|Food and Nutrition Bulletin Volume 02, Number 2, 1980 (UNU, 1980, 40 p.)|
|Food and nutrition policy|
|A look at the Incaparina experience in Guatemala|
Robert P. Wise
Harvard School of Public Health, Boston, Massachusetts, USA
Perhaps the most widely publicized low-cost, high-protein new food of the last two decades is lncaparina, a mixture of vegetable sources supplying an amino-acid balance comparable to that in foods of animal origin. The formulas were developed and trademarked in the 1950s by the Pan American Health Organization's Institute of Nutrition of Central America and Panama (INCAP) in Guatemala.
After careful documentation of safety and efficacy, commercial production began in 1961, under exclusive contract to CervecerCentroamericana, S.A., in Guatemala It was widely anticipated that this product would help reduce malnutrition by providing a lower cost alternative to cow's milk for human nutrition, with similar nutritional value, and as its sales in Guatemala have grown, it has been called a success. There is now a need to appraise its course in Guatemala, including exploration of alternatives for increasing Incaparina's so-far limited nutritional impact. It is produced at present in smaller quantity than desirable, and sold at a higher price than affordable by that large target group of persons malnourished by reason of low income (1) Though commercially self-sustaining, lncaparina's nutritional impact is therefore small compared to the magnitude of the problem of malnutrition (2).
THE STATUS QUO: LIMITED NUTRITIONAL IMPACT
The "conflict between nutritional impact and profits" (3) plagues all commercial approaches to the malnourished as a target group. "Since nutritional deficiency accompanies low purchasing power, the consumers who need the new products cannot afford them or cannot afford them in prescribed quantities, and the consumers who can afford them may not need them." (4) In March 1976 INCAP's Director of the School of Nutrition wrote:
"Unfortunately, the world economic crisis has made it necessary to increase the price, due to higher cost of the ingredients This increase places Incaparina a little beyond the purchasing power of the people who need it most - the underprivileged." (5).
In general, those proclaiming "success" for Incaparina are limiting their definition to commercial survival in the marketplace (6). Certainly there have been many obstacles overcome in achieving even the current limited distribution (7-9), and the growth of sales from 1961 to 1977 in Guatemala has been reasonably steady, averaging nearly 400,000 pounds per year (total sales were 6,775,044 pounds in 1977 . see fig. 1) Consideration of annual per capita sales puts these figures into perspective
In brief, the 1977 sales represented 1.2 pounds per person per year,* and the linearly projected sales will never surpass two pounds even under the most optimistic of three assumed population growth rates. Even these modest annual per capita sales estimates fail to reflect that the poor actually buy less than the mean, and they tell nothing about intra-familial distribution. Moreover, a pound or two per person per year is little when compared with the recommended consumption. At 75 grams per day, 365 days per year, and 2.205 pounds per 1,000 grams, about 60 pounds per year are recommended:
(75 g/day) (365 days/year) (2.205 Ib./1,000 g) = 60.36 Ib/year
Thus, the 1977 level of 1.2 pounds per year amounts to about 2 per cent of the recommended intake for a child.**
A MONOPOLY INDUSTRY
Incaparina is produced by a single company in Guatemala (8). INCAP started licensing private companies to sell exclusively in each country (12) and then expanded these protected markets to exclusive multi-national regions (12, 13). R.L. Shaw, INCAP's Economic Consultant, expressed the need to set a price (controlled in the license, but subject to renegotiation) (12, 14) high enough to give the private firm "reasonable returns" (9, 12, 14). "Authorizations are normally granted on an exclusive basis.... Experience early in the programme showed that this measure of protection for the producer was required in order to give him the time to carry out the extensive and costly development work needed to establish such a new food product in the commercial market." (12) For this reason, significant barriers to entry of even the first firm were anticipated, and the expectation of reasonable profits was felt necessary to induce the first firm in each region to take the risks and pay the costs of those barriers. Kapsiotis refers to the "precarious undertaking" for such a firm, making it "often desirable or necessary to obtain support from governments or U.N. Agencies.... there must be economic incentive." (15) De Muelenaere elaborates on the risk and expense of low-cost, high-protein product development (6).
It must be noted, however, that many costs of entry were, in fact, borne by INCAP, and the foundations and governments supporting it (9, 16). Research and development of the product cost the firms nothing, and ongoing technical assistance, including quality control, is provided in exchange for a "contribution" of 1 per cent of net sales (14). In Iight of the govern mental encouragement of Incaparina production, the element of risk is probably also reduced (9), although no direct governmental financial support was involved. Also, in spite of the original desirability of exclusive marketing arrangements, it is likely that the price charged and the quantity produced are adversely affected by persistent monopoly. In principle, only under perfect external regulation of both price and quantity of output would a monopoly be expected to function in the socially optimal manner, with price as low and output as high as would be found in a freely competitive industry.
Source: Reconstructed and updated using INCAP figures from Informe de Actividades del Pero Cuadrienal 1971 - 1975. Division de Nutriciplicada, INCAP, Guatemala, February 1976, p 59.
TABLE 1. Incaparina Prices (in cents of US dollars per lb.)
|Country and purchase unit||About 1963(9)||July 1965(39)||1968(12)||1970(16)|
|Colombia, 500 g||11.9||7||12||9.5|
|Guatemala, 75 g||24.3||24||24.1|
|Guatemala, 1 lb.||24||20|
(Numbers in parentheses are to references)
COMPETITION IN MARKETING
In 1964, the Guatemalan producer was permitted to "make the product available to any food wholesaler at a sliding price scale based on the volume of the purchase instead of attempting to handle all distribution through his own distributing company." (8) Along with increased promotional activities, the resulting increase in sales volume permitted a price reduction from 24 per lb. to 20 per lb. the following year (8). The increased output and decreased final consumer price were partly the consequence of the introduction of competition into the marketing. "Competition between marketing enterprises induces them to seek better and cheaper methods and to be economical in their use of equipment. Where competition is sharp, producers and consumers benefit through the competitive cutting of margins and firms are under constant pressure to minimize their costs." (17) However, both competition at the marketing level, and the introduction of producer price discrimination to the wholesaler probably worked together here to increase output and decrease price.
COMPARISONS WITH INCAPARINA IN COLOMBIA
In Colombia, Incaparina sold for much less than in Guatemala (tables 1 and 2), and with lower wholesale and retail profit margins (table 3). Three factors probably account for the difference. First, in Colombia packaging costs were cut (partially passed on implicitly to the retailer) by supplying the product in bulk 12- and 35-kilogram bags to the retailer, along with supplies of empty 500-gram bags, which he could fill for each customer (13). The inordinate contribution of packaging to the final price of processed vegetable protein foods is discussed by Abbott (18) and Call and Levinson (3).
TABLE 2. Cost of Recommended Allowances of Incaparina per Child, at Retail Prices in 1979 - 1971, as Percentage of 1968 Per Capita Income
|Country||Annual cost in US dollars||Annual cost as % of 1968 per capita income||Daily cost,|
Source Orr (16)
TABLE 3. Profit Margins in Guatemala and Colombia, about 1963, for Incaparina
Source: Belden et al. (9)
The second reason seems to be a greater determination on the part of the Colombian producing firm, Productos Quaker, to sell at the lowest possible price, specifically to maximize access by the poor (9).
A third reason is that in Colombia, Incaparina faced competition. Belden et al. refer to the marketplace competition in 1963 (9). In 1967 Pochito (withdrawn in 1969) (16) and Colombiharina appeared, and later in 1969 Duryea (19). As a result of the low price, Dimino even considered the staples, beans and rice, competitors (13). By 1973 Colombian Incaparina cost half as much as beans, and a new, cheaper, rice-based Incaparina was selling at the same price as the most expensive grade of corn (20).
Kracht (19) and Berg (21) have pointed out that many consumers are perceiving Incaparina as a substitute for corn (at about one fourth the price of Incaparina) rather than as a milk substitute. This accounts, in part, for the low sales even among groups with adequate income, and suggests that concentration on changing the consumers' perception via informational advertising by government, the producing company, or if competitors enter the field, a trade association, can be expected to shift the demand curve farther to the right (18).
Competition from donated food from the United States (dried skim milk, in particular) was a factor contributing to Incaparina's commercial failure in other Central American countries (C. Tejada, personal communication, 1976; U. Kracht, personal communication, 1976; R. Bressani, personal communication, 1976; 8; 16; 22) and was a factor affecting price in Guatemala. Insofar as such competition limits sales and production volumes, economies of scale are reduced, raising average cost and therefore price (3, 23).
Aside from price, an interesting possible contribution to the low consumption per family might be misinterpretation of the advertising message by some of the populace. De Gonzalez found that some Guatemalans believed that foods they perceived as highly nutritious "were so potent and so nourishing, one needed to eat them only in small quantities." (24) Problems of nutrition propaganda's conveying unintended messages and causing unintended harm have been reviewed elsewhere (1, 25-27), and include principally the danger that the product promoted will displace breast-feeding (28), and that it may encourage economically unwise choices when the poor are persuaded to buy foods that are so expensive relative to their limited budgets as to displace more nutrients than are purchased (1, 22).
AN EXPERIENCE WITH SUBSIDIZATION
Some feel significant nutrition programmes, including Incaparina (22), inevitably require government subsidy (23, 29). "The over-all conclusion . . . is that the needy groups can take advantage of advances in food science and technology only if someone else pays their grocery bill." (30) But others stress the limited resources available in developing countries (18), the possible political instability of government subsidy over time (6), and express the conviction that better approaches are possible (3).
By 1973 plans to subsidize Incaparina in Guatemala were being discussed (5, 31). CARE was to import US corn, paid for by the US Agency for International Development and turned into Incaparina by Alimentos, S.A., the Guatemalan producing firm, for sale at 12 per lb. (approximately one-half the normal price), with the Government of Guatemala contributing the balance of the ingredients The subsidized product was to be distributed to children and mothers through health workers, with the intention of increasing use of the health services, and of increasing the Incaparina market (32). By August 1976 the health centre in San Martin Jilotepeque (a town severely damaged in the February earthquake, and part of a pilot programme for several years to provide integrated social, medical, and nutrition services) was giving Incaparina free to children under five diagnosed to be malnourished, and to pregnant women. It was sold at 12 per lb. to lactating mothers and to mothers with children under six years of age. However, only 2 lb. per month per eligible person were provided, and dealing through the mother of qualified families provided no guarantee of optimal intra-familial distribution. In spite of the rationing, supplies were inadequate (C. Ryan, personal communication, 1976), and the programme has since been terminated.
Though Incaparina's history appears disappointing in its failure to make a significant dent in the problem of malnutrition caused by poverty, there is no reason why the situation cannot be improved. The possibilities of introducing competition, and of making other changes in the product and its packaging, should be explored, with open debate and critical evaluation of all options.
"That undernutrition is a function of absolute poverty is self-evident." (33) The most obvious needed change is a decrease in purchase price, to make the product more accessible to those who need it. "In developing countries with lower per capita incomes, the price elasticity of demand for food is, in fact, high among the lower income groups." (34)
Second, a specific food, e.g., Incaparina, will have an even greater demand elasticity than the general category of food, because other foods in the category are substitutes. Quantitative prediction of the effect of decreasing price is probably impossible, among other reasons (4, 35) because the demand curve has been shifting to the right, with increasing sales over 15 years at almost constant prices as a result of government promotion through the health delivery system, commercial advertising, and improved distribution. Qualitatively, however, the quantity demanded at lower prices must increase, with the largest percentage of increase among the poor. Thus, the benefit of reducing the price of Incaparina would tend to target itself specifically to those in need, because of their greater price elasticity of demand for food. The importance of targeting in nutrition intervention programmes has been discussed by Reutlinger and Selowsky from the viewpoint of cost-effectiveness (33).
The belief that the intended low-income market would be unable to purchase more than small quantities at a time doubtless was involved in the original design of small-package distribution. But, as Mez Domuez found in the Incaparina marketing survey in 1968, as consumers came to perceive the product as a basic foodstuff, they became more willing to purchase in larger quantities (36) The acceptance of simple 500-gram bags filled at the point of purchase in Colombia suggests that simpler packages in a range of sizes should be tried in Guatemala as a means of reducing costs. Such a development might be stimulated by new manufacturing competitors.
Because the product can be sold in any quantity, the introduction of competition into the industry might be facilitated by elimination of restrictions on package size, by correction of misinformation, and by better public education on the product's virtues and correct use (perhaps including radio messages in the principal Mayan dialects of each region), and by continuing the INCAP seal of approval through use of its name and through expansion of quality control to include new manufacturers.
Replacement of the monopoly with a few similarly large, capital intensive producers might be impossible given the size of the market. It would also fail to exploit the potential efficiency of a more appropriate mix of labour and capital in this Third World context. Where the price of labour is low relative to capital, a labour-intensive technology of production should prove more efficient than the present mechanized style, modelled after the developed nations' food industries. Labour-intensive technology may be more socially responsible as well. "The smaller labour-intensive unit, which can be established in small towns, may supply useful employment and counteract the population drift towards large towns." (37)
As a better alternative, therefore, licensing of a large number of small-town millers to produce Incaparina or similar products under other names would have important advantages. They already have the basic equipment in place, so barriers to entry would be low. They have the potential for greater efficiency through employment of a larger ratio of labour to capital. Their decentralized locations would facilitate distribution throughout this mostly rural country. The large number of small firms would ensure a competitive industry, and barriers to entry and exit should be low, as little or no new and specialized equipment would be involved. Quality control would, however, be a major problem. INCAP or the government would need to maintain a quality control programme.
Of course, all possibilities should be examined. One important alternative, which should not be considered mutually exclusive with the foregoing, would be the entry of agricultural co-operatives into Incaparina production. Vertical integration, utilizing their own harvests for raw materials, plus their non-profit status (at least for sale to members) could make their Incaparina an especially lowpriced product. Another alternative worthy of further study is production by local health centres, as is the case with Acamil (a mixture of vegetable sources, of beans with rice, corn, or sorghum) in Haiti, using mills donated by USAID (38). Moreover, a wider variety of Incaparina formulas might be exploited to suit the ingredient mix to fluctuations in the prices of raw materials, and perhaps provide flavour options.
Since 1961, Incaparina has become an established commercial product in Guatemala, but in spite of having its price controlled and being less expensive than comparable sources of animal protein it has still been too costly to have much effect on malnutrition of the poor. Its production by a single manufacturer is a factor likely to increase the price and limit total sales. Among the alternatives that should be considered to reduce the price is licensing of small-town millers and of agricultural co-operatives. The price of a product of this type can be reduced through packaging in larger units and by using less expensive packaging in larger units and by using less expensive packaging materials. The benefits of price decreases would be naturally targeted to the poor, through their greater price elasticity of demand for food.
I do not intend to suggest that Incaparina or any commercial product could be a panacea against hunger secondary to poverty. There does not exist any simple solution to the web of historical, economic, and political factors that jointly determine the poverty complex, in which malnutrition is but one reflection of inadequate real income.
Precisely because there is no cure-all, it is essential to derive the maximum possible contribution from those partial solutions that do exist, such as Incaparina.
1. B. Popkin and M.C. Latham, "The Limitations and Dangers of Commerciogenic Nutritious Food," Am. J. Clin. Nutr., 26: pp. 1015-1023,1973,
2. E. Orr, "The Contribution of New Food Mixtures to the Relief of Malnutrition, A Second Look," Food & Nutr.,3 (2): 4 and 6, 1977.
3. D.L. Call and F.J. Levinson, "A Systematic Approach to Nutrition Intervention Programs," in A. Berg, N.S. Scrimshaw, and D.L. Call, eds., Nutrition. National Development, and Planning (MIT Press, Cambridge, Massachusetts, and London, England, 1973), pp. 166-197.
4. B. Wickstrom, "Purchasing Power of African and Asian Consumers in Relation to Meeting the Nutritional Needs of the Child through Commercial Channels," PAG Bull., 2: 20,1972.
5. S.J. Icaza, "The Incaparina Project. Case Histories in Mass Communications," PAG Bull., Vl (1): 37, 1976.
6. H.J.H. De Muelenaere, "Development, Production, and Marketing of High-Protein Foods," in M. Milner, ea., Protein-Enriched Cereal Foods for the World Food Needs (American Association of Cereal Chemists, St. Paul, Minnesota, 1969), pp. 266-277.
7. R.L. Shaw, "The Flour of San Vicente," Americas, 12 (2),1960.
8. R.L. Shaw, "Incaparina in Central America," in M. Milner, ea., Protein-Enriched Cereal Foods for the World Food Needs (American Association of Cereal Chemists, St. Paul, Minnesota, 1969), pp. 320-333.
9. G.C. Belden, Jr., W. L. Congleton, W.R. Devoto, T.A. Hurlbut, Jr., B. Johnston, D.P. Katz, J.T. Michelson, A.P. Pipkin, C.D. Tibbits, and D.R. Weston, The Protein Paradox. Malnutrition, Protein-Rich Foods, and the Role of Business (Management Reports, Boston. Massachusetts, 1964), pp. 29-50.
10. Institute of Nutrition of Central America and Panama (INCAP), Libras de Incaparina Vendidas en Guatemala, A977.
11. R.P. Wise, The Case of Incaparina in Guatemala (proposed for publication in Joint MlT-Harvard Working Paper Series. Cambridge, Massachusetts, 1980).
12. R.L. Shaw, "Incaparina: A Low Cost Vegetable Mixture and Its Commercial Application," Plant Foods for Human Nutrition, 1: pp 101-102, 1969.
13. A. Dimino, "Incaparina in Colombia," in M. Milner, ea., Protein-Enriched Cereal Foods for the World Food Needs (American Association of Cereal Chemists, St. Paul, Minnesota, 1969), P- 343.
14. R.L. Shaw, Incaparina (pamphlet by INCAP, revised ea., May 1965), p. 21.
15. G.D. Kapsiotis, "History and Status of Specific Protein-Rich Foods," in M. Milner. ea., Protein-Enriched Cereal Foods for the World Food Needs (American Association of Cereal Chemists, St. Paul, Minnesota,1969), p. 257.
16. E. Orr, The Use of Protein Rich Foods for the Relief of Malnutrition in Developing Countries: An Analysis of Experience (Report of the Tropical Products Institute No. G73, Tropical Products Institute, Grays Inn Road, London, W .C. I., England, 1972).
17. J.C. Abbott, Marketing-Its Role in Increasing Productivity (FAO Freedom from Hunger Campaign, Basic Study No. 4, Food and Agriculture Organization of the United Nations, Rome, Italy, 1962), pp. 62-63.
18. J.C. Abbott. "Economic Factors Affecting the Distribution of World Food Protein Resources." in M. Milner, ea., Protein-Enriched Cereal Foods for the World Food Needs (American Association of Cereal Chemists. St. Paul. Minnesota, 1969), p. 24.
19. U. Kracht, "The Economics and Marketing of Protein-Rich Food Products. Status Report: Incaparina and Competitors," in Proceedings of the Western Hemisphere Nutrition Congress III (Future, Mt. Kisco, New York, 1972), p. 99.
20. U. Kracht, "Marketing Unconventional Protein-Rich Foods-One Form of Nutrition Intervention." in A. Berg, N.S. Scrimshaw, and D.L. Call, ads., Nutrition, National Development, and Planning (MIT Press, Cambridge, Massachusetts. and London, England, 1973), pp. 213-216.
21. A. Berg and R.J. Muscat, The Nutrition Factor-Its Role in National Development (The Brookings Institution, Washington, D.C., 1973), p. 148.
22. B. Popkin, "Economics and Nutritional Change." Arch. Latinoam. Nutr., 25 (1): pp. 9-13 (1975).
23. S.M. Gupte, "The Lost Cost High Protein Food Mixtures- Prospects and Problems," J. Food Sci. Tech 9 (1): 6,1972.
24. N. L. Sol fen de Gonzalez, "Beliefs and Practices Concerning Medicine and Nutrition among Lower-Class Urban Guatemalans," Am. J. Public Hlth., 54: 1730, 1964.
25. D.B. Jelliffe, "Commerciogenic Malnutrition?" Food Tech. 25 (2): pp. 55-56, 1971.
26. A. Fuglesang, "Vested Interests and Future Perspectives in Mass Communications and Media; A Few Small Notes." PAG Bull., Vl (1): 9,1976.
27. B. Popkin and R. Lidman, "Economics as an Aid to Nutritional Change," Am. J. Clin. Nutr., 25: 341,1972.
28. E.M. DeMaeyer, "Target Groups for Protein-Rich Mixtures." in A. Chavez, H. gorges, and S. Basta, eds., Proceedings of the 9th International Congress of Nutrition (Karger, Basel, 1975),p. 161.
29. J. Mauron, "Protein Enriched Foods: Facts and Illusions," in A. Chavez, H. gorges, and S. Basta, eds., Proceedings of the 9th International Congress of Nutrition (Karger, Basel, 1975), pp. 237-238.
30. J.B. Cordaro and D.L. Call, "Nutritional Protection of Vulnerable Groups through Protein-Rich Mixtures, A Critical Review," in A. Chavez, H. gorges, and S. Basta, eds., Proceedings of the 9th International Congress of Nutrition (Karger, Basel, 1975), p. 196.
31. J.E. Austin, "The Incaparina Program, A Case Study Prepared for the Harvard Business School and Harvard School of Public Health" (Department of Nutrition, Boston, Massachusetts, 1975), p. 7.
32. Informe de Actividades del Periods Cuadrienal 1971 - 1975, Division de Nutriciplicada, INCAP, Guatemala, 1976, p. 58.
33. S. Reutlinger and M. Selowsky, Malnutrition and Poverty- Magnitude and Policy Options (World Bank Staff Occasional Papers No. 23, Johns Hopkins University Press, Baltimore, Maryland, and London, England, 1976), p. 2.
34. B.L. Rogers and F.J. Levinson, Subsidized Food Consumption, Systems in Low-Income Countries: The Pakistan Experience (Massachusetts Institute of Technology International Nutrition Planning Program Discussion Papers No. 6, Cambridge, Massachusetts, 1976), pp. 9-10.
35. W. Mertens, "Population Growth, Population and Food Policies in Latin America," in Proceedings of the Western Hemisphere Nutrition Congress Ill (Future, Mt. Kisco, New York,1972), p. 17.
36. A. Mez Dommuez, "Aspectos Evaluativos de la Introduccil Mercado de una Mezcla Vegetal pare Consumo Humano," Arch. Latinoam. Nutr., 21 (2): 135, 1971.
37. F. Aylward and M. Jul., Protein and Nutrition Policy in Low-Income Countries (Charles Knight and Co.. London and Tonbridge, UK, 1975), p. 87.
38. Acamil, Bureau de Nutrition, Department de la Santublique et de la Population, Haiti, February, 1978.
39. R.L. Shaw, Mmo Autorizado y Precios de Venta de Incaparina, Julio, 1965 (Institute of Nutrition of Central America and Panama, Guatemala City, Guatemala).