Over the last decade, Nestle has developed and refined a specific business model called Popularly Positioned Products (PPP) for 3 billion lower-income consumers worldwide. But why? Towards the end of the last decade, Nestle was quick to realise the latent business opportunity in this segment. Lower-income consumers want access to aspirational products that they can afford.  PPPs offer these consumers the opportunity to consume high-quality food products that provide nutritional value at an affordable cost and appropriate format.

Nestle’s success in the PPP model comes with a deep understanding of the consumers.

For instance, in Indonesia, Nestle found more than a third of the population consumes less than half the recommended daily amount of iron. To solve this problem, Nestle went back to its drawing board with Milo, an immensely popular brand among the local kids and mothers. Consumer research showed an opportunity to extend the brand into the fast-growing sweet snacking segment in Indonesia, through an affordable, nutritious, light snacking product for school children. Nestle came up with Milo Choco Blazz, bite-sized cereal pillows coated with MILO, filled with chocolate cream and fortified with iron and vitamin C. Launched in 2010 at a price equivalent to 12 US Cents for 14 grams, the product became widely popular. Due to the high sales volume, Nestlé has a good profit margin despite the low price.

The PPP business strategy combines the great taste of popular Nestle products with enhancing nutritional value.

Today, 83%[1] of the PPPs for lower-income consumers are fortified with at least one of the WHO defined ‘Big 4’ – iron, iodine, zinc and Vitamin A. For example, after understanding the challenges around iron deficiency in Africa, in 2009 Nestle introduced iron-fortified Maggi bouillon cubes in West and Central Africa, which was already a popular condiment among the locals. “We looked at our product portfolio to identify potential carriers for fortification. Maggi bouillon cubes and tablets were widely consumed across the region, making them an ideal vehicle for iron fortification,” says[2] Petra Klassen-Wigger, Scientific Advisor at Nestle’s Nutrition, Health and Wellness department. In 2011, Nestle recorded sales of 75 million[3] Maggi bouillon cubes every day in Africa alone.

Today, Nestle sells 174 billion servings of PPPs in 66 countries with higher vulnerability to micronutrient malnutrition. A global leader in premium infant food, Nestle, in recent years, has also developed affordable infant food for several emerging markets.  For example, sold in 135 g aluminium sachets at a 15-20% lower price than mainstream products, Nestogen Classic was innovated for lower-income consumers in the Philippines. Similarly, NIDO Bunyad in Pakistan for older kids, Lactogen Recover in India for infants suffering from diarrhoea and Lactogen Klasik in Indonesia, were all born out of the PPP innovation labs.

But, along with creating value for the lower-income consumers, Nestle has made a strong business sense through the PPP model.

For the organization, PPP is one of the fastest-growing segments. In 2017, Nestle through its 4,746 Popularly Positioned Products (PPP) earned a gross revenue of CHF 12.2 billion – contributing to about 14% of its total revenue[4]. This is almost a 55% growth from 2009 when the PPP sales contributed to 8% of the total revenue equating to CHF 7.84 billion.

However, Nestle realized developing a product is only half the job done, and hence they concentrated their efforts on localized routes to market innovations.

With a range of locally adapted distribution methods, including street markets, mobile street vendors and door-to-door distributors, PPPs are a source of income for street traders and individual distributors and contribute to the creation of local jobs. In Brazil, Nestle has built a network of 200 micro-distributors and 7,000 door-to-door saleswomen selling fortified Nestlé products to around 700 000 lower-income consumers each month[5]. Furthering its micro-distribution in the country, Nestlé launched the floating supermarket that targeted inaccessible villages in the Amazon, to supply products to consumers as well as to micro-distributors in those areas.

Through “Maggi Cooking Caravans” in Central and West Africa, Nestle engaged its consumers to understand the concepts around micro-nutrients, balanced diet and food hygiene. Apart from being a nutrition awareness tool, the Cooking Caravans were a great platform for consumers to try Nestle products.

Nestle’s PPP business model is a fantastic learning opportunity for leading consumer product brands to seamlessly intertwine business opportunities with impacting the Base of the Pyramid consumers. A deep understanding of the consumers and developing innovative go-to-market strategies will be the key success factors to create a win-win situation for the consumers and businesses.

Sources:

[1] https://www.nestle.com/asset-library/documents/library/documents/corporate_social_responsibility/nestle-csv-full-report-2017-en.pdf

[2] https://www.nestle.com.au/media/newsandfeatures/maggi-bouillon-cube-iron-deficiency-micronutrient-fortification

[3] http://www.wphna.org/htdocs/downloadsdec2012/2011_Nestle_PPPs.pdf

[4] https://www.nestle.com/asset-library/documents/library/documents/corporate_social_responsibility/nestle-in-society-summary-report-2017-en.pdf

[5] https://www.nestle.com/ask-nestle/health-nutrition/answers/addressing-new-york-times-obesity-junk-food-brazil