Download a PDF of this issue - Field Exchange - Emergency ...

Field Article
staff in Niger and Ethiopia, further audits were
conducted at manufacturers in Malawi, the
Democratic Republic of the Congo,
Mozambique, Madagascar and Tanzania and
resulted in their approval for local purchases to
UNICEF. The suppliers listed in Table 3 are
authorised to sell RUTF to UNICEF’s country
programmes locally. As of 2010, about 23% of
the RUTF purchased by UNICEF was sourced
locally.
As programme demand and production
capacity increased, so did the volume of
UNICEF procurement, in terms of the number
of MT purchased and the number of countries
placing orders. After a steady increase from
2000 to 2008, procurement of RUTF decreased
not because of declining needs but as a result of
resource mobilisation challenges caused by the
global economic crisis and availability of stocks
in countries from 2008. However, orders have
rebounded in 2010 and by mid-year had
surpassed 2009 levels, reaching 20,690 MT as of
year-end (2010) (for more details see Table 4).
Forecasting
The growing demand for RUTF, production
capacity constraints and the volatility of prices
of raw materials made forecasting of demand
increasingly necessary. UNICEF first undertook
global forecasting to collect information on
needs for RUTF and other nutrition products in
January 2009. This resulted not only in forecasting
of global product needs (used for the
bidding process) but also contributed to a better
understanding of the scale of implementation
of CMSAM.
The 2010 forecast indicated that UNICEF
currently is implementing CMSAM in about 55
countries, where there are 6.1 million children
with SAM. UNICEF country programmes
intended to reach 1.8 million children (about 30
per cent), revealing a large gap in coverage,
especially given the 20 million children estimated
to be suffering from SAM worldwide.
RUTF Pricing
Peanut-based RUTF consists of milk powder
(30%), sugar (28%), peanut butter or paste
(25%), vegetable oil (15%) and vitamin and
mineral premix (1.6%). 4 The product is packed
in standard foil sachets. The milk and packaging
material (aluminum foil) are the most
expensive components, followed by the premix,
peanut butter, sugar and oil.
Somewhat surprisingly, the entry of new
suppliers into the market has not resulted in
any dramatic drops in price, for a number of
reasons. One possible reason might be that new
suppliers do not have the large production
volumes that usually result in lower prices, and
are also faced with high-start-up costs.
Prices of globally purchased RUTF
The pricing structure in the LTAs is complex
because of volume discounts, payment terms,
currency used and other factors. The initial
price paid by UNICEF for RUTF in 2001 was
about €41.50 (56.80 USD) per carton. In 2006, as
the average size of orders began to increase,
Table 4: UNICEF Global Purchases of RUTF, 2000-10 (in MT)
Countries
ordering
RUTF
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1 4 6 7 8 17 26 41 48 45 52
Total 3 84 57 109 344 1,793 2,697 4,552 10,741 8,129 20,690
Nutriset proposed scaled prices for larger
orders, and the price decreased gradually to
about €35.20 (48 USD) per carton in 2011.
However, this drop in price was masked by
fluctuations in the rate of exchange between the
euro and the United States dollar, because the
price is fixed in euros, as proposed by Nutriset.
The RUTF prices offered to UNICEF by other
suppliers range from 48.00 USD to 56.50 USD
per carton in 2010.
Prices of locally procured RUTF
Local producers import almost all of the ingredients
and the packaging material, most of
which are subject to import duties. Often the
price offered initially is too high to justify local
purchase on a cost basis alone, even considering
the added cost of freight.
Supply Division carefully scrutinises the
prices proposed by local companies in order to
assure best value for money. They are compared
to the landed cost of globally procured RUTF
(price at the factory plus freight cost to the final
destination) and when found too high, UNICEF
attempt to negotiate a lower price.
The prices of locally produced RUTF vary
significantly among the different suppliers. In
2010, the local prices ranged between 57.00
USD (in Madagascar) and 69.00 USD per carton
(in Mozambique).
Freight costs
RUTF is a heavy and bulky product, with a
course of treatment for one child (one carton)
weighing about 15kg. The 16,000 MT of RUTF
purchased off shore in 2010, filled 830 40-foot
containers. Shipping the product by sea is the
most economical option, but air shipment
might be required when RUTF is needed for
emergency response to natural disasters,
drought or political instability. Air freight of
RUTF increases the landed cost by 100 per cent
whereas sea freight only by 10 per cent.
In 2008, nearly 35% of RUTF purchased by
UNICEF had to be transported by air, at a cost
of $8.5 million, in order to reach the beneficiaries
on time. By 2010, less than 1% of the RUTF
had to be transported by air, costing less than
$400,000. The decrease in shipment by air is a
result of RUTF supply chain analysis that
suggested a number of tools to reduce freight
costs. These included introductions of forecasting
of country programming needs,
development of supplier base in locations close
to where the product is used and prepositioning
of stock in areas closer to emergency-prone
countries (e.g. Dubai for the Horn of Africa and
Ghana or Cameroon for the Sahel region).
Issues for future consideration
As more countries adopt and/or scale up
CMSAM to treat SAM, the need for RUTF will
continue to increase. Supply Division will
continue to refine its procurement strategy and
work with UNICEF’s Programme Division and
Table 3: UNICEF-approved local RUTF suppliers
Global supplier
Product Name
1. STA (Niger) Plumpy Nut®
2. Hilina (Ethiopia) Plumpy Nut®
3. Project Peanut Butter ( Malawi) Plumpy Nut®
4. Valid Nutrition (Malawi) Plumpy Nut®
5. Amwili (DR Congo) Plumpy Nut®
6. JAM (Mozambique) Plumpy Nut®
7. Power Foods (Tanzania) Plumpy Nut®
external partners to address a number of issues
that could affect RUTF availability and accessibility
for the final beneficiaries.
UNICEF sees the continued diversification
of the supplier base, with more qualified manufacturers
in countries and regions closer to the
end-users, as an important concern. This will
facilitate the eventual transfer of CMSAM and
use of RUTF from UNICEF and NGOs to
national authorities.
Building a strong network of smaller suppliers
in countries with the highest incidence of
SAM therefore remains a priority. The work is
ongoing with potential manufacturers in Sierra
Leone, Uganda and Rwanda in order for them
to become part of UNICEF-approved manufacturers.
However in the process of expansion of
UNICEF approved-manufacturers, the focus on
product quality and safety shall remain central.
Conclusions
The Supply Division strategy to increase the
availability of RUTF and assure a sustainable
and diverse supplier base has accomplished its
main goals. In 10 years, the supplier base has
grown from one global supplier in Europe to 19
global and local manufacturers in Africa,
Europe and Americas. The seven local suppliers
are in countries where RUTF is used, and more
local manufacturers are expected to be
approved in the near future. Even with this
substantial growth in production capacity,
quality standards have been maintained.
Forecasting of demand has been systematised
and orders can be filled promptly when they
are placed on time. Supply Division continues
to work with UNICEF country offices to refine
forecasting of demand and to work with suppliers
to manage global production. Air freight
costs have been reduced dramatically as a result
of these improvements, and stocks are being
prepositioned in key regions to allow for rapid
response when necessary.
As outlined above, the major future challenge
is the potential increased demand for RUTF as
countries adopt and expand CMSAM. Supply
Division will continue to work with suppliers,
country offices, UNICEF’s Programme Division,
and external partners on development of
sustainable RUTF supply chain.
For more information, contact: Jan Komrska,
email: jkomrska@unicef.org
4
Mark J. Manary. Local production and provision of ready-touse
therapeutic food (RUTF) spread for the treatment of
severe childhood malnutrition. Food and Nutrition Bulletin,
vol. 27, no. 3 (supplement) 2006, The United Nations
University
Table 2: UNICEF-approved global RUTF suppliers
Global supplier
Product Name
1. Nutriset (France) Plumpy Nut®
2. Vitaset (Dominican Republic) Plumpy Nut®
3. Diva Nutritional Products (South Africa) Generic name***
4. Insta EPZ (Kenya) Generic name
5. Challenge Dairy (United States)* Generic name
6. Tabatchnick Fine Foods (United States) Nutty Butta
7. Compact (India) EeZee Paste TM
8. Compact (Norway) EeZee Paste TM
9. Edesia (United States) Plumpy Nut®
10. Nutrivita (India) Plumpy Nut®
11. JB/Tanjaka Foods (Madagascar)** Plumpy Nut®
12. Mana Nutritive Aid Products (United Generic name
States)
*Dairy-based, not peanut-based, RUTF.
**The first company located in programmatic country capable of exporting RUTF
***Supplier agreed to remove branded name Imunut from the labels
47