Project Novella A proprofit publicprivate partnership in a

Project Novella A pro-profit public-private partnership in a framework of environmental and social benefits Harrie Hendrickx Nairobi October 23 rd 2006

AB is more than just another fat! l Unique fat composition of edible quality l l l High yield l l l unique source of stearic acid melting sharply stable oil not healthy, but enables healthier compositions no ingredients that jeopardize food grade status higher than most, ……but lower than PO relatively inexpensive to produce (labour & land use) LT price level like other edible oils Can grow in many countries Oil can be sold / used in Africa and world wide Will be used by many companies / industries for widely different applications

Typical uses: l In spreads as hardstock: 2 – 10% of composition l l In chocolate products: few percent on product l l Good melting, good stability, natural hardstock Volume: at least 100. 000 t/a, niche: typical 100 t/a Issue: permission to use has been applied for in EU as CBE / crystallisation stabiliser Volume: about 10. 000 t/a Issue: no legal permission in most countries (EU, USA, …. ) In many other composite food products l l Culinary mixes / cubes Bakery ingredient Peanut / cashew butter a. s. o.

Novel Foods. l Current estimates on timing: l l January 2003 Internal Unilever clearance August 2004 Application in Germany October 2004 Questions raised January 2006 Questions answered April 2006 90 - day period ended September 2006 60 - day period ended October 2006 Questions answered ---------------------------------------March 2007 Novel Food clearance obtained April 2007 Products launched l (Predictions on future developments are highly uncertain!) l l l l

Typical uses: l In industrial applications l l l In soap: 20 – 30 % of composition l l edible / food grade lubricant chemical industry raw material Slightly harder product Value: premium over PO only few percent Volume: up to 1. 000 t/a In ointments: (few percent on product only) l l l good skin melting / moisturising properties Typical volume is 25 – 100 t Only when marketing effort creates this value (Aloe Vera)

Main issues / concerns l Safety of the oil l l Intrinsic quality Contamination of the oil l l Mixing seeds with other type of seeds Spraying seeds with pesticides / herbicides Smoke when drying seeds Storage of seeds near mineral oil or other chemicals Treatment of seeds with fungicides Cleanliness of tanks, prior cargo’s Environmental problems in area of seed production Mixing with different species HACCP / One mistake only !!! Quality of the oil l Fat composition Level of ffa, water, moisture, … Storage conditions / oxidative damage

Main issues / concerns l Volume of the oil l l Supply security / regularity l l l Small volumes jeopardise profitability for farmers, focal persons, crushers and industry Most difficult times are within the next 2 years The more oil the better Safety margins on supply level cost a lot Safety enables more profitable usage Ethics l l Child labour, fair price, gender Law and regulations

How do we get it ? T Wild picking / Harvesting Inspection Oil Inlet Oil seeds storage T Oil milling Inspection Oil Inlet Vent Dip Point Sample Shell Manhole T Agitatorcontolled by Timer Coil Inlet/Outlet Oil Outlet Crude oil storage Shell Manhole Agitatorcontolled by Timer Coil Inlet/Outlet Oil Outlet storage and blending Oil refining The supply chain of AB is very similar to other modern supply chains, like that of palm kernel oil, coconut oil or Shea nut oil.

Basic understanding: l l Each part of the supply chain is of equal importance Each part is needed for the others to be successful l l The problems of one of us are the problems of all of us! Since we depend on each other: l l l We should try to understand the needs of the other We should try to help each other We should be happy with each others success

Shared partnership vision: l 1. Sustainability is required l l 2. Profitability for all in the SC l l l For african farmers only Non-AB benefits can chip in when main project allows Unilever guarantees the market others start buying when volume grows 3. Long / mid-term ownership of SC will be local 4. Partnershipping / Joint approach l l l Environmental & social NGOs, research institutes and governments complement our skills Partners to take as many responsibilities as they can Risk aversion on all levels Resources need (public) supplementation 6. Transparency / adherence to the law / business principles l Gender sensitive, child labour, environment, corruption. .

Price considerations Price should reflect variable SC costs and overheads Price should stimulate the growth of the project Price should support the development of AB exclusively for Africa Price should grow towards expected market level • • l l Price for 2007: US$ 1600 /t (c. AB ex port) Price for 2012: US$ 1100 /t Price will always command small premium over PO Market priceing may come from 2012 onwards

Price considerations Low volume Large volume

To guide future developments l Volume: l l Rural cost (capital, land, labour): l l Planned to be stable, guaranteed till 2012 World oil market: l l May be stable or go down up to 50% Rural price: l l Can increase about 10. 000 times from current level Price can not drop below PO level, volume is many orders of magnitude from saturation level. Conclusion: l Farmer income levels for seeds can improve 5. 000 to 10. 000 times from current level!

Quantity: l Current best volume estimates for AB oil from existing trees (t/a): l Other countries, like Liberia and Cameroon, may add to this.

Potential long-term development of AB production l l In 2015: 40, 000 t oil

Market development for Allanblackia l Unilever to guarantee for the next few years (2012) l l l Others can come in the partnership l l l Should invest in growth of the partnership Should support our development agenda Should support business principles / adherence to the law Should support the sustainability guidelines Market should begin to function from 2012 latest l l Price fixed at initial high level, quality is food grade Volume is open end Aim to deliver the volume and reduce SC costs Support to cultivation to grow volume How to ensure a smooth transition ? Local usage will not be profitable for several years l Exception possible for niche applications (foods / ointments)

Risks l In the supply chain l l In the growth of the production l l l Produce enough new trees Plant them successfully Production is satisfactory Pests and diseases Internal threats l l Product quality (safety included) Success of final products Competition Keep the partnership together External threats l l Malaysia / Brazil can do better Other crops will become more productive

Thank you

Results l Working in 3 countries l l l l 7500 collectors / farmers over 500 communities 12 donors / NGOs / governments from northern world 30 NGOs / companies / research institutes / from Africa Working with local-, regional and national governments Income generated for farmers is still small, about US$ 250. 000/a but increasing quickly Domestication of AB makes quick progress Biodiversity benefits are in development

Vision of small-holder production 5 -50 trees per ha on 5 ha 30 fruit per tree 1 st harvest 4 years Full harvest 7 years US$ 1. 5 per tree per year Replace after 40 years

(Additional) Benefits and Risks l Benefits: l l l Demonstrates commitment to the development of the poorest in Africa (Millenium development goals). Demonstrates commitment to protecting and supporting the environment and sustainable developments. Creates options to link business partners with these developments. Enables partners to develop a wider scope Brings a close partnership with high profile institutions like UNDP, Oxfam, IUCN, Df. ID, USAID, GTZ and SNV. Risks: l Financial l l Loss of investment, liability for own activities, liability for activities of partners, . . . Reputational l Connection to child labour, poverty, environmental degradation, low payment to farmers, exclusion of women, spread of HIV/Aids, set up of plantations, move AB out of Africa, use African resources for our profit growth, use of this project to cover up other activities, . . .

Outlook on near future l l l l Unilever to obtain Novel Foods clearance and perform factory trials. Production level of about 370 t oil in 2007 and growing From 2 Q 2007 Allanblackia used in production of spreads, to start with Becel / Bertolli. Planting of Allanblackia trees starts in 2006 (about 20. 000) and will increase to more than 100. 000 in 2007. Project structure in the countries will develop in separate companies Make the SC project profitable to all actors quickly. More publications on the project Stimulate the partnership to take over more responsibilities. Relative to total project size Unilever involvement reduces.

What makes Allanblackia unique. . l Only two major fatty acids • Triacylglycerols: %

Supply chain and Quality l SC experience in Gh and Tz is 3 years. l l l QA has not seen any real problems yet l l Some ffa, moisture and filtering problems during initial trials HACCP analysis done in Tz and Gh with return visits. l l Transport by Iso-container, rehearsed twice from Tz, once from Gh Crusher is now established in both countries Recommendations are being implemented. Ng to catch up quickly (2006/7)