2017;
 improvements in product quality, sustainability of the supply chain (including a more
diverse range of viable suppliers) and reliability (e.g. reduced delivery time and stockouts avoided).
33. The outputs expected within the direct control of the project are production and sale of
19,750 MT of new Amul RUTF over a 5 year period, for the initial DFID investment of
£1.5m. This will be delivered through a new, India-based production line for RUTF that:
 competes successfully on cost, quality, reliability and sustainability of supply for SAM
treatment in Asia and Africa;
 meets stringent international standards (UNICEF);
 supports the livelihoods of Indian smallholder farmers.
Table 2: expected impact of RUTF produced by the Amul/Valid collaboration
12
Figure 2: Expected Results Chain
IMPACT
More SAM cases treated,
DALYs gained, lives saved,
money saved
Better access to cheaper
RUTF
OUTCOME
Stronger global market
for RUTF (cost, quality,
sustainability, reliability)
Enhanced contribution
to global nutrition by
Indian innovators
More competitive global
RUTF market
New Indian RUTF produced
competitively at scale
OUTPUT
New operational
production chain and
trained workforce
INPUT
Funding, knowledge, capital
13
34. The assumptions associated with this results chain include:
 global demand for RUTF continues to grow, stimulated by the SUN movement;
 procurement agents (particularly UNICEF) meet their forecasted order volume for
RUTF;
 Amul has sufficient experience, capacity, business know-how and new knowledge
absorbed from Valid Nutrition to produce RUTF;
 Amul’s RUTF production line meets projected costs and timelines, quality and capacity
requirements; scoring competitively against UNICEF RUTF supplier criteria on landed
price, product quality and reliability (volume delivered on time);
 UNICEF awards Amul a Long-Term Agreement as a supplier of RUTF – although their
long-term preference is for local production, the challenges outlines above set out the
reality that imported supplies will remain important for the conceivable future;
 UNICEF sets demand targets based on accurate demand forecasts;
 Amul learns quickly during the early maturation period and performs well in meeting
demand targets effectively and efficiently;
 Political and operational risks set out in Management Case section B are effectively
managed.
Appraisal Case
A. What are the feasible options that address the need set out in the Strategic case?
35. The premise of this business case is that India’s track record on low cost innovation and
expertise in the dairy sector can be harnessed to inject competition into the global RUTF
market, achieving improvements on cost, quality, reliability and sustainability, resulting in
better coverage and access to cheaper RUTF, reduction of SAM worldwide, and lives saved.
The Strategic Case provides the evidence and expected results chain. To maximise the
potential impact on the global RUTF market, options were judged against the following criteria:
 Legitimacy with Indian civil society and government: sensitivities exist in India regarding
RUTF and partners will need to secure the support of multiple stakeholders.
 Capacity – a supplier is needed that can rapidly set up production of RUTF at scale and
draw on a responsive supply chain that can consistently react fast when demand arises,
particularly during hunger emergencies.
 Quality standards – RUTF produced will need to meet exacting standards in order to allow
manufacturers to secure long term procurement agreements.
 Patent restrictions – suppliers will need to be exempt from Nutriset’s patent restrictions in
target countries.
 N4G implementation - implementing commitments made at N4G is an important driver of
this proposal.
36. Description of options:

Option 1 – Do Nothing. This is a zero expenditure option. Under this option, there would
be no investment by DFID in manufacture of new RUTF. The assumption is that market
forces alone will be sufficient to improve cost, quality, reliability and sustainability.

Option 2 – DFID initiates a competitive process to identify viable partners to produce
14
RUTF in India for export. This option would adopt an approach similar to the one proposed
by Valid Nutrition, but consider partners beyond Amul and Valid Nutrition.

Option 3 – Provide support to the Amul / Valid Nutrition partnership to produce RUTF
in India for export and local markets. Under this option DFID would provide an
accountable grant to Valid Nutrition based on its proposal to partner with Amul to
manufacture RUTF for the treatment of SAM, initially for export.
B. Assessing the strength of the evidence base for each feasible option including delivery routes
37. Option 1 – Do Nothing
Pros:
 Avoided expenditure by DFID of £1.5 million.
 Avoided risks associated with investment.
Cons:
 This option is a missed opportunity because global nutrition outcomes remain unaddressed,
lives are not saved, and capacity/productivity enhancements are not made.
 Failure to support the Amul/Valid partnership would mean that Amul’s important N4G
commitment would not be implemented and Amul would not produce RUTF. Amul is
unlikely to enter the RUTF market without the risk mitigation that DFID can provide, and
without the technical transfer from Valid that DFID can facilitate. Traditionally focused on
marketing conventional food products, Amul does not have experience of the highly
specialised RUTF market; does not have the incentive of a viable domestic market for RUTF
(see para 38-40); and is unlikely to take on all the risk of moving into this new area without
concrete support. Amul and Valid Nutrition have sought DFID’s support because of DFID’s
global leadership on nutrition.
 Imperfections and opportunities in the global RUTF market would not be addressed,
maintaining a status quo offering poor value for money for RUTF funders like DFID.
 The opportunity to offer a constructive reference (an operational not-for-profit, Indian
supplier of RUTF) to debates on the CMAM protocol and RUTF in India would be missed or
delayed.
38. Option 2 – DFID initiates a competitive process to identify partners to produce RUTF in
India (i.e. consider partners beyond Amul and Valid Nutrition)
Pros:
 Opens up the (theoretical) opportunity to identify additional partners with capacity to service
global markets and meet Indian civil society and government requirements.
 Increases transparency; mitigates risk of distorting the market in favour of one company.
 Other advantages might be identified through a competitive process.
Cons:
 A competitive process would place DFID in the driving seat, rather than responding to the
initiative of India’s private sector and Amul’s commitment under the UK-led N4G process.
DFID would play a prominent role in selecting partners, which could undermine the
15
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credibility of an India-led process in a field where Indian leadership is needed.
Few other viable partners exist. Existing RUTF export manufacturers in India (Nutrivita and
Compact) do not have the dairy supply chain advantage of Amul8, making them less
competitive on cost. As foreign-owned, profit-making companies they do offer a model that
would be more difficult to align with GoI and civil society values. Hence the opportunity to
advance debates (and potentially operations) on CMAM/RUTF in India would be missed or
delayed.
The only comparable dairy supply chain in India (Mother Dairy) is wholly owned by the
National Dairy Development Board (NDDB). This does not offer the more agile, private
sector profile presented by Amul. NDDB have made no existing offer to produce RUTF or to
partner with RUTF experts. Engagement with NDDB could prove bureaucratic and lengthy
with no guarantee of buy-in, risking significant delays in getting Indian RUTF manufacturing
up and running.
There are no equivalent organisations that can match Valid Nutrition’s unique history of
pioneering the CMAM treatment protocol, and global credibility, technical expertise and
business acumen in RUTF.
39. Option 3 – Provide support to the Amul / Valid Nutrition partnership to produce RUTF in
India.
Pros:
 Together, Amul and Valid nutrition satisfy the political, technical and business requirements
for RUTF manufacture for the export market, and offer competitive advantage in tackling the
challenges and barriers to market entry (See para 22-23; Table 1).
 Supporting the Amul/Valid proposal would effectively implement an important commitment in
the global Nutrition for Growth Compact: a policy priority for the UK.
 Amul has already set aside space to set up a RUTF production line; although this will be
reassigned for other use if the proposal to DFID is not taken up.
 The prospects for delivering against the theory of change and expected results chain are
good.
 The policy environment in India is becoming more open to considering a CMAM style
approach. An Amul/Valid Nutrition partnership would demonstrate operational Indian
capacity to produce RUTF using a socially responsible cooperative model, presenting Indian
civil society and government to consider as a factor in their deliberations over domestic
guidelines on CMAM/RUTF. Amul appears to offer a best-fit option with domestic values
and priorities, and could act as a demonstrator to stimulate domestic demand for Indianmade RUTF.
Cons:
 There are political/reputational risks associated with RUTF in India. Some commentators
object to any use of pre-packaged, ‘commodified’ therapeutic food products. There are also
fears that traditional foods and state child nutrition services will be displaced by prepackaged products of private enterprise. These objections have resulted in GoI stepping in
to halt programmes using CMAM/RUTF approaches for SAM (e.g. UNICEF in Madya
Pradesh). However, the main objections to date relate to production by foreign commercial
enterprises for the Indian market, which is not the case for the Amul option.
8
Raw materials (ingredients) comprise approximately 62% of the net selling price and milk products are 46% of this cost. This
gives Amul a distinct advantage over other manufacturers including local African producers who are unlikely to be able to
replicate Amul’s supply and its input costs. Research indicates that it is more cost effective to produce RUTF in India and ship
it to Africa even when transportation and import costs are considered (CHAI 2013).
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There is a political risk associated with DFID’s support, linked to perceptions of foreign
interference in India’s nutrition security systems. The focus on global markets mitigates this
risk, together with stakeholder advocacy planned under the initiative.
There is a political risk linked to possible perceptions that preferential support to one
supplier may distort/skew market conditions. This can be mitigated through advocacy work
planned under the programme, and by communicating UNICEF’s call for enhanced
competition to address well-known market failures. Amul will need to secure procurement
deals with UNICEF/others on its own merit – DFID is only providing seed funding for start-up
costs and is not interfering in the market.
There is a risk associated with DFID support to a large, well-resourced Indian business.
This can be mitigated by highlighting the barriers that have prevented Amul from entering
the RUTF market so far; the small size of DFID’s catalytic support; Amul’s co-funding
commitment; Amul’s potentially valuable leadership role on this key development priority;
Amul’s cooperative status in which profit is shared by smallholder farmers.
This partnership is not alone sufficient to address SAM: it is essentially a supply response
intervention and will not address the gap in demand for RUTF. However, complementary
activities outside the scope of this business case are already acting in parallel to stimulate
demand for RUTF and secure broader political commitment to addressing SAM. This
includes the work of the global SUN movement, and initiatives under the N4G process.
In the table below the quality of evidence for each option is rated as either Very Strong, Strong, Medium,
Limited (or No Evidence)
Option
Evidence rating
1
Strong
2
Medium
3
Medium
C. For each feasible option, what is the assessment of local capacity? Is the intervention likely to
strengthen capacity in a durable manner?
40. Option 1 is ruled out on the grounds that it does not advance DFID’s objectives. Option 2 is
feasible on some counts but not all. With reference to the criteria outlined in para 35:
 an wieldy competition process risks compromising legitimacy with Indian civil society and
government; and redirecting important leadership away from Indian institutions; Feedback
from stakeholders also indicates that there are no alternative suppliers that can match
Amul’s potential to contribute to debates on CMAM/RUTF in India;
 there are no identifiable alternative suppliers with equivalent capacity to achieve the
objectives of the initiative;
 Valid Nutrition has an exemption to Nutriset’s patent restriction that few other partners can
match. Coupled with the lack of a viable competitor to Amul, this suggests that a
competitive process would not offer best value for money.
 selection of alternative partners to Amul/Valid would fail to implement N4G commitments.
17
41. Option 3 is the preferred option since it meets the success criteria above; and hence offers
greatest prospects for impact on SAM. The approach is based on existing demand from both
Amul and Valid Nutrition as set out in the business commitments of the N4G Compact. This
formal public commitment and ownership of the initiative introduces accountability and raises
the probability for success.
42. Option 3 draws on substantial comparative advantage of two strong partners in their field as
set out in Strategic Case A. Amul can draw on its extensive supply chain, capital reserves,
knowledge and expertise in the sector of most relevance to RUTF (dairy). Its capacity and
cooperative model are unmatched in India. Amul’s experience at producing for export markets
is reflected in its GoI Trading House status. As a household Indian brand and a dairy
cooperative Amul is well-positioned to offer the GoI and India’s Right to Food Coalition an
attractive model to consider in debates over domestic use of RUTF.
43. The intervention is likely to build capacity in a durable manner: Amul is investing an equivalent
amount to match DFID’s catalytic funding, and is receiving the necessary technical know-how
and expert advice from market leaders Valid Nutrition to build its capacity on RUTF. DFID is
not committed to subsequent funding. It is in the market interests of both organisations to
establish sufficient local capacity to make the initiative viable and successful.
D. What is the likely impact (positive and negative) on climate change and environment for each
feasible option?
Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity; C,
low / no risk / opportunity; or D, core contribution to a multilateral organisation.
Option
Climate change and environment risks Climate
change
and
environment
and impacts, Category (A, B, C, D)
opportunities, Category (A, B, C, D)
1
C
C
2
C
C
3
C
C
4
C
C
44. This case is category C, low/no risk or opportunity. RUTF production is a global supply chain
that is highly dependent on dairy production. This case makes no substantive change to
methods of production and land use. Therefore implementing the recommended option will
not create significant risks or opportunities in either the life cycle of the dairy supply chain or
the RUTF production and distribution supply chain. The following factors were considered:
 Generically, the greenhouse gas (GHG) emissions across the food lifecycle break down as
35% related to indirect emissions from deforestation, 49% from direct agricultural production,
4% from food processing and 12% from post-production including shipping and transportation
(CCAFS, 2013).
 In general, across geographic regions, the dairy lifecycle in Africa creates the highest GHG
emissions, followed by South Asia with Western Europe among the lowest. However, when
emissions by climatic zones are considered, the semi-arid area of Anand in Gujarat where
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most of Gujarat’s dairy production takes place has among the lowest emissions of any type of
climatic zone (FAO, 2010). Therefore in the area of agricultural production, the recommended
option in this case would not be expected to increase emissions related to the dairy life cycle
and could be among the most efficient in the world.
DFID’s funds will be used to purchase specialised manufacturing equipment for RUTF
production. Energy will be consumed to run the RUTF production line, however this is not
expected to make any significant change to Amul’s current energy consumption levels and
therefore this is rated low.
RUTF uses whey - a by-product of cheese manufacturing - and therefore could capture some
efficiency in the food processing part of the dairy lifecycle. However, this is a relatively low
impact area of the overall dairy lifecycle and hence is not presented as a substantive
opportunity.
RUTF is shipped globally and in a few instances where there is humanitarian need is flown to
its destination. This case locates the RUTF production closer to markets in Asia and Africa,
potentially reducing the emissions impact of this part of the dairy lifecycle.
E. If any, what are the likely major impacts on social development?
45. There are potentially significant impacts on social development:
 if the anticipated capacity of 19,750 MT of RUTF is purchased over five years, it means that
nearly two million children would be given access to treatment for SAM, with some 227,125
lives saved. Reducing malnutrition would make a significant contribution to improving
maternal health and rates of child mortality;
 In the longer term, the human development and economic benefits associated with improved
nutrition for these children are enhanced. Evidence in Strategic Case A summarises the
benefits of better nourished children in terms of illness and DALYs avoided, physical and
cognitive development attained, improved education performance, and improved economic
productivity citizens. Social and economic costs avoided (at both household and national
levels) can be reinvested productively, and intergenerational benefits realised: better
nourished girls complete more schooling and are less likely to have undernourished children
themselves;
 Amul’s cooperative model means that the milk sourced for RUTF production is supplied by
its network of 3 million smallholder dairy farmers. Although this initiative is not designed to
channel significant new economic returns to cooperative members, this option enables a
globally-facing initiative to generate secondary, indirect benefits to the welfare of low income
Indian farmers.
46. There are potentially indirect benefits for gender equality (para 27):
 the initiative does not target women since evidence indicates that SAM affects girls and boys
equally. The price reduction expected through the intervention is also considered to be
gender-neutral since RUTF procured by agencies like UNICEF is accessible to both women
and men equally. There are no observed gender-related norms linked to RUTF use in
communities. A differentiated strategy is therefore not required in this case;
 enhanced use of RUTF through a community-based approach is expected to have some net
secondary positive outcomes for women and girls by reducing the need for mothers to travel
to and stay at healthcare facilities with their malnourished children. This frees up time and
capacity for mothers to contribute to livelihood and domestic activities. Community-based
approaches also empower women by placing mother/carers at the centre of the therapeutic
process, making them the active agents of recovery, and improving their understanding of
poor nutrition as the cause of acute illness;
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there is anecdotal evidence in India that girls suffering SAM are much less likely to be taken
to health services than boys. Community-based use of RUTF is therefore a potential way to
improving girls’ access to life-saving treatment. However, this may not hold true in African
countries where much of Amul’s RUTF is expected to be used;
Amul’s supply chain and cooperative members are small dairy farmers and cow owners, 6080% of whom in rural India are typically women. The composition of the Amul supply chain is
therefore a positive gender choice as a manufacturer of RUTF compared with other options.
F. For fragile and conflict affected countries, what are the likely major impacts on conflict and
fragility, if any?
47. SAM may be prominent where there have been natural disasters or conflict. However, this is
not a strategic driver of this particular case as it is not known if the RUTF manufactured for the
Amul/ Valid Nutrition partnership will reach children suffering from SAM caused specifically by
natural disaster or conflict.
G. What are the costs and benefits of each feasible option? Identify the preferred option.
Economic Appraisal of Amul-Valid Nutrition
48. The economic appraisal is based on the premise that DFID’s support for production of new
Indian RUTF will help in reducing acute malnutrition across the globe by boosting the global
supply of RUTF and reducing global market price of RUTF. It assumes a theory of change in
which greater production capacity and competition in the global RUTF market will introduce
price competitiveness and improved responsiveness in supply. A broad set of market failures
are widely recognised related to cost, quality, sustainability and reliability. Presently, one
single producer (Nutriset) controls 75% of the global market with limited scope of price
competition; production capacity is insufficient to meet demand, particularly during hunger
emergencies; and reliability of supply is inadequate to get life-saving product to the right
people at the right time. It is expected that the intervention will address all of these market
failures, with an emphasis on improving supply and reducing cost.
49. Globally, a large portion of the 20m children who suffer from severe acute malnutrition do not
have access to cost-effective lifesaving treatment and there is strong evidence that CMAM
which includes RUTF is a well-established and cost-effective approach to tackle SAM.
50. Cost comparisons of SAM treatment programmes have found that Community-based
Therapeutic Care (CTC) using RUTF to be relatively more cost-effective when compared with
care in a medical facility. Analysis of comparing cost and outcomes showed that the
institutional cost of rehabilitating a SAM child under CTC at $128.5 per child was less than half
that of inpatient management in medical facilities, which averaged $262. On the outcomes,
effectiveness of the treatment programmes was found to be similar at 95.3% and 94.3%, for
facility-based and community-based care respectively, when comparing cure rates shown in
patients’ follow-up records.
51. Given the efficacy and cost effectiveness of the approach, for economic appraisal we have
considered the following options for appraisal:
 Do nothing: There are no costs involved if we do not intervene therefore DFID can use £1.5m
for other initiatives. However, DFID would lose an opportunity to save 227,125 children; and
bring efficiency improvement in the monopolistic supply chain model of global RUTF.
 Support the Amul/ Valid partnership to produce RUTF in India.
20
52. The option that DFID initiates a competitive process to identify partners has been discarded as
unlikely to be viable given the political and business requirement context:
 preliminary findings show that the option of DFID initiating a competitive process to find a
partner for Valid in India will be politically sensitive;
 pricing of existing Indian private sector producer of RUTF for African market is roughly same
as Nutriset France’s price structure. It would therefore be difficult to bring in price competition
if pure private firms are being selected;
 there is no other dairy player in India who would be able match the scale and quality that Amul
provides. The closest equivalent supply chain (Mother Dairy) is wholly part of the National
Dairy Development Board (NDDB) - a Government of India corporation. This would miss the
opportunity to harness India’s private sector innovation and resources. Starting discussions
and negotiation with NDDB as a Government of India entity is anticipated to be highly complex
with no clear likelihood of a positive outcome.
Costs and Benefits of preferred option:
53. Costs:
 DFID’s direct costs for the project are the accountable grant support of £1.5m to Valid
Nutrition. The support from DFID is catalytic financing to support start-up of the Amul/ Valid
Nutrition venture. DFID resources will offset the cost of time and resources for the transfer of
technology from Valid Nutrition to Amul for RUTF manufacture and to purchase specialised
equipment that Amul will need to begin RUTF manufacture.
 Apart from the DFID’s direct cost which relates to technology transfer there are other costs for
production and marketing of RUTF. These would include- capital costs (land, building)
expertise cost (dairy production) working capital (labour, inventory etc.), ingredient/ raw
material costs, and packaging and shipment costs. Amul and Valid Nutrition are expected to
bear these costs from their own resources.
54. Benefits: There are a host of direct and non-direct benefits of the support:
 additional production of 19,750 MT of RUTF in a 5 year period, equivalent to treatment for
1,975,000 children. Based on global evidence (e.g. Bachmann, 2009), it is estimated that
treatment of 1,975,000 additional children will lead to 227,125 deaths averted; and total
7,495,125 DALYs saved over 5 years. As well as reducing mortality and morbidity, improved
nutritional outcome in the long run will also improve in cognitive ability and workforce
productivity;
 progressive reduction in product cost (Amul’s competitiveness), freight cost (production in
India closer to affected areas than many current suppliers) and hence total landed cost of
RUTF in affected countries; a catalytic effect on the global market stimulated by Amul’s
competitive edge, driving down cost further as other suppliers strive to maintain/gain market
share. Conservative estimate suggests a possible cost reduction of up to 10%;
 a minimum 10% reduction in prices could translate to net annual savings for UNICEF of up to
$22m by 2017 (based on UNICEF demand projections) each year. Associated additional
purchasing power for UNICEF would be equivalent to that needed to treat an additional
200,000 children per year, translating to additional 23,000 lives saved and 759,000 DALYs
gained;
 associated cost savings for DFID as one of the three major funders of RUTF procurement
through UNICEF (alongside US and Japan): estimated as up to $3.1m/yr by 2017;
 a better deal for developing countries committed to reducing their under-nutrition burden;
 a stronger, more diverse and more competitive global supply chain for RUTF;
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reduced delivery time from supply base in India to affected countries,( esp. in South Asia
region) improving the responsiveness of the global RUTF supply chain and hence lives saved
during hunger emergencies;
operational capacity for Amul to, if they chose, use in the future to develop a more diverse
range of nutrition product options that could deliver additional development impacts. Other
products – e.g. supplementary foods – for addressing other forms/aspects of under-nutrition
could in theory be made by Amul using the same machinery. Global demand for this broader
range of nutrition products is also increasing;
operational capacity demonstration of RUTF manufacture in India by a credible Indian
cooperative, to feed into GoI’s decision-making process on domestic guidelines on CMAM and
RUTF;
evidence of enhanced leadership by India in addressing under-nutrition and in playing a global
development role.
a stronger UK-India global partnership for development.
H. Theory of Change for Preferred Option
55. Building on the results chain set out in Strategic Case B and the premise set out in Appraisal
Case A, the theory of change for the preferred option is that Amul’s experience and expertise
in driving India’s dairy revolution can be harnessed to (1) provide a new source of affordable
RUTF for affected communities, and (2) inject competition into the global RUTF market in
order to drive down cost at high quality standards and improve reliability and sustainability.
The expected impacts of a stronger market are better global access to a timely supply of
cheaper RUTF; reduction of SAM worldwide; and associated health benefits and lives saved
(Figure 3).
56. The assumptions (introduced in Strategic Case B) are:

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
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


global demand for RUTF continues to grow - as forecasted by UNICEF;
political will to address SAM continues to strengthen – evidenced by the active SUN
movement and the commitments made at N4G in 2013;
procurement agents (particularly UNICEF) meet their forecasted order volume for RUTF;
Amul has sufficient experience, capacity, business know-how and new knowledge absorbed
from Valid Nutrition to produce RUTF;
Amul’s RUTF production line meets projected costs and timelines, quality and capacity
requirements; scoring competitively against UNICEF RUTF supplier criteria on landed price,
product quality and reliability (volume delivered on time);
UNICEF awards Amul a Long-Term Agreement as a supplier of RUTF;
UNICEF sets appropriate demand targets based on accurate demand forecasts;
Amul learns quickly during the early maturation period and applies learning to drive
performance against targets and standards;
risks set out in Management Case section B are effectively managed.
22
Figure 3: Expected results chain over 5 years for theory of change for preferred option
IMPACT
Additional SAM cases treated, DALYs
gained, lives saved, money saved




1,978,000 SAM cases treated
7,495,125 DALYs gained
227,125 lives saved
Up to $22m saved on cost of RUTF
Better global access to
cheaper RUTF
OUTCOME
Stronger global market for RUTF:
Cost: 10% reduction target
Quality: consistent
Sustainability: more diverse suppliers,
Reliability: reduced delivery time;
stock-outs avoided)
Enhanced direct contribution to global
nutrition by Indian innovators
More competitive global RUTF
market
Production and sale of 19,750MT RUTF in the first five
years (4000MT by year 3)
OUTPUT
New Amul RUTF production line
operated by trained workforce that
harnesses Indian smallholder dairy
farmers and meets UNICEF standards
INPUT



Amul capital investment
DFID investment
Valid investment and technology
transfer
I. What measures can be used to monitor Value for Money (VFM) for the intervention?
57. The VFM of the intervention is measured in terms of economy, cost effectiveness and
efficiency:

Economy: The main measure is the savings that will accrue to UNICEF due to expected
23
reduction in prices of RUTF. The price reduction will stem from Amul’s low cost of production
and induced price competition in the global market. Savings to DFID as a major funder of
UNICEF’s RUTF procurement is an associated metric. VFM based on economy can also be
measured in terms of price differential of production of RUTF in India compared to local
production in Africa, and price differential of average port of departure price from Nutriset
France and Amul/ Valid in India.

Cost effectiveness: The cost effectiveness of the programme will be measured in terms of
DALYs saved due to the intervention. It is estimated that 1,975,000 people will be treated,
translating to 227,125 lives saved.

Efficiency: The efficiency improvements can be measured during implementation using
metrics like reduction in production/supply lead times and reduced stock-out situations.
J. Summary Value for Money Statement for the preferred option
58. Economy: The expected Amul model offers value for money over Africa-based production for
local markets. Based on available ingredient prices and cost structures including duties and
taxes (including data from CHAI, 2013), the cost of production of a standard 95g packet in
India is half that of production in Africa. The net selling price (landed price in Africa) including
freight and duty charges of a 95g packet would be around US$ 26-32 cents, nearly 40% less
than Africa production (US$ 51cents).
59. The expected Amul model also offers value for money over Nutriset’s French manufacturing
operation, which is taken as the most important benchmark for export operations. Using the
above cost calculation, it is estimated that Amul will achieve a cost of production of around
$2600 per MT of RUTF, and a sale price of around $3200. This sale price would be around
10% ($300) lower than the sale price of Nutriset’s French manufacturing operation.
60. It is assumed that this will stimulate a market response as other suppliers adjust their
approach in order to remain competitive. Taking a conservative approach, we forecast that
through this intervention, RUTF prices will reduce by at least 10% globally. High product cost
of RUTF is an obstacle for its inclusion in the national health budget of many countries, and
the intervention will contribute to improving affordability by driving down global prices.
61. UNICEF spent $111m purchasing RUTF in 2013, and expects demand to double by 2017
(Figure 1; para 27) stimulated by SUN and the N4G process amongst others. A minimum
10% reduction in prices could therefore translate to net annual savings for UNICEF of
between $11m (based on 2013 purchase levels), and $22m (based on projected 2017 figures)
each year. An estimated 10% reduction in prices means additional purchasing power for
Unicef, saving equivalent costs to treat an additional 200,000 more children per year,
translating to additional 23,000 lives saved.
62. DFID has funded 11-14% of UNICEF’s total expenditure on RUTF over the last 4 years, so a
10% reduction in the price of RUTF would also translate to VFM savings for DFID of $2.4 3.1m per year by 2017 based on UNICEF’s demand projections. It is therefore expected that
DFID would recoup its costs well within the lifetime of the project.
24
63. Cost-effectiveness: The projected costs of the intervention are DFID’s investment +
production + marketing + technology transfer + logistics + duties. We assumed a market price
achieved of $3200 per MT of Amul RUTF. The cost effectiveness of the intervention is
measured in terms of Disability Adjusted Life Years (DALYs) saved due to DFID’s direct
investment. The overall cost per DALY gained is estimated to be around $8.8 and the cost per
life saved is $2899. According to WHO, an intervention is ‘highly cost effective’ if it is less than
1 x GDP per capita The costs calculated above are significantly lower than an assumed
benchmark of $706 GDP per capita (an average of participating countries in Africa), therefore
the intervention is expected to be highly cost effective. The intervention is highly targeted,
ensuring focus on impact.
64. Efficiency: It is difficult to quantify and monetise the efficiency benefits of the intervention at
this stage, however, it is expected that the intervention will help in improving responsiveness
in the supply chain and smoothen the demand spikes that occur during humanitarian crises. It
is expected that this programme would help in improving average on-time delivery (to port of
entry) from 61% (UNICEF, 2011) and reduce average delays from 28 days.
9
Based on principles set out in the best available peer-reviewed evidence (Bachmann, 2009).
25
Commercial Case
Direct procurement through a contracted supplier
A. Clearly state the procurement/commercial requirements for intervention
65. The preferred delivery option will be implemented through an accountable grant
between DFID and Valid Nutrition. This accountable grant will provide start up
resources, including purchase and delivery of specialised equipment that Amul will need
to begin RUTF manufacture.
66. Procurement of equipment will be initiated and managed by DFID through DFID’s
assigned procurement agents. The supplier will be selected by Valid Nutrition, informed
by a steering committee including Valid Nutrition and DFID. Equipment and machinery
bought using DFID money through the accountable grant will become a DFID asset
during the active period of the accountable grant (3 years), after which ownership of the
asset will be passed to the accountable grant recipient (Valid Nutrition) for continued
non-profit production of affordable products for addressing under-nutrition in developing
countries.
67. Around 1% of the accountable grant will be released to enable Valid Nutrition to cover
the costs of business planning, informing a commercial negotiation leading to a contract
with Amul. Release of the remainder of the accountable grant (in milestone and resultsbased tranches as set out in the Financial Case below) will be conditional on Amul and
Valid Nutrition agreeing a commercial arrangement that is acceptable to both parties,
and meets DFID’s basic requirements that:
 there is a credible approach for marketing and sale of the final product;
 that DFID’s policy on purchase of the equipment as set out above is met;
 DFID’s grant subsidises Valid Nutrition’s engagement in the venture and either ends up
as viability gap funding for early years losses, or feeds through into lower costs of
RUTF; and
 price-setting by Amul and Valid Nutrition respects the humanitarian spirit of the venture
to optimise price reductions in RUTF.
68. Both partners are agencies with a development mission. Amul’s cooperative model
provides assurance that any profit made on its part will ultimately benefit smallholder
dairy farmers. Valid Nutrition’s non-profit status and mission to tackle under-nutrition
provides assurance that any profit made on its part will be reinvested in providing
access to affordable products for addressing under-nutrition in developing countries.
69. As set out in the theory of change (para 55), DFID’s investment will complement (1)
Amul’s capital investment; and (2) Valid Nutrition’s investment and technology transfer
to Amul. These three inputs will together equip Amul with the necessary resources to
pursue the intended outputs and outcomes. In-house programme design and direct
procurement of Valid Nutrition’s services will ensure VFM by avoiding costly and lengthy
outsourcing and procurement processes.
70. The partners have a solid track record in delivering similar outputs at the agreed cost.
Amul is India’s largest food product marketing organisation, offering unprecedented
capacity for cost-effective manufacture at scale. Valid Nutrition has significant
26
experience in setting up local manufacture of RUTF and is recognised by governments,
the UN and civil society as the authority in programme development and
implementation. Competitive advantage of both partners is set out in detail in Strategic
Case A.
71. The accountable grant will set out performance criteria to manage Valid’s performance
during delivery. It will also include sufficient flexibility – including the use of grant
disbursements based on milestones - to manage the project risks and potential future
changes to requirements of the intervention.
B. How do we expect the market place will respond to this opportunity?
72. The intervention will be delivered through direct procurement of services, not open
competition, in response to the Amul/Valid pledge at N4G and their subsequent
approach to DFID for support in implementing this pledge.
73. DFID has discussed the Amul option extensively with important RUTF procurement
agencies - UNICEF (who currently procure 80% of all RUTF produced) and Médicines
Sans Frontières (MSF). UNICEF stand by their assessment of existing market failures
related to cost, quality, sustainability and reliability, and the value of diversifying the
market in order to drive the competition necessary to address these failures. While
UNICEF cannot make any preferential commitment towards any one supplier and are
working towards a goal of local purchase in SAM-affected countries, officials stated that
Amul’s capacity, location and performance indicated that it could be competitive in
meeting their standards, and that UNICEF would be open to judging Amul on its merits.
MSF indicated a preference for suppliers with a socially-responsible profile like Amul,
and suggested that they would seek to procure from such suppliers even if they
matched (rather than undercut) current market price.
74. Broader stakeholder consultation to triangulate these views showed a universally
positive assessment of Amul’s potential to (a) be competitive in the global market; (b)
drive improvements in market conditions; and (c) help to advance the debate on use of
RUTF in India.
C. How does the intervention design use competition to drive commercial advantage for
DFID?
75. A competitive process to identify partners is not recommended since this would transfer
ownership of the intervention to DFID and hence undermine the objective of the
intervention to boost Indian leadership in the RUTF market. The accountable grant
mechanism responds to a direct approach by Valid Nutrition for DFID’s support, and a
pledge by Amul/Valid at the N4G Summit, 2013. The accountable grant will focus clearly
on payment for results and VFM.
D. What are the key cost elements that affect overall price? How is value added and how will
we measure and improve this?
76. Price of specialised equipment is the biggest cost factor. Direct procurement rather than
open competition may introduce pressure on VFM. This will be mitigated by a detailed
planning process on costs, price and production planning and set up, including for the
purchase of equipment. This business planning process will be triggered by approval of
the business case and will be supported under the accountable grant. Transfer of
27
subsequent instalments of the grant will depend on DFID’s approval of this detailed
plan, and the conclusion of a satisfactory commercial negotiation between Amul and
Valid Nutrition that achieves maximum contribution to the objective of driving down the
cost of RUTF. A phased approach to implementation and payment based on
milestones will help to establish supplier incentives.
E. How will the contract be structured and how will contract & supplier performance be
managed through the life of the intervention?
77. The agreement will be managed by DFID Global Partnerships, India. Phasing of outputbased payments will be a mechanism to review priorities, incentivise suppliers and
mitigate risks.
78. The accountable grant will set clear and measurable outputs and performance
indicators. There will be an agreed delivery plan linked to the logframe, and a
cancellation clause in the event of (a) failure of Amul and Valid Nutrition to conclude an
acceptable commercial negotiation or (b) poor supplier performance. Workplans will be
sufficiently flexible to enable the partners to manage risks. DFID’s regular review and
reporting cycle will be used to mitigate and manage poor supplier performance.
28
Financial Case
A. Who are the recipients of all proposed payments?
79. The funds will be paid out through a DFID Accountable Grant to Valid Nutrition. About
65% of the proposed payments are for equipment and materials for Amul based on
manufacturing requirement as provided by Valid Nutrition. Valid Nutrition will be the
recipient of 15% of all proposed payments for technical expertise and support they will
provide to Amul. While 4% payment is set aside for M&E, 10% payments are set aside for
advocacy and the rest is for legal services and contingency. Further details are set out
below in para 81.
B. What are the costs to be incurred directly by DFID?
80. The costs to be incurred directly by DFID are £1,500,000 as detailed in the table below.
DFID’s investment will complement Amul’s broadly equivalent capital investment (Section
C below); and Valid Nutrition’s transfer of knowledge and technology to Amul. The budget
is based on discussion with active stakeholders and will be refined in detail by Amul and
Valid Nutrition as part of an initial business planning phase set out in para 81 and
Management Case Section A.
81. Description of select budget lines:
 Development of Business Case: once the accountable grant is approved, Valid
Nutrition and Amul will prepare an operational business case together with Amul,
including timeline, roles and responsibilities, commercial relationship and sales model,
Capex budgeting and procurement, ingredient and production costs refinement, Sales
Plan. This will inform a commercial negotiation between Amul and Valid Nutrition.
 Pre-launch and technical support – support from Valid Nutrition to Amul on setting up
commissioning of equipment, production trials and product analysis to meet specification
requirements, preparation for UNICEF Certification of product and factory, on-going
business support, customer / sales preparation and management.
 Legal and other services - In addition to advice on our contract with Amul, the ultimate
commercial entity will need to be appropriately registered and structured. This requires
legal advice on preparing and finalising Valid’s collaboration agreement with Amul;
accountant/financial services advice regarding trading and tax; legal advice on
registration and execution of same; on-going regulatory compliance by Valid.
 Advocacy: this will cover Valid’s costs in building the case with stakeholders for export
volume orders and any discussions on domestic supply (in parallel with the CMAM trial).
The combination of Valid’s charity and social enterprise model with Amul’s co-operative
union of smallholder farmers is a unique selling proposition that needs to be properly
communicated to underpin the business case. Valid International’s expertise will be a
useful point of reference for this advocacy work; Valid Nutrition will lead, co-ordinate and
implement the project.
29
C. What are the costs to be incurred by third party organisations?
82. Amul India will be making a resource investment in the form of land, upgrading existing
buildings, training labour force, supply chain management, etc. of approximately £1.4
million.
D. Does the project involve financial aid to governments? If so, please define the arrangements
in detail.
83. None.
E. Is the required funding available through current resource allocation or via a bid from
contingency? Will it be funded through capital/programme/admin?
84. Funding is available through DFID India’s current resource allocation to the Global
Development Partnership Programme coordinated by Global Partnerships Department.
The project approval is sought for 3 years and will be funded from the programme budget
30
(mix of programme capital and programme resources).
F. What is the profile of estimated costs? How will you work to ensure accurate forecasting?
85. To ensure accurate forecasting, spend will be estimated based on the annual work plans
provided by Valid Nutrition and Amul. This will be reviewed on a quarterly basis to take
stock of progress and take into account risks/factors that may affect expenditure. Regular
dialogue with all stakeholders involved in the project will also help in keeping track of the
progress of the project and will ensure better forecasting. Valid Nutrition has requested
payment of some of the quarterly tranches to be made in advance. This will be discussed
with Valid and appropriate permissions/waivers will be obtained from HQ before
processing any advances.
86. Quarterly profiling is given below. DFID’s contribution is expected to be delivered over
three years, but the results of the intervention would be monitored over five years to fully
assess the impact of DFID’s investment. Depending on the results observed and the
outcomes of monitoring and evaluation, options would be left open to consider a new
phase of DFID support after year three through extension of this business case.
31
G. What is the assessment of financial risk and fraud?
87. Financial risk associated with the project is low/medium due to the following reasons:
 The partners for the project are well established, credible organisations that attach
importance to reputation and this reduces risk. Valid Nutrition is internationally recognised
as the global leader in CMAM. Valid Nutrition has a strong expert base and demonstrates
evidence-based results on treating SAM using RUTF. Amul was one of only ten
businesses in the world that received a letter from the Prime Minister inviting attendance
at N4G. This indicates the level of confidence regarding Amul’s business credibility. Amul
is India’s largest dairy manufacturer with nearly 70 years’ experience and a sociallyresponsible cooperative model of operation. The Ministry of Commerce in India has
awarded Amul the status of a trading house, providing assurances regarding its robust
financial practices. The World Bank expresses confidence in the ‘Amul model’ as an
effective tool to fight poverty.
 Close to 70% of the small amount of grant that will be administered by the DFID India
32






office is for buying equipment and machinery. This will ease out physical verification of
how and where DFID’s money is spent, minimising financial risk and fraud for a large
tranche of the grant.
Purchase of machinery has the potential to introduce delays into the process, depending
upon the planning approach decided in phase one. But it is expected that this will be
mitigated by Amul’s extensive experience and supply network regarding procurement,
and Valid Nutrition’s knowledge and network on specialised RUTF equipment.
DFID has zero tolerance for fraud and will apply strict standards and procedures.
Partners will be informed of DFID’s approach and procedure that must be followed if any
irregular activity involving DFID money is suspected.
The accountable grant will be issued only once DFID carries out a proper due diligence of
Valid Nutrition to assess financial and management capabilities.
External audits will be conducted annually to ensure that funds are utilised for intended
purpose only. DFID will carry out regular inspection visits to ensure satisfactory progress
of the project.
DFID will put in place strict monitoring and reporting procedures as per Blue Book
guidance.
Although the assessment above identifies Amul as a strong contender to compete
effectively in the global RUTF market, UNICEF as key procurer will make its own
judgements about Amul’s capabilities as a new supplier. To mitigate risks that Amul fails
the procurement challenge, DFID has held extensive conversations with UNICEF. While
UNICEF cannot make any preferential commitment towards any one supplier, officials
stated that Amul’s capacity, location and performance indicated that it could be
competitive in meeting their standards, and that UNICEF would be open to judging Amul
on its merits.
H. How will expenditure be monitored, reported and accounted for?
88. Milestone-based annual budgets will be agreed by DFID and Valid Nutrition together with
Amul. The first milestone (acceptable conclusion of commercial negotiation leading to
contract between Valid Nutrition and Amul) will be critical to release the majority (some
99%) of the grant. Quarterly progress reports will be produced by the two partners and
payments will be made against these quarterly reports. Audited annual accounts will also
have to be submitted to DFID India for every financial year during the project period.
Annual external audit of project funds will also be carried out.
89. Assets (capex) bought using DFID funds will be the property of DFID during the project
cycle. Maintenance and control of the equipment will be Amul’s responsibility. An annual
inspection of the equipment will be undertaken to ensure it is being maintained properly
and being used for its intended purpose by trained staff. Once the project finishes,
ownership and responsibility of the equipment will pass to the accountable grant recipient
(Valid Nutrition).
I. Are there any accounting considerations arising from the project?
90. None.
33
Management Case
A. What are the Management Arrangements for implementing the intervention?
91. As DFID’s investment will support the start-up of a new venture between Amul and Valid
Nutrition, it is proposed that DFID structure its grant on the basis of achieving clear
milestones as proposed above. The business case approval will set in motion the nondisclosure arrangements between Amul and Valid Nutrition and detailed planning on costs,
price and production planning and set up including the purchase of equipment. It is
expected that around 1% of the accountable grant will be used to support Valid Nutrition’s
engagement in this process.
92. Before the second instalment is made on the grant, the detailed plan should be accepted
by DFID; an acceptable commercial agreement concluded between Amul and Valid
Nutrition (see para 67); and Amul and Valid should have completed a pre-negotiation
phase with UNICEF with an agreement in place for the criteria Amul/Valid Nutrition must
meet to become a LTA supplier. The third disbursement should be made when supplier
status is agreed by UNICEF and it begins to order from Amul / Valid Nutrition. DFID’s
investment will be blended with (1) Amul’s capital investment; and (2) Valid’s investment
and technology transfer to Amul.
93. The project progress will be monitored and assessed by a steering committee comprising
of DFID, Valid and Amul representatives who will meet every 6 months to discuss and
progress of the project. It is suggested that 25% of the grant be held back until Amul / Valid
can demonstrate that it is meeting its plan to reasonable expectations and that mitigations
are in place where there have been unexpected issues and challenges.
94. Depending on the results observed and the outcomes of monitoring and evaluation,
options would be left open to consider a new phase of DFID support after year three
through extension of this business case.
B. What are the risks and how these will be managed? (See also para 39)
Risk
Mitigation
34
1. Amul and Valid do not
agree to final partnership
terms
1% of the grant will be forgone. Because the grant
disbursements are based on milestones the grant commitment
can be terminated when no agreement is reached.
2. UNICEF does not
approve Amul / Valid as a
RUTF supplier
This risk has been mitigated through extensive discussion with
UNICEF and other procurement agents (e.g. MSF). UNICEF
will make decisions based on Amul’s competitive offer, but
informally recognised Amul’s potential as a RUTF supplier. The
social aims of Amul as a business owned by 3 million small
holder farmers are also seen as commendable and aligned with
positive development outcomes, but not part of UNICEF’s
cost/quality/capacity criteria for making procurement decisions.
The second disbursement should require evidence of
successful pre-negotiations with UNICEF which indicates the
terms under which it will purchase from Amul / Valid Nutrition,
and the expected volumes. Amul / Valid Nutrition should
indicate how these terms will be met.
3. A new formulation is
developed by a
competitor which is
approved by WHO and
UNICEF
A new formulation will take time to develop and bring to market,
therefore this is not an immediate risk. Amul / Valid Nutrition
are well positioned to compete on cost with the milk-based
formula because of Amul being the largest dairy cooperative in
India and the lower cost of RUTF supplied by India to the
African market.
4. RUTF demand does
not increase as expected
Because Amul / Valid Nutrition can compete on cost, quality and
reliability through the supply chain, they are well positioned to
capture share from existing producers.
5. GoI objects to
production of RUTF in
India (even for global
markets), introducing
political/ reputational
risks.
The proposed initiative will target global rather than local
markets, and remain guided by GoI’s policy stance on domestic
use of RUTF. Companies located in India like Compact and
Nutriva already produce RUTF for global markets, so precedent
already exists to explore this market opportunity from an Indian
base, and deal-breaking opposition to production for non-Indian
markets seems unlikely. Objections to RUTF tend to focus on
foreign commercial enterprises making profits out of hunger and
under-nutrition in India: the Amul-Valid partnership is between
cooperative and non-profit organisations working together to
address global SAM, and is therefore judged to be more aligned
with the values and priorities of GoI and civil society. DFID will
continue to consult closely with a range of stakeholders,
including the GoI and its agencies, the Right to Food movement
and RUTF procurement agents, to build support for the
initiative.
6. GoI objects to DFID’s
involvement with the
project, linked to
perceptions of foreign
interference.
The focus on global markets mitigates this risk. DFID will
remain guided at all times by the GoI’s policy. DFID’s good
relationship with GoI, civil society and the Right To Food
movement in India places DFID favourably and credibly to
engage in constructive dialogue with government and civil
35
society, including through advocacy activities planned under the
initiative.
7. Public dissatisfaction
with DFID funding a
large, well-resourced
Indian business.
This can be mitigated by highlighting the potential impact of
Amul’s contribution; the barriers that have prevented Amul from
entering the RUTF market so far; the limit of DFID’s catalytic
support; Amul’s co-funding commitment; and Amul’s potentially
valuable leadership role on this key development priority.
C. What conditions apply (for financial aid only)?
95. N/A
D. How will progress and results be monitored, measured and evaluated?
96. A milestone-based disbursement approach will allow DFID to monitor the performance of
the investment and mitigate risks. As set out in the Commercial and Financial Cases,
release of some 99% of the grant will be contingent on Amul and Valid Nutrition completing
a commercial negotiation that is acceptable to both partners and meets DFID’s basic
requirements as set out in para 79. In addition to these safeguards, DFID will use its
regular cycle of mid-term and annual reviews to assess performance of its investment. The
project progress will be monitored and assessed by a steering committee comprising of
DFID, Valid and Amul representatives who will meet every 6 months during the project
period to discuss progress.
Logframe
Quest No of logframe for this intervention: to be provided
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