Sub-saharan Africa • Ethiopia
PepsiCo: Partnering with
international development
organizations to scale up chickpea
production and fight malnutrition
in Ethiopia
Prepared by • Tofik Siraj Fite
Sector • Food and Beverage
Enterprise Class • MNC
Table of contents
Introduction ................................................................................................................................ 4 Context ....................................................................................................................................... 4 Socio-Economic Characteristics of Ethiopia .......................................................................... 4 Organizational Background of the Business .......................................................................... 5 Origin of the idea .................................................................................................................... 5 The Business Model ................................................................................................................... 7 PepsiCo's pilot project: Ethiopia’s Shewa province ............................................................... 9 Key Challenges ......................................................................................................................... 10 Solution strategies .................................................................................................................... 10 The Business and its Relationships .......................................................................................... 12 Results ...................................................................................................................................... 15 Socio-economic results ......................................................................................................... 15 Environmental Results.......................................................................................................... 16 Conclusion ................................................................................................................................ 16 References ................................................................................................................................ 18 Annex ....................................................................................................................................... 19 2
Executive Summary
PepsiCo is a multinational company that is known for its variety of food and beverage
products. The company’s core brands include Pepsi-Cola, Gatorade, Frito-Lay, Tropicana and
Quaker Oats. The company operates in over 200 countries and territories across the globe,1
including Ethiopia. PepsiCo established the PepsiCo Foundation in 1962 in order to support
charitable and educational initiatives in health, education, and environment in underserved
populations around the world. In September 2011, with sights set on improving productivity
of Ethiopian smallholder chickpea farmers and fighting malnutrition with this locallyproduced crop, the company established a private-public partnership with the United Nations
World Food Program (WFP), United States Agency for International Development (USAID)
and the government of Ethiopia. The Partners signed a memorandum of understanding and
launched the “Enterprise EthioPEA” Alliance in May 2012 during the Grow Africa / World
Economic Forum, held in Ethiopia.
PepsiCo’s objective is to increase its revenue from sale of nutritious products from the current
US$10 billion to US$30 billion by 2020. The company is the world’s largest producer of
chickpea-based products; their chickpea-based product range includes “Sabra Hummus” dips
and some of the “Naked” Juice and Smoothies line, such as “Berry Veggie” and “Mango
Veggie”. Ethiopia is among the top producers and exporters of chickpea in the world.
However, the crop is grown as a secondary crop between harvest seasons by smallholder
farmers and relies on unreliable rainfall for natural irrigation. Therefore, PepsiCo sought to
introduce modern farming practices, better irrigation, and high-yielding seeds in order to
increase the production and export of chickpeas in Ethiopia. This will help the company
secure a reliable supply of chickpeas that will contribute towards the achievement of its plan
of increasing revenue.
The project is expected to benefit around 10,000 smallholder farmers. Farmers in Ethiopia’s
Shewa and Gondar provinces are already involved in the pilot study, which will run until the
end of 2013. They are offered the improved seeds for free but are expected to purchase the
seeds once the pilot study is over. Three local manufacturers are contracted by the Alliance to
produce Ready-to-Use Supplementary Food (RUSF) from chickpeas. These companies have
benefited from the project in terms of revenue generation and capacity building. The WFP
expects to reach out to 40,000 malnourished children with the supplementary food.
GUIDING QUOTE
“At PepsiCo, we believe that what is good for society and what is good for business can and
should be the same.” PepsiCo’s Corporate Social Responsibility, PepsiCo (2010)
1
2
PepsiCo (2010), sustainability summary
According to UNDP’s Human Development Report (2010), Ethiopia is ranked 174
th
out of 187
3
Introduction
Ethiopia is among the bottom of the Less Developed Countries (LDCs) in the world2. The
country’s economic performance has been very volatile as it heavily depends on the
performance of agriculture. Agriculture accounts for 42% of Gross Domestic Product (GDP)3
and 90% of foreign exchange earnings. Traditional rain-fed agriculture is the major livelihood
for an estimated 83% of the country’s population4. Due to unpredictable climate patterns and
inadequate rainfall resulting in critical droughts, the country had experienced food security
challenges and high levels of malnutrition of children on different occasions. For instance,
according to the 2011 Ethiopian Demographic and Health Survey, 44% of children under five
years old are in a condition of chronic malnutrition. Therefore, this case study investigated the
private-public partnership established by a Multinational Company, PepsiCo, and
international donor agencies to improve the productivity and production of smallholder
chickpea farmers and use this locally produced chickpea to produce Ready-to-Use
Supplementary (RUSF) to feed malnourished children in Ethiopia.
Context
SOCIO-ECONOMIC CHARACTERISTICS OF ETHIOPIA
Ethiopia is an east Africa country that has never been colonized. It is the second most
populous nation in Africa with a population of approximately 83 million. An estimated 83%
of the population lives in rural areas where the major livelihood is subsistence agriculture.
The country has been through different political and economic systems. From 1974 to 1991,
Ethiopia had a socialist government, under which the private sector was deliberately
neglected and ownership of economic resources and production decisions were completely
under the discretion of the central authority. As a result, the country experienced serious
economic and political problems. In May 1991, the Ethiopian People’s Revolutionary Front
(EPRDF) came into power and made several reforms to the economy. The economy was
partially liberalized and private sector participation was encouraged. Consequently, Ethiopia
was able to revive and get back on the growth track. However, it is still ranked extremely
poorly among the Less Developed Countries (LDCs) in the world. Ethiopia’s Gross Domestic
Product (GDP) and GDP per capita5 in 2010 were US$18 billion and US$221 respectively.
The human development index score for the same year was 0.358, which is lower than the
Sub-Saharan average (0.46)6.
As previously mentioned, Ethiopia’s economy mainly depends on the performance of the
agriculture sector, which is illustrated by the sector’s shares in GDP (50%), foreign exchange
earnings (more than 90%) and employment (83%). The agricultural sector is characterized by
2
th
According to UNDP’s Human Development Report (2010), Ethiopia is ranked 174 out of 187
countries based on the human development index.
3
Agriculture, value added (% of GDP), http://data.worldbank.org/indicator/NV.AGR.TOTL.ZS
4
UN (2011): rural population, development and the environment
5
Data are in constant 2000 U.S. dollars
6
UNDP (2010)
4
subsistence traditional farming practices and relies heavily on unpredictable rainfall and
climatic conditions. Its performance has been quite unsatisfactory due to frequent droughts
and has led to subsequent food security challenges and very volatile and fragile. The recent
food insecurity problem of the 2011 is worth mentioning in this regard7.
ORGANIZATIONAL BACKGROUND OF THE BUSINESS
PepsiCo is a multinational company that is known for its variety of food and beverage
products. It is the largest food and beverage business in North America and the second largest
in the world. The company’s core brands include Pepsi-Cola, Gatorade, Frito-Lay, Tropicana
and Quaker Oats. It generates more than US$1 billion from sales of each of its 19 different
brands annually. The company operates in over 200 countries and territories across the globe,
including Ethiopia. It has approximately 294,000 employees in more than 700 facilities8.
Pepsi-Cola is the company’s only product that is widely consumed in Ethiopia.
PepsiCo has been involved in development activities such as sustained and improved health,
environment and education through partnership and programs in poor regions of the world.
These activities are done through the company’s philanthropic arm, the PepsiCo Foundation.
The foundation was established in 1962 and it has been making significant charitable
contributions to NGOs and responding to disasters and rebuilding activities. In 2010 alone,
the company made total donations of US$25.9 million9.
ORIGIN OF THE IDEA
Ethiopia has a favorable climate for chickpea production. The country is the top chickpea
producer in Africa and the seventh largest in the world with around 330,000 Metric tons
productions on over 230,000 hectares of land10. Chickpea is the major type of pulses11
produced by smallholder farmers, mainly based on rainfall and traditional farming techniques.
The crop is produced for subsistence and only a small proportion is supplied to the market. A
lack of modern farming technology, high-yielding seeds, and irrigation facilities has resulted
in lower productivity and marketability of the crop. The average productivity (yields) of the
farmers had been 1.2 tons per hectare, which is of course higher than the world average
productivity of 0.8 tons per hectare.
Though Ethiopia is a top producer of chickpeas, a nutritious crop, malnutrition has been a
major challenge. According to the Ethiopian Demographic and Health Survey (2011), 10% of
children are acutely malnourished, 44% are chronically malnourished, and an estimated 1.3
million children need supplementary feeding.
7
USAID’s report on the food security outlook report for Ethiopia showed that about 4.8million people
including 250,000 refugees from the neighboring countries required food assistance in 2011.
8
PepsiCo (2010)
9
http://www.pepsico.com/Purpose/PepsiCo-Foundation.aspx
10
Kassie M. et al. (2009)
11
Pulses are the edible seeds of legumes.
5
Ms. Nancy Roman12 explained WFP’s success in feeding undernourished children with a
chickpea-based product called “Acha Mum” during a major flood in Pakistan to Mr. Derek
Yach13 when they met at the World Economic Forum held in Dubai. She told him that they
lack the capacity to scale up the program and feed malnourished children in other parts of the
world, especially in Sub-Saharan Africa. He was very excited about the concept and indicated
PepsiCo’s interest in moving towards chickpea-based nutritious products, as chickpea is a
nutritious crop with 22% protein. In order to meet PepsiCo’s substantial demand for
chickpeas, he explained that the company wants to work more extensively in Africa where
chickpeas are grown. They discussed the possibility of creating a partnership and go beyond
‘just’ increasing production to address malnutrition in Africa14.
Acha Mum is a supplementary food made
out of chickpeas used to feed malnourished
children in Pakistan during the deadly
flood in 2009. It is a nutritious paste full of
vitamins, minerals, and protein and
children eat it directly from the packet. The
term “Acha Mum” is derived from Pashto,
one of the languages spoken in Pakistan,
which is to mean “Good Food, Mom”. Ms.
Roman said that they want to call this new
product “Shimbra Mum” which means
“Chickpea, Mom” in Ethiopia, during her Mother helping her daughter eat a packet of Acha
interview with the Center for Strategic and Mum (Credit: Amjad Jamal/WFP)
International Studies (CSIS).
Table 1: Nutritional value of “Acha Mum”
Composition
Energy
Proportion
513 KCal
Fat
30%
Protein
13%
Source: Partnership project update (2012)
In September 2011, at the Clinton Global Initiative annual meeting in New York, PepsiCo
established a private-public partnership with the United Nations World Food Program (WFP)
and United States Agency for International Development (USAID) in order to scale up
chickpea production and fight malnutrition in Ethiopia. The partnership is called “Enterprise
12
Ms. Roman is a director of communications, public policy and private partnership of UN-WFP.
Mr. Yach is a senior vice president of global health and agriculture policy of PepsiCo.
14
PepsiCo WFP: A Public-Private Partnership to Transform Nutrition across Africa - YouTube
13
6
EthioPEA”. The partners aim to replicate the success of “Acha Mum” in Ethiopia. Moreover,
they plan to help Ethiopia realize its potential to become the main exporter of chickpeas in the
world and to promote the agricultural value chain. At the Grow Africa / World Economic
Forum held in Ethiopia in May 2012, the Ethiopian Ministry of Agriculture, the Ministry of
Health, the Agricultural Transformation Agency, PepsiCo, WFP and USAID signed a
Memorandum of Understanding and launched the Alliance.
Representatives who signed the Memorandum of Understanding (Source:
http://ethiopia.usaid.gov/node/301)
Generally, the main objectives of the alliance are:15
•
To develop a new locally-produced cost-effective Ready-to-Use Supplementary Food
(RUSF) made of chickpea that will be used to feed malnourished children in the age
of 6-59 months,
•
To improve the productivity and production of smallholder chickpea farmers in
Ethiopia, which will in turn help the country to be the main exporter of the crop,
•
To develop the capacity of local food processors to sustainably produce a new RUSF
and manage their safety and quality control systems, and
•
To expand the use of RUSF across the Horn of Africa, if proven cost-effective.
The Business Model
PepsiCo’s objective is to expand its brand and boost revenue from nutritious products.
According to Indra Nooyi, Chairman and CEO of PepsiCo, “this initiative will positively
impact the livelihood of local farmers, address the critical issue of famine in the Horn of
15
Project update (2012)
7
Africa and create sustainable business opportunities for PepsiCo". Despite the company’s
global reputation for its food and beverage products, consumers in the Sub-Saharan African
region have not been exposed to its nutritious food products. Therefore, the company wants to
know these consumers’ taste for and response towards the products in order to expand its
market. It does not have the experience in this region; however, the WFP and USAID have a
great deal of experience as they have been working there for several decades. The partnership
is therefore an ideal opportunity for PepsiCo to test the market while simultaneously helping
the agencies achieve their humanitarian and development objectives.
The establishment of the partnership with the aid organizations also helps PepsiCo fulfill its
corporate social responsibility16. As a leading producer of food and beverages made of
agricultural products, PepsiCo is considered as part of the agricultural industry. PepsiCo has
been playing a role in global issues such as affordable health, water availability, climate
change and sustainable agriculture, and aims to continue to do so. While adopting strategies
that maximize its value, the company strives to supply a variety of food products to
consumers to help them live a healthier life. It also works to develop and use more efficient
technologies that could minimize its consumption of natural resources. In this regard,
chickpeas are an interesting crop for PepsiCo not only for its nutritional content17 but also for
its environmental benefit in terms of soil conservation. It is a nitrogen-fixing crop, as it uses
nitrogen from the air instead of the soil. Due to its efforts in these global issues, the company
has been recognized as the most admired company by Fortune, the most innovative by Fast
Company, the most respected by Barron’s and the most ethical by Ethispehere18.
The project incorporates the
poor community both on the
demand and supply side. On the
demand side, PepsiCo and
USAID are combining their
agriculture expertise to enhance
the productivity of 10,000
smallholder chickpea farmers
through introducing modern
farming practices, high yielding
seeds and better irrigation.
Scientists from the company
have also partnered with the
Ethiopian
Institute
for
Agricultural
Research
to
develop better chickpea seeds.
16
PepsiCo’s CSR is “Performance with Purpose”.
Chickpea has 22 percent protein and a lot of iron.
18
PepsiCo (2010), sustainability summary
17
8
PEPSICO'S PILOT PROJECT: ETHIOPIA’S SHEWA PROVINCE
The partners have launched pilot projects in two chickpea-producing areas (Shewa and
Gondar Provinces). At the moment, PepsiCo is not directly involved in the production of the
RUFS. Rather, the farmers supply the chickpeas to local food manufacturers that are
contracted by the alliance to process and package the RUSF. Three manufacturers are selected
based on their technological capacity. The WFP provided the RUSF formula and coordinates
the whole production process based on experience in developing a similar product in
Pakistan. With a donation from PepsiCo Foundation, the charity arm of the company, the
WFP then buys the RUSF from the manufacturers and supplies to approximately 40,000
malnourished children in the country for free.
Table 2: RUSF formula
Ingredients
Roasted chickpeas
% dry weight
32.75
Soya bean oil
9.0
Palmolein oil
19.0
Hydrogenated vegetable fat
2.0
Sugar
15.0
Skimmed milk powder
20.0
Lecithin (Max)
0.5
Premix (Vitamins and Minerals)
1.75
Source: Partnership project update (2012)
PepsiCo’s investment in Ethiopia goes beyond helping the Ethiopian chickpea farmers and
malnourished children. The company wants to boost its revenue from sale of chickpea-based
nutritious products from the current US$10 billion to US$30 billion by 2020. As this will lead
to a rise in its demand for the crop, PepsiCo is trying to diversify its sources worldwide.
Ethiopia is among the top producers and exporters of the crop, but there is still a lot to do to
increase farmers’ productivity and the country’s export potential. This project in Ethiopia is at
the pilot stage and, hence, it is not yet generating any profit for PepsiCo. However, when the
pilot phase ends by the end of 2013, the company plans to source chickpeas from Ethiopia for
production and marketing of nutritious products, especially “Sabra Humus” dips19. In
addition, PepsiCo produces other chickpea-based products, like "Berry Veggie" and "Mango
Veggie", smoothies made 100% from fruits and vegetables. The company expects to use
around 6,500 tons of chickpea for the production of these foods in 2012. This is expected to
grow to 12,000 tons by 2014 and 10% of it is expected to be sourced from Ethiopia. The
company anticipates forming contract farming with the smallholder farmers in order to
19
It is a nutritious food product that is produced by PepsiCo and Strauss Group Ltd, an Israel company.
9
guarantee them a stable market and price. Besides, the WFP is among the potential buyers of
the crop as it aims to expand the project to other parts of the Horn of Africa. The Ethiopian
government and the WFP will also change the project to a Supplementary Food Programme if
the project is proven to be cost-effective 20.
Key Challenges
The project is ideal when we consider its objectives and the forces joined to achieve them. All
the stakeholders have the capacity to realize the project and deliver its intended benefits.
However, the project is still in its initial phase – and there are several challenges ahead21.
Smallholder farmers in Ethiopia lack the knowledge and skills required for modern farming
practices and were hesitant to adopt them. These farmers have been practicing traditional
farming for many years. They are risk-averse, possibly owing to socio-economic factors like
age, education and size of the family, other factors like non-farm income, and the inherent
riskiness of the sector. Furthermore, the local food processing companies do not have state-ofthe-art technology. They also do not have the experience and required capacity to develop and
produce supplementary nutritious food.
The production of chickpeas takes place mainly in remote areas where the transportation
infrastructure is poor. As a result, it remains difficult for USAID and PepsiCo to reach out to
the farmers.
The WFP faces the challenge of identifying target children while distributing the food. Most
of malnourished children dwell in remote areas that lack necessary infrastructure.
Additionally, most poor families living in rural areas want to register their children, whether it
is critically malnourished or not, in order to get the food as it is offered for free.
As an interviewee22 stated, “everybody has the power to say no, but nobody has the power to
say yes”. When dealing with getting permits and other regulatory measures, many have found
that lower-level officials will either not allow the permit to be issued or they will refer the
case to their superiors. This implies how powerless some lower level officials are, and as a
result, how difficult it was to implement the project. For instance, there are several
bureaucratic procedures that the WFP has to go through before it gets permission to import
the ingredients required for the development of the supplementary food.
Solution strategies
In order to overcome the problem of lack of knowledge and skills from the farmers’ side,
PepsiCo approached USAID and the Ethiopian Institute for Agricultural Research (EIAR).
With help and agricultural expertise from USAID and EIAR, PepsiCo has been introducing
the benefits of modern farming to smallholder farmers. PepsiCo and EIAR have been
conducting collaborative research on developing better chickpea seeds that can help improve
their productivity and production. They have been introducing better farming practices,
20
Project update (2012)
These challenges are identified based on the UNDP’s strategy matrix and are listed below.
22
It is one of the interviewees from the WFP that want to remain anonymous.
21
10
irrigation, soil enhancement and better seeds to farmers in two provinces (Shewa and
Gondar). Following the change in the attitude of the farmers towards modern farming, they
are collecting data for comparison on the yields of different improved seeds in the two
locations. It is expected that this will be extended to other chickpea-producing areas to benefit
an estimated 10,000 smallholder farmers by the end of 201323. In addition to improving the
productivity of farmers and their living standard, the project will help PepsiCo secure a
reliable source of chickpea supply for the production of its nutritious products.
The partners have engaged the community as they conduct training on modern farming
techniques. The chickpea farmers’ cooperatives were approached and ‘train the trainers’
courses have been provided to selected individuals from the group. Some farmers were
selected to multiply the improved seeds and provide it to their neighbors. For example, Mr.
Bedilu, a smallholder farmer from East-Shewa province, was trained and provided with
several new varieties for testing on his field by EIAR for free. He is now able to produce 3.5
tons of chickpeas per hectare from the improved seed. Furthermore, he is able to generate
revenue from selling the new high yielding seed to the farmers in his province24.
USAID and EIAR are well-established organizations with a stock of experience in working
with farmers and reaching out to them. They have vehicles that can take them to the farmers
even when infrastructure is poor. PepsiCo and EIAR chickpea researchers have been using
this resource in order to reach the remote pilot areas of Shewa and Gondar provinces.
The WFP introduced the formula of the new Ready-to-Use Supplementary Food (RUSF) to
the selected local manufacturers25 in order to help them produce it using the chickpeas. These
manufacturers have the technological capacity to process and package the RUSF so that it
could be conserved properly until it is distributed to the final consumers. The product is
similar to “Acha Mum.” The WFP has also been closely working with the Ministry of Health
in order to identify the malnourished children. It has been using its well-established
distribution network to reach out to the needy children in rural areas. The WFP is the largest
humanitarian agency in the world and it has been operating in different parts of the world,
including Ethiopia, in order to feed malnourished children and famished people due to
different natural and manmade calamities. The stock of experience that it has acquired since
its establishment has enabled the agency to establish a well-developed distribution network.
Representatives from PepsiCo, WFP and USAID have held several meetings and engaged in
discussion with the prime minister of Ethiopia for possible coordination and facilitation of the
project’s implementation. Those discussions have helped them to ease bureaucracy at
different levels. The WFP has engaged in several policy dialogues with the Ministry of
Agriculture and the Ministry of Health, which are among the partners of the project, to
overcome the problem of bureaucracy and red tape while importing the ingredients required
for producing the RUSF.
23
Project update (2012)
Changing chickpea culture in Ethiopia – YouTube
25
Three local companies are selected by the WFP based on their production and packaging technology.
24
11
The Business and its Relationships
There are several stakeholders that have made contribution to the implementation of the
project. The major actors are PepsiCo, USAID, WFP, the Ethiopian Ministry of Agriculture,
the Ministry of Health, the Agriculture Transformation Agency, smallholder chickpea
farmers, and local food processing companies.
Figure 1: Stakeholders map
PepsiCo
WFP
Developing better
seeds, introducing
modern farming
techniques to
smallholder farmers and
making donation to
WFP
Coordinating the
production of RUSF
and distributing it to
malnourished
children
Smallholder
chickpea farmers &
Malnourished
Children
USAID
Partnering with
PepsiCo to help
farmer improve their
productivity
Local Food
Processors
The Government
Authorities (e.g. MoA,
MoH, EATA, EIAR &
EHNRI) cooperate
with other stakeholders
Source: Author
12
PEPSICO
PepsiCo’s goal is to double chickpea production that will be used to produce supplementary
food to feed malnourished children in Ethiopia. The company granted approximately US$3.3
million through its philanthropic arm, PepsiCo Foundation, for this purpose. PepsiCo’s
interest goes beyond helping farmers and malnourished children. The company wants to
expand its sources of chickpea supply for the production and marketing of its nutrition
products, an important core business activity. This is part of its business plan to increase
revenue from sales of nutritious products from US$10 billion to US$30 billion by 2020. To
achieve this objective, it is conducting pilot study for increasing chickpea productivity and
production in two locations such as Shewa and Gondar provinces of Ethiopia.
THE US AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID)
USAID made a grant of US$7 million to the Alliance. The money is used to finance training,
technical and financial assistance provided to increase the productivity and commercialization
of the farmers and the nutritional support as well. PepsiCo and USAID introduced modern
farming practices like irrigation, soil enhancement and better farming practices to 10,000
smallholder farmers to increase their productivity and, hence, production of chickpeas26.
UNITED NATIONS WORLD FOOD PROGRAMME (WFP)
WFP is UN’s humanitarian agency that provides relief to people suffering from malnutrition
and hunger worldwide. The agency has long been providing humanitarian aid in Ethiopia.
Within this partnership, the WFP plays the role of developing and distributing Ready-to-Use
Supplementary Food (RUSF) to 40,000 target children through its existing distribution
network. The acquisition and distribution of the RUSF is financed by the donation from
PepsiCo Foundation. Furthermore, it has been supporting local manufacturers and the
Ethiopian Health and Nutrition Research Institute through capacity building, which consisted
of introducing the formula to develop and produce RUSF out of chickpeas. The
manufacturers are expected to include the RUSF in their product mix and reap the market
opportunities in Ethiopia in particular and in the Horn of Africa in general.
MINISTRY OF AGRICULTURE (MOA)
The MoA has been part of the project in different ways. The Ethiopian Agricultural Research
Institute (EIAR), a research wing of the ministry, identified two locations (Shewa and Gondar
provinces) for the implementation of the project. As the partners, PepsiCo and USAID, do not
have a good knowledge of chickpea-producing areas in Ethiopia, they approached the EIAR
for the identification of the pilot areas. The EIAR has additionally been working closely with
the farmers in order to improve their productivity through introducing better seeds. The
26
http://ethiopia.usaid.gov/node/301
13
partners, especially PepsiCo, were keen to collaborate with the institute in order to develop
better seeds and compare data on yield increases with several seed varieties from these pilot
areas.
SMALLHOLDER CHICKPEA FARMERS
In this combined effort to develop the chickpea value chain and fight malnutrition, the role of
smallholder farmers is very instrumental. They are the ones targeted to increase the chickpea
production and export in Ethiopia. They produce and supply chickpea to the local food
processing companies. PepsiCo will source chickpeas from these farmers for the production
of its nutritious products.
THE ETHIOPIAN AGRICULTURE TRANSFORMATION AGENCY (EATA)
Ethiopia is now on the second year of its five-year Growth and Transformation Plan (GTP).
In the plan, the government clearly targeted the transformation of the economy from
agriculture to a relatively industrialized one through encouraging the establishment of agroprocessing and other light industries. The agriculture sector of the country has been
characterized by traditional, rain-fed subsistence farming. As part of the GTP, the EATA was
established as a responsible body for the transformation of the sector to a more modern and
commercial sector so that the country would be able to realize its goals of food security,
poverty reduction, human and economic development. In order to address systemic
bottlenecks in the sector, it supports and enhances the capability of the Ministry of
Agriculture and other public, private and non-governmental implementing partners27.
In order to address the bottlenecks in the chickpea value chain and develop the sector, the
EATA is developing a 5-year roadmap. This could provide insights on the value chain and its
problems to the project partners so that they can plan well-targeted interventions.
MINISTRY OF HEALTH (MOH)
The MoH is the authority in Ethiopia responsible for monitoring the provision of health
services and malnutrition to improve the country’s overall health. In order to fight
malnutrition through the project, it has been providing support in identifying malnourished
children and assisting the WFP in distributing the RUSF. The Health and Nutrition Research
Institute from the Ministry has been involving in the development of the supplementary food.
Their role is to combine their expertise with the WFP and the local manufacturers in the
development of a more cost-effective formula of the RUSF28.
27
28
http://www.ata.gov.et/about/our-mandate/
Partnership project update (2012)
14
LOCAL FOOD MANUFACTURERS
These are profit-oriented food processing companies that are involved in producing,
packaging, and selling manufactured foods. With the chickpeas they buy from the smallholder
farmers, they produce and package the RUSF and sell it to the WFP.
In general, PepsiCo is trying to accomplish its corporate social responsibility and create
business opportunity simultaneously. To do so, it approached USAID, WFP and the
government and made the initial investment of US$3.3 million in the form of donation.
Results
SOCIO-ECONOMIC RESULTS
Expected rise in supply of chickpea and revenue to PepsiCo
This project will help Ethiopia fully utilize its potential as a major chickpea exporter.
Currently, the company is not making profit as it is at the pilot stage. When this pilot study
ends, PepsiCo plans to get a greater percentage of its chickpea supply for the production of its
nutritious product from Ethiopia. This will contribute to its business plan of increasing
revenue from sales of nutritious products from US$10 billion to US$30 billion by 202029.
“With the expected growth of our business in chickpea-based products such as hummus, we
expect to source at least 10 percent of our supply from Ethiopia, which amounts to at least
2,000 tons of chickpea per year”, said Mr. Derek Yach of PepsiCo30.
Improved living standard for smallholder farmers
The project is expected to help smallholder farmers improve their productivity from the
current average 1.2 tons of chickpeas per hectare. Consequently, they will be able to realize
their hope for a better life with the increased income they generate from selling their products.
The farmers are not threatened by the rise in the supply of chickpeas and the subsequent fall
in price as the partners, mainly PepsiCo and the WFP, will likely buy the chickpeas once
there is substantial supply for export. The additional income may help them afford services
like health and education. Moreover, poor women are among the producers of chickpeas;
hence, the business has the capacity to empower women and bring about gender equality.
Capacity building and improvement in revenue to local manufacturers
The local food processing companies are also among the beneficiaries. RUSF production has
been outsourced to three home grown manufacturers so far. They buy the chickpeas from the
farmers and produce the food, which in turn is supplied to the WFP. As a result, the project is
helping them to generate additional revenue from selling the food. WFP is also providing
technical assistance to the companies in order to develop their capacity in producing
nutritious foods. This will help them to exploit both local and foreign market opportunities31.
29
PepsiCo WFP: A Public-Private Partnership to Transform Nutrition across Africa - YouTube
An interview with Derek Yachs during CGI 2011 - YouTube
31
An interview with individuals from the WFP who wanted to remain anonymous
30
15
Rise in government revenue and foreign exchange earnings
The improvements in the capacity and revenue of the manufacturers will also have an impact
on government revenue. These companies are registered tax payers and thus a rise in their
income will help the government to collect more revenue in terms of profit tax, value added
tax and export tax. The development in the sector, especially in export potential, could help
the government to generate more foreign exchange.
Capacity building for the local research institutes
According to Dr. Asnake, a researcher at the EIAR, the partnership of their institute with
PepsiCo to develop new better seeds has been improving their research capacity. As an
interviewee stated, “the Ethiopian Health and Nutrition Research Institute has been
benefiting from working with the WFP in developing the new supplementary food.”
Attainment of humanitarian objective
From the demand side, the end users of the product are malnourished children in Ethiopia.
The project has the capacity to reach out to 40,000 children. This is quite important for the
physical and mental development of the children. Consequently, WFP and USAID are able to
achieve their humanitarian and development objectives through the partnership with the
PepsiCo32.
ENVIRONMENTAL RESULTS
Production of chickpea is helpful in terms of soil conservation as it is nitrogen fixing. This
will help to conserve the soil that could improve the production of other crops in the future.
The improvement in the productivity of the farmers could help them to get more output from
small plot of land and hence save land for the production of other crops.
In general, the project is very helpful for the development of agriculture and manufacturing
sectors in particular, and the whole economy in general. It helps develop the chickpea supply
value chain from the bottom – production by smallholder farmers –to the top – processing and
distribution by manufacturers. Government authorities, such as the Ministry of Agriculture
and the Agricultural Transformation Agency, could take this project as a model and replicate
it on other agricultural products. This is very important, as it is the central point in the current
Growth and Transformation Plan and Agricultural Transformation strategy of the
government.
Conclusion
The business illustrates an inclusive business model. It incorporates the poor both on the
supply and demand sides. On the supply side, it is helping poor farmers through increasing
their productivity and income while on the demand side it is making a significant contribution
32
http://ethiopia.usaid.gov/node/301
16
to the fight against malnutrition through producing and supplying ready-to-use supplementary
foods (RUSF).
PepsiCo’s business plan to move towards the production and marketing of healthier foods that
are made of chickpea could be an excellent opportunity to scale up the business. The
company aims to source up to 10 percent of its chickpea demand from Ethiopia. Besides,
there is a commitment from the government of Ethiopia and the WFP to change the project to
a supplementary feeding programme. Furthermore, the donors aim at replicating the project in
other parts of the Horn of Africa. These plans could create an opportunity for the smallholder
chickpea farmers, local food manufacturers and PepsiCo.
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References
Kassie M. et al. (2009): “Current Situation and Future Outlooks of the Chickpea Subsector in Ethiopia”, Nairobi
PepsiCo (2010): “Annual Report”
PepsiCo (2011): “Annual Report”
USAID (2011): “Ethiopia food security outlook update”, Addis Ababa
USAID (2011): “Feed the future: Ethiopia’s multi-year strategy (2011-2015)”, Addis
Ababa
UN (2010): “World Population Prospect: The 2010 Revision”, New York
UNDP (2008): “Creating Value for All: Strategies for doing Business with the Poor”, New
York.
UNDP (2010): “Human Development Report”, New York
The farmer's apprentice website; Link:
http://thefarmersapprentice.blogspot.de/2012/05/pepsico-and-chickpeas-privatepublic.html - accessed: June 2012.
PepsiCo website; Link: http://foodfrontiers.pepsicoblogs.com/2012/01/pilotphase/ accessed: June 2012.
PepsiCo website; Link: http://www.pepsico.com/Purpose/PepsiCo-Foundation.aspx accessed: July 2012.
USAID/US Embassy in Ethiopia website; Link: http://ethiopia.usaid.gov/node/301 accessed: July 2012.
UNDP Human Development Report website; Link:
http://hdrstats.undp.org/en/countries/profiles/ETH.html - accessed: July 2012.
WFP website; Link: http://www.wfp.org/stories/wfp-pepsico-and-usaid-fight-childmalnutrition-ethiopia - accessed: July 2012.
YouTube - Changing Chickpea Culture in Ethiopia; Link:
http://www.youtube.com/watch?v=FDJYeaZygf0&feature=youtu.be - accessed: July
2012.
YouTube - An interview with Derek Yachs during CGI 2011; Link:
http://www.youtube.com/watch?v=W7C5-vcvSc8&feature=related- accessed: July 2012.
YouTube - PepsiCo WFP: A Public-Private Partnership to Transform Nutrition across
Africa; Link: http://www.youtube.com/watch?v=MX1M9d9d3iY - accessed: July 2012.
WFP-PEPSICO-USAID Partnership project update (2012)
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Organisation
Name
Role
Date
WFP
Anonymous
Experts in the project
July 17, 2012
EIAR
Dr. Asnake
Researcher
July 18, 2012
Annex
Table 1: Socio-economic indicators for Ethiopia
Indicators
GDP
(constant
2000 USD)
GDP Per
capita
Poverty
Life
expectancy
HDI
GINIIndex
2010
US$18
billion
US$221
0.562
59.3
0.358
0.247
Source: Human Development Report (2010)
Figure 1: Trends in chickpea production in Ethiopia
Source: Adopted from the bulletin of tropical legumes (2011)
Figure 2: Trends in chickpea exports from Ethiopia
Source: Adopted from the bulletin of tropical legumes (2011)
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