Editor's Note: This article was originally published at Mercy Corps' Global Envision, and is republished with permission.
In the urban slums of Jakarta, young kids are getting enriched, healthy nutrition from an unusual place: franchised healthy food carts.
The KeBAL street food concept is an innovative way of reaching young children with affordable and aspirational nutritious meals that help reduce malnutrition. Operating in urban Jakarta, the program is piloting its business proposition, testing meals, developing distribution channels and developing the franchise formula. KeBAL claims the unique proposition of `street food – children – nutrition` by connecting its proposition with the Indonesian habit of street food snacking, as well as connecting it to those stakeholders who can strengthen the concept.
The KeBAL food carts (which translates to ‘My Child’s Café) have grown from a small nutrition project piloted by Mercy Corps in 2009 to a social enterprise with two central cooking centers, 22 carts and a franchise business model. KeBAL partners with DSM, the global leader in micronutrients, such as vitamins, and the Rabobank Foundation. Both companies are helping KeBAL develop a sustainable business case, build the brand and develop new avenues for growth. The end of 2013 marks the first milestone of the pilot period. The five-year goal is to meet the nutritional needs of hundreds of thousand of kids under five years old every day in Jakarta.
Global Envision, a blog exploring market-driven solutions to poverty produced by Mercy Corps, joined Robert van den Heuvel, head of new business development of DSM`s Nutrition Improvement Program, and Sean Granville-Ross, Mercy Corps’ regional program director for Southeast Asia, to talk about the partnership.
Global Envision: As a company working in 100 countries around the world, what interests DSM in the base of the pyramid market segment?
DSM: Our strategy is to see how we can connect our business proposition to our social goal, improving health. Besides the use of healthy ingredients for KeBAL meals and snacks, micronutrients can complete the nutritional value of the street food for malnourished children in urban Jakarta. Micronutrients are vitamins (e.g. A, B, C, D, E, K) and minerals (e.g. iron, zinc, calcium), which are indispensable for physical and mental growth, and resistance to disease and deficiencies, especially for young children.
Our business goal is to develop new products, markets and distribution channels, and build relationships with new customers. We scanned the market in Indonesia to find a partner that could help us meet these goals and reach impact with a scalable project. Mercy Corps' KeBAL is such a project.
Global Envision: Why does DSM seek out partners in these markets, and are they always international NGOs?
DSM: Not always, and not only. We also work with local companies, such as production units and retailers, to develop new products and new distribution channels. They have a good understanding of the local culture. Local engagement and knowledge is crucial. NGOs are closely connected with the social component we seek, but more and more we also see that NGOs, too, are looking at a blend of social and business objectives.
NGOs also have social marketing skills; they know their audience. Mercy Corps’ KeBAL has a vision for the development of a social enterprise, including short-term and long-term goals.
At DSM we select our partners with this combination of social and business propositions. We want to reach the base of the pyramid and contribute to public health.
Global Envision: Was there one particular challenge KeBAL overcame that led to it being ready to engage in a high-level partnership with a global company like DSM?
Mercy Corps: I think the biggest challenge was getting beyond being seen as an NGO project and being able to show to DSM that we had a viable business case. Most important was demonstrating that there was a vision and the potential for scale. Often in NGO development projects we don't really understand what we mean when we talk about scale.
Global Envision: Why did you choose KeBAL?
DSM: KeBAL was already underway. We could hook on to an existing solution. We see a lot of good concepts and ideas on paper; KeBAL is already being rolled out in the streets of Jakarta.
KeBAL helps children access enriched, healthy street food, which is a unique and relevant combination in urban Jakarta. The proposition supports our business and social goals. The central cooking facilities offer an easy way to efficiently fortify food in large volumes instead of plate-by-plate, and the food carts provide a culturally acceptable, easy vehicle to ensure that the food reaches many people.
Global Envision: I understand you worked together to create financial forecasts and scale-up scenarios for KeBAL. What went through your mind when you saw the results?
Mercy Corps: We set ourselves pretty ambitious targets. The truth is that taking our vision from the whiteboard and our targets from the PPTs to the reality of the urban slums in Jakarta is going to take a lot of energy and commitment. Ambitious targets are needed for the business to break even and be able to grow, but maintaining an understanding of the reality of the context is our challenge. We’re constantly monitoring and tweaking the model, from the marketing, promotion, menus, recruitment, to incentives for vendors, cooking staff and management. It's a never-ending cycle.
The win for DSM is accessing different markets for their products through innovative distribution channels.
The win for KeBAL and Mercy Corps is the opportunity to access DSM’s scientific knowledge and global business expertise. We benefit from DSM’s scientific micronutrient expertise, their abilities in analysis and forecasting, their marketing experience and the company’s promotion and branding expertise. All important ingredients in our business partnership.
Global Envision: What’s the next phase of the project for the partnership?
Mercy Cops: DSM is developing a focused marketing and promotion campaign to bolster our brand recognition, our position, our tagline and what we stand for. We’ll take that business thinking and apply it at the base of the pyramid in urban, poor communities – it’s certainly going to be an interesting learning curve for all of us.
DSM: There are a couple of key success factors to reach our first big milestone one year from now. One is this branding campaign, and two is making the central cooking centers financially sustainable. Now we need to increase sales and save costs.
We expect the campaign and increased awareness about the benefits for the children will also help us attract other partners such as schools. And we plan to further develop the franchise model to attract and support Indonesian entrepreneurs.
Global Envision: Your department at DSM is specifically focused on finding business opportunities at the base of the pyramid. Do you face internal pressures regarding the extended timing, additional complexities and unexpected hurdles that come with working in this market?
DSM: DSM supports these kinds of initiatives and created a specific unit to incubate them within its human nutrition and health division. We are incubating new business models for the base of the pyramid in Asia, Africa and Latin America, and developing public-private partnerships. We strengthen our proposition by including new target groups and new distribution channels.
Working with the mainstream side of our business forces us to find avenues that can speed up the process and drive our key success factors: branding, growth, scaling up. Then, once the projects become mature, like KeBAL, and its future franchisee owners, we can embed it in our regular business.
Mercy Corps: We've had some discussions internally about how the business could break even a little bit quicker if we went to a slightly wealthier market segment and opened a branch in a low-end shopping mall, for example. We're OK with different market segments purchasing the product, but Mercy Corps doesn’t want to invest time, money or energy in targeting those markets. I think that if our branding, marketing and promotion is effective, other people will see the product and want to purchase it. That's all part of the process of social marketing; learning what sells, what doesn't sell, and what our customers are looking for. But we see the need to closely maintain our original social mission.
Global Envision: For Mercy Corps, is this a project that would eventually be let go, or would we always have some kind of interest or stake in it?
Mercy Corps: KeBAL is already an independent entity, registered legally in Indonesia as a company. Mercy Corps’ role now involves the day-to-day management and technical support, along with engaging DSM, Rabobank and looking for other investors. Pretty quickly, however, we will assume our place on the board of directors and be involved in the governance structures of the business. The general manager and KeBAL employees will take ownership and run the day-to-day business.
Ultimately Mercy Corps’ key reason for remaining engaged at the board of directors’ level and in the governance structure is to ensure that KeBAL maintains it social mission. There's always going to be a healthy tension between generating good sales, and getting a good number of products sold, while maintaining our social mission of ensuring healthy, nutritious, safe food for urban poor children under five years old.
Global Envision: To a global company putting its name on what could be considered a conventionally risky project, what's the importance of donor funding in the pilot stage from your perspective?
DSM: These two things go hand in hand. You can call it seed money or donor money but the goal is to make it sustainable, and investing in the pilot phase helps overcome the first hurdles in this crucial stage. We see promising and aspiring new markets at the base of the socio-economic pyramid. To make a long-term impact, you have to develop business models that are market-driven and you have to work with local companies, retailers and producers to create products that are aspirational, affordable and accessible for low-income families.
These kinds of projects are inherently more risky. We know they take more time. We know they have no immediate impact in our portfolio. But as a market leader in this sector, we are constantly exploring new routes to create new, sustainable business.
It’s also important to find different partners who have a similar vision of long-term engagement with the base of the pyramid. The Rabobank Foundation joined a couple of months ago and helps KeBAL source ingredients from local agriculture cooperatives, thereby boosting farmers’ incomes, too.
See photos and read more about KeBAL's journey to a thriving social enterprise
Check out the Mercy Corps' video on how KeBal food carts fight malnutrition and create jobs