Increasing Access to Ready-to-use Therapeutic Foods (RUTF)

By Jan Komrska

Jan Komrska is a pharmacist working at UNICEF Supply Division leading Nutrition unit and responsible for procurement of products related to nutrition interventions of UNICEF.

The author acknowledges the work of UNICEF Supplies Division reflected in this article.

Since 2007, the use of ready to use therapeutic foods (RUTF) to treat severe acute malnutrition (SAM) in young children has been endorsed by the United Nations and non-governmental organisations (NGOs), and received wide notice by the media. With the proven success of RUTF, more countries have adopted their use as part of community-based management of SAM (CMSAM), and demand for the products has soared. Since 2006, UNICEF, the world’s major purchaser of RUTF¹, has taken a series of steps to shape the market and diversify the supplier base. As a result of this effort, the market has grown from one qualified manufacturer in 2000 to 19 today. This number is expected to increase in the coming years, especially in countries where RUTF is used.

RUTF are high-energy foods fortified with vitamins and minerals, packed in individual portions providing energy intake of 500 kilocalories. They can be in the form of a soft paste or a crushable biscuit that is easy to swallow. Individual packaging allows easy handling and prevents contamination of the product between feedings. UNICEF requires RUTF to be manufactured by qualified suppliers in accordance with stricter quality standards than normal food products. The product most in demand and the subject of this article is RUTF in peanut paste form.

The first peanut paste RUTF was developed jointly by the French Institute of Research for Development and the manufacturer Nutriset in 1996 as a fortified peanut spread, now marketed under the name Plumpy’Nut®.

UNICEF Supply Division is responsible for procurement of specific products (including RUTF) for UNICEF country programmes and external partners, assuring transparency in using public funds and maintaining agreed product quality.

UNICEF procurement of RUTF in the period 2000-2010

UNICEF began to procure RUTF in 2000, when Nutriset was the sole qualified supplier and annual demand was below 100 metric tonnes (MT)². The first long-term RUTF supply arrangement (LTA) was established with Nutriset on a sole-source basis in 2001.

Test products

Under an LTA, Supply Division places orders with suppliers, based on requisitions from UNICEF country offices. Suppliers are responsible for manufacturing the product and delivering it to the nearest seaport for shipment by sea freight or, in urgent cases, to an agreed airport for air shipment. Further transportation of RUTF to the beneficiary countries is assured by UNICEF-contracted freight forwarders. Therefore, RUTF prices referred in this article exclude shipping costs.

By 2004, demand began to rise as more countries began piloting the use of RUTF, and it became increasingly urgent for UNICEF to identify new sources of RUTF. During 2006, Supply Division began to work with manufacturers in countries where the product could be manufactured for local use, and approved suppliers in Niger and Ethiopia for local purchase in 2006 and 2007 respectively.

With the publication of the UN Joint Statement in 2007³, demand increased dramatically, outpacing global production capacity. The situation became critical in 2008, when a hunger emergency in the Horn of Africa caused a spike in demand in the second half of the year. Even after a second global supplier (Vitaset, located in Dominican Republic) had been approved, the 11,000 MT ordered by UNICEF, still largely from Nutriset, did not meet peak in demand.

As a result of this experience, Supply Division made three key decisions in 2008:

1. to initiate competitive bidding for RUTF in order to open the market for new suppliers
2. to begin conducting annual forecasting for RUTF with individual country programmes, and
3. to conduct a study on RUTF supply chain performance in order to identify weaknesses and propose solutions.

These efforts were part of a larger procurement strategy developed by Supply Division through which UNICEF could leverage its buying power to influence the market, promote increased competition and ensure a diverse and sustainable supply base.

Implementation of the Procurement Strategy

In 2008, in line with its procurement strategy, Supply Division launched the first competitive bidding exercise for the supply of forecasted 20,000 metric tonnes (MT) of RUTF, for the period 2009-2010. This exercise was preceded by a lengthy, multi-year process of advocacy for increasing production capacity with existing suppliers, identification of potential new global and local suppliers (usually existing food companies), and the development of manufacturing standards coupled with inspection of various manufacturing facilities.

For the majority of products, UNICEF typically would establish a LTA, based on the results of competitive bidding, for a period of two to three years with the supplier making the lowest acceptable offer, and eventually a backup LTA with the supplier making the second lowest acceptable offer. However this approach was not applicable in the case of RUTF, because it would not encourage any further market development and would leave UNICEF with one or two suppliers. Therefore, it was decided to distribute total forecasted quantity among all companies meeting UNICEF technical requirements for manufacturing facilities as well as product specifications.

Proposals were received from 13 companies and seven proved to be able to meet defined requirements for global supply of RUTF. LTAs were established subsequently with all seven suppliers, expanding significantly the supplier base (for more details see Table 1).

The second competitive bidding exercise for supply of forecasted 54,000 MT of RUTF for the period 2011-2012 was issued by the end of 2010. The forecasted quantity was based on the assumption of continued expansion of CMSAM to new countries and scaling up of existing programmes. Proposals were received from 27 companies out of which 12 met UNICEF requirements for global supply of RUTF. LTAs were established subsequently with all 12 suppliers listed in Table 2.

*Dairy-based, not peanut-based, RUTF.
**The first company located in programmatic country capable of exporting RUTF
***Supplier agreed to remove branded name Imunut from the labels

It is important to underline that RUTF products manufactured by UNICEF-approved manufacturers comply with the Joint statement specifications and they can be used by country programmes interchangeably.

A key part of the procurement strategy was to support the development of local production in countries where RUTF is used, particularly in Africa, in order to bring the supply closer to the beneficiaries and reduce delivery lead times.

After successful audits of the manufacturing sites by Supply Division’s Quality Assurance staff in Niger and Ethiopia, further audits were conducted at manufacturers in Malawi, the Democratic Republic of the Congo, Mozambique, Madagascar and Tanzania and resulted in their approval for local purchases to UNICEF. The suppliers listed in Table 3 are authorised to sell RUTF to UNICEF’s country programmes locally. As of 2010, about 23% of the RUTF purchased by UNICEF was sourced locally.

As programme demand and production capacity increased, so did the volume of UNICEF procurement, in terms of the number of MT purchased and the number of countries placing orders. After a steady increase from 2000 to 2008, procurement of RUTF decreased not because of declining needs but as a result of resource mobilisation challenges caused by the global economic crisis and availability of stocks in countries from 2008. However, orders have rebounded in 2010 and by mid-year had surpassed 2009 levels, reaching 20,690 MT as of year-end (2010) (for more details see Table 4).

Forecasting

The growing demand for RUTF, production capacity constraints and the volatility of prices of raw materials made forecasting of demand increasingly necessary. UNICEF first undertook global forecasting to collect information on needs for RUTF and other nutrition products in January 2009. This resulted not only in forecasting of global product needs (used for the bidding process) but also contributed to a better understanding of the scale of implementation of CMSAM.

The 2010 forecast indicated that UNICEF currently is implementing CMSAM in about 55 countries, where there are 6.1 million children with SAM. UNICEF country programmes intended to reach 1.8 million children (about 30 per cent), revealing a large gap in coverage, especially given the 20 million children estimated to be suffering from SAM worldwide.

RUTF Pricing

Peanut-based RUTF consists of milk powder (30%), sugar (28%), peanut butter or paste (25%), vegetable oil (15%) and vitamin and mineral premix (1.6%).⁴ The product is packed in standard foil sachets. The milk and packaging material (aluminum foil) are the most expensive components, followed by the premix, peanut butter, sugar and oil.

Somewhat surprisingly, the entry of new suppliers into the market has not resulted in any dramatic drops in price, for a number of reasons. One possible reason might be that new suppliers do not have the large production volumes that usually result in lower prices, and are also faced with high-start-up costs.

Prices of globally purchased RUTF

The pricing structure in the LTAs is complex because of volume discounts, payment terms, currency used and other factors. The initial price paid by UNICEF for RUTF in 2001 was about €41.50 (56.80 USD) per carton. In 2006, as the average size of orders began to increase, Nutriset proposed scaled prices for larger orders, and the price decreased gradually to about €35.20 (48 USD) per carton in 2011. However, this drop in price was masked by fluctuations in the rate of exchange between the euro and the United States dollar, because the price is fixed in euros, as proposed by Nutriset. The RUTF prices offered to UNICEF by other suppliers range from 48.00 USD to 56.50 USD per carton in 2010.

Prices of locally procured RUTF

Local producers import almost all of the ingredients and the packaging material, most of which are subject to import duties. Often the price offered initially is too high to justify local purchase on a cost basis alone, even considering the added cost of freight.

Supply Division carefully scrutinises the prices proposed by local companies in order to assure best value for money. They are compared to the landed cost of globally procured RUTF (price at the factory plus freight cost to the final destination) and when found too high, UNICEF attempt to negotiate a lower price.

The prices of locally produced RUTF vary significantly among the different suppliers. In 2010, the local prices ranged between 57.00 USD (in Madagascar) and 69.00 USD per carton (in Mozambique).

Freight costs

RUTF is a heavy and bulky product, with a course of treatment for one child (one carton) weighing about 15kg. The 16,000 MT of RUTF purchased off shore in 2010, filled 830 40-foot containers. Shipping the product by sea is the most economical option, but air shipment might be required when RUTF is needed for emergency response to natural disasters, drought or political instability. Air freight of RUTF increases the landed cost by 100 per cent whereas sea freight only by 10 per cent.

In 2008, nearly 35% of RUTF purchased by UNICEF had to be transported by air, at a cost of $8.5 million, in order to reach the beneficiaries on time. By 2010, less than 1% of the RUTF had to be transported by air, costing less than $400,000. The decrease in shipment by air is a result of RUTF supply chain analysis that suggested a number of tools to reduce freight costs. These included introductions of forecasting of country programming needs, development of supplier base in locations close to where the product is used and prepositioning of stock in areas closer to emergency-prone countries (e.g. Dubai for the Horn of Africa and Ghana or Cameroon for the Sahel region).

Issues for future consideration

As more countries adopt and/or scale up CMSAM to treat SAM, the need for RUTF will continue to increase. Supply Division will continue to refine its procurement strategy and work with UNICEF’s Programme Division and external partners to address a number of issues that could affect RUTF availability and accessibility for the final beneficiaries.

UNICEF sees the continued diversification of the supplier base, with more qualified manufacturers in countries and regions closer to the end-users, as an important concern. This will facilitate the eventual transfer of CMSAM and use of RUTF from UNICEF and NGOs to national authorities.

Building a strong network of smaller suppliers in countries with the highest incidence of SAM therefore remains a priority. The work is ongoing with potential manufacturers in Sierra Leone, Uganda and Rwanda in order for them to become part of UNICEF-approved manufacturers. However in the process of expansion of UNICEF approved-manufacturers, the focus on product quality and safety shall remain central.

Conclusions

The Supply Division strategy to increase the availability of RUTF and assure a sustainable and diverse supplier base has accomplished its main goals. In 10 years, the supplier base has grown from one global supplier in Europe to 19 global and local manufacturers in Africa, Europe and Americas. The seven local suppliers are in countries where RUTF is used, and more local manufacturers are expected to be approved in the near future. Even with this substantial growth in production capacity, quality standards have been maintained. Forecasting of demand has been systematised and orders can be filled promptly when they are placed on time. Supply Division continues to work with UNICEF country offices to refine forecasting of demand and to work with suppliers to manage global production. Air freight costs have been reduced dramatically as a result of these improvements, and stocks are being prepositioned in key regions to allow for rapid response when necessary.

As outlined above, the major future challenge is the potential increased demand for RUTF as countries adopt and expand CMSAM. Supply Division will continue to work with suppliers, country offices, UNICEF’s Programme Division, and external partners on development of sustainable RUTF supply chain.

For more information, contact: Jan Komrska, email: jkomrska@unicef.org

¹UNICEF is the largest, but not the only, purchaser of RUTF. Other major purchasers include MSF, the Clinton Foundation and different NGOs.

²1 MT contains 72 cartons of RUTF. It takes approximately one carton to treat and save a child, so that each MT can save the lives of 72 children.

³WHO/WFP/UNSCN/UNICEF. Community-Based Management of Severe Acute Malnutrition. A Joint Statement by WHO, WFP, UNSCN and UNICEF, May 2007

⁴Mark J. Manary. Local production and provision of ready-touse therapeutic food (RUTF) spread for the treatment of severe childhood malnutrition. Food and Nutrition Bulletin, vol. 27, no. 3 (supplement) 2006, The United Nations University