Indra Nooyi: World Food Prize 2009. part 2

World Food Prize, October 15, 2009.
Address by: Indra Nooyi, CEO PepsiCo, Inc.

Ladies and gentlemen, it is my sincere pleasure to be here with you today on this important occasion. The program you have assembled is amazing and the cast of speakers is quite incredible. To follow Bill Gates — overwhelming! I am humbled and honored to be on this platform.

Now, some of you may wonder what the CEO of a food and beverage company is doing addressing all of you on imbalanced food equations in the world. Well, believe it or not, companies like us can thrive only if we have access to agriculture crops to make our products and if society is healthy enough to have productive jobs, earn wages and buy our products. Our very existence and success is tied to a thriving agriculture base and good nutrition practices.

So, I want to spend some time this afternoon talking about a grave and serious issue – How do we make sure that agriculture is organized to serve the nutrition needs of the world.

Let me try to summarize the basic problem. The agricultural community tends to focus on the quantity of food produced and the price it fetches in the market place. But those most concerned with nutrition, focus on the quality of the food and who it is getting to. The absence of overlapping incentives results in a problem that is encapsulated in two terrible facts. One – every day a billion people the world over go hungry, more than at any point in the past forty years. And the situation is getting worse. That’s why we need to ensure that nutritious food gets to the people that need it. 

And two – more than half the food produced today is lost, wasted or discarded. That’s why we need to become more efficient.

We have accepted the reality of these two problems for far too long. It is a problem that is worsening due to the current economic crisis. It is a problem that needs immediate concerted action.

So, in my short remarks today I will not mention the importance of world trade, of pulling down protectionist walls, of empowering women and of the looming disasters of climate change. I know that these topics will be addressed by others more expert than me.

But what I do want to do is try to explain why the needs of agriculture and the needs of nutrition are so poorly aligned. I’ll lay out what I think the consequences of this are and I’ll suggest ways in which an engaged company can help. But then I want to finish with a call to action – a partnership between governments, multilateral organizations, NGOs and corporations to address this grave issue.

All these seem like daunting questions but we should remember that we do not confront them alone. We are, as Isaac Newton said, standing on the shoulders of giants.

The great agricultural pioneer Norman Borlaug, the patron saint of this gathering, showed us, in his remarkable career, how to feed many in the world.

Norman Borlaug is someone for whom anyone from India has a connection, whether they know it or not. It is amazing to think of the story of human progress that can come out of doctoral research into semi-dwarf, high-yield, disease resistant wheat varieties. Out of the curiosity of Norman Borlaug came a green revolution which probably saved over one billion lives the world over. Between 1965 and 1970, thanks to Norman’s work, wheat yields nearly doubled in India.

For the remarkable contribution that Norman Borlaug made in India he was awarded its second highest civilian honor, the Padma Vibhushan. And of course he received the Nobel prize. We do not encounter many great men. Norman Borlaug was a great man.

Let me also note the work of another great scientific pioneer, the great sage of nutrition, David Morley. If Norman Borlaug showed us how to feed the world, David Morley showed us what to feed the world. His work, starting in Nigeria back in the 1940s, has made us understand the need to monitor growth and good food intake from a very young age. The “Morley” baby scales were named after him-and reminds us that before he started work, weighing babies and children was virtually unknown.

I do not know if they ever met. It would have been a fascinating conversation if they had. Between them, they provide the answer to the problem that we confront today. By using both Norman and David’s insights, global agriculture and global nutrition can be fully in unison.

So let us get to the heart of the big question here. Why is there a gap between agriculture and nutrition? What causes the damaging division?

I think there are three things. First, agricultural incentives are not well aligned. There is, for example, an economic incentive to produce meat and dairy for richer populations, rather than cereals for poorer people. Second, too much food is lost through inefficiency. And third, people go hungry because we do not have the right alignment between supply and demand.

The consequences of this misalignment can be terrible. The most obvious and most distressing is massive under-nutrition. The UN recently estimated that over one billion people worldwide are undernourished. This is more than 15 percent of the estimated world population. Iron, vitamin A and zinc micronutrient deficiencies affect billions, damage the brains of babies and increase the risk of many diseases.

Under-nutrition is not the only problem. In many countries, we face a rising tide of obesity which leads to diabetes and heart disease. In fact, chronic diseases are now the dominant causes of death and disease everywhere except in sub-Saharan Africa. And we know that adults are far less likely to contract chronic diseases if they have a healthy nutritional start as a baby and their mothers have better nutrition in pregnancy.

Clearly, the harmony between agriculture and nutrition is a long way distant.

So, what can we do about it? It is such a tough problem, how do we even start? Well, obviously, it requires many hands to make it right. In fact, the importance of partnership was the golden thread through the proposal for combating hunger that Secretary Clinton recently unveiled.

I want to build on that notion of a partnership and concentrate my remarks on what I think the contribution of the private sector might be. 

Before I get into detail on that, I want to point out that we do need to fix the serious issue of access to finance.

Farmers, particularly smallholders, cannot invest in technology and innovation, or improve their distribution networks, without capital which can be hard to find.

Rural households in developing countries are still largely reliant on informal credit, such as money lenders and pawn brokers. Micro-finance and community lending are so important for these people, but governments, NGOs and other agents can’t develop these without at least some investment and backing of larger financial firms.

If the finance is in place I do believe that the contribution of the private sector, especially consumer product companies like ours, could be immense.

This belief comes from my conviction that a company has a soul. That soul is made up of all the people who comprise it. Our associates are first children, wives and husbands, fathers and mothers, citizens of the community. They don’t want to park their persona at the company door in the morning when they come to work and pick it up on the way out. They want to work in a company that cares about the world collectively as they do individually – they want to be part of a good company.

With that as a backdrop, I think there are three specific things that we, the private sector, especially the food and beverage sector can do. We can help across the entire process of our business – from farming, to product formulation to distribution.

First, we can and must share our core “farming” expertise. In the course of doing business we build a great store of knowledge on things like nutrition science, irrigation techniques and the development of resilient crop strains. There is no reason why this knowledge can’t be shared with small-scale farmers to help improve their yields and enrich their crops.

Small-scale farmers who would benefit are vital to the solution. Two-thirds of the 3 billion rural people in the world live off the income generated by farming less than two hectares. And, these small-scale farmers are the ones who are least able to get hold of agriculture advancements, but they are also the ones who have the greatest capacity to turn the sector around.

It’s not well known today, but when PepsiCo launched its business in India in the 1980’s, we began with agriculture. We worked directly with thousands of farmers in Punjab and other states transferring techniques and best practices to improve the yields of tomatoes, chili and rice. We shared technology, including introducing new tomato and chili varieties that tripled yields. Recently, we also started a high yield citrus processing farm, planting millions of orange trees that have the potential to make India a global orange growing base. At the same time, we introduced critical food processing technology. That meant fewer fruits and vegetables would rot on their way to market.

We have also worked with local scientists in India to implement drip irrigation, a paddy field watering technique that uses significantly lower levels of water to produce a rice crop. This saves crops and improves the return to the farmer.

In Inner Mongolia, China, we helped local potato farmers develop thriving crops in the middle of the desert. Water-saving irrigation and crop-rotation methods were shared along with regular training on modern, environmentally friendly technologies.  Production per hectare at these farms is world class at 39 tons, more than double the 18 ton average in China. We benefit from these productive farming techniques – we buy the output at competitive prices. The farmers in turn make a good living.

Second, the private sector can use its R&D and product formulation expertise to incent healthier eating by providing consumers with products that are both highly nutritious and taste great. For many years now, at PepsiCo, we’ve found creative ways to reformulate our products. We’ve reduced fat, we’ve reduce sodium and we’ve taken out added sugars. We are now adding whole grains, fruits, and vegetables to our snacks and making many of our drinks healthier too. For example, over the past 5 years, in the US alone, in Beverages our total calories per 8oz serving decreased 11%.

Frito Lay led the industry in 2003 by being the first major food company to remove trans-fats from it entire snack chip portfolio. We are reformulating our packs and products to address obesity with better nutrition labeling and portion control.

The third thing that private sector companies can do is leverage its distribution expertise. Lots of companies have highly developed supply chains and these can be used in the biggest task of all – to distribute food to places where it is needed most.

Take PepsiCo in India, South Africa, Nigeria, Mexico, China as examples. We service between one hundred thousand and one million urban and rural outlets depending on the country and reach these outlets once, sometimes twice, a week. How can we and other companies with similar distribution networks, utilize this precious resource to help address the under-nutrition issues that are so rampant? 

At PepsiCo, we recently launched Project Asha (“hope” in Sanskrit). This project draws on the expertise that we have gained through our extensive food R&D. In partnering with several organizations, we have been able to develop highly nutritious products for the under-nourished. We want to augment this development with the reach of our supply chain so we can get it into the hands of the poorest of the poor, in countries like India, Nigeria, Mexico and South Africa. It is a work-in process, we have run into many obstacles; but we are resolute. Finding innovative solutions is what we in the private sector do best.

We also have another great resource: our highly qualified and capable people. We are seconding retirees with expertise in distribution, to the World Food Program, to transfer best practices from our company to them to improve the efficiency of distribution of food aid. We have business initiatives with UNICEF and Valid in Nigeria to support and learn about possible roles in addressing under-nutrition. All these form part of a commitment I made to UNDP and the British Government with 17 other companies to show how we can use our core business capabilities to tackle the MDGs.

Knowledge transfer, understanding of consumers and nudging them to make the right food choices, and reach – that is the holy trinity that the private sector can offer to align agriculture and nutrition.

The picture I have painted is of a company that cares about its responsibilities. Companies, in my view, operate with a license from the societies that host them. They have the privilege of limited liability in return for being a responsible corporate citizen. At PepsiCo we call that obligation “performance with purpose”. It means that we think of these responsibilities as part of our core mission.

But a word of caution is in order. I have to say that this will not be enough. Even if we did one hundred per cent of what we can do, would that solve the problem? No, it wouldn’t. It wouldn’t nearly solve the problem.

I think the time has come for concerted action. As we are dealing with a global problem, the UN, the WHO and other large NGOs need to play a coordinating role. I want to salute all the people who work in this field for the amazing hard work they do. In the corporate field we are very well compensated for what we do. For the people in the NGOs it is a labor of love and I salute their great efforts.

I think the rest of us need to ask ourselves now whether our work is making enough of a difference at a pace that begins to curb the growth of the problem. 

Let’s not forget … problems in the modern world today cannot be contained within national borders. We need global solutions … but progress so far is glacial.

What if we take the conversation that is taking place here and put it on a more formal footing? What if we create a commission of all the interested parties to look ahead to 2020 or 2030?

The commission’s task will be simple to state but difficult to do: how do we align agriculture and nutrition to address the world’s nutritional needs? And in doing so, how do we use the R&D expertise and knowledge, and supply chain capability of industry to bridge the farm to family divide?

This is the big issue of the 21st century, as the WHO Assistant Director General, Dr. Ala Alwan, identified at last week’s International Conference on Nutrition in Thailand.

We have to act now. We have come a long way but time is short and the need is great. We all demand food. It is a basic human need.

United by commitment; underpinned by science, operating with a sense of community, we must make a difference.

It was this task to which Norman Borlaug and David Morley devoted their distinguished careers. It is up to us now to pick up where they left off and complete their work. It is up to all of us, when we leave this gathering, to continue “The Borlaug Dialogue”.

It is hard to imagine a more important task today. I would like to commend the conveners of this great gathering one more time. It is a great program in a noble cause. It has many dimensions and requires partners from every sphere. It needs our attention, our skill and our devotion. But, most of all, it needs action and it needs action now. 

The stores of the developed world are full of fruits that are rich in vitamins. They have traveled the world so we can eat well. Yet, back at home, in the countries where the fruit grows naturally, people go hungry and people remain deficient in vitamins. People who do not get the nutrition they need find their energy is sapped, their brainpower is diminished, their economic potential is reduced. And of course they become more vulnerable to chronic disease.

Ladies and gentlemen, it is within our power and not beyond our expertise to consign this suffering to history. WE MUST DO WHAT WE CAN.

Thank you to you all for listening.

Indra Nooyi – 2009 World Food Prize Symposium. part 1:
http://zyozy.org/blog/2009/10/15/indra-nooyi-2009-world-food-prize-symposium/