Iodine deficiency disorder (IDD) is the world’s leading cause of mental disorders, including retardation and lowered IQ. Research indicates that 30 percent of the world’s population is at risk of IDD. Well-balanced diets provide the required amount of iodine, making the poor particularly susceptible to this condition. A beggar on the street with a prominent goiter on his neck is one visible sign of IDD. Children living in iodine-deficient areas have an average IQ 13 points less than that of children in iodine-sufficient areas. The most severe form of this disease is hypothyroidism and is prevalent among young children in remote areas where the daily iodine intake is less than 25 micrograms (mcg).^[1] Hypothyroidism causes cretinism, gross mental retardation, and short stature. In India, almost 90 percent of the population earns less than $3,000 per year;^[2] over 70 million are already afflicted with IDD, and another 200 million are at risk.^[3]

Since even the poorest people eat salt, it is globally recognized as the best vehicle for supplementing diets with iodine. However, many still do not receive the required amount of iodine from salt because:

The paradox of the Iodine Deficiency Disorder is that the solution is known and is inexpensive. The issues are how to reach and educate the poor while, at the same time, getting salt producers to innovate inexpensive methods to guarantee a minimum level of iodine concentration in salt. In developing countries, such as India, traditional methods of iodizing salt are no guarantee that the salt will retain its iodine content as it reaches the consumer.

Nongovernmental organizations and governmental organizations are traditionally called on to solve problems pertaining to the poor and public-health crises such as IDD. Conversely, multinational corporations typically limit their involvement with the poor to corporate social responsibility. Although many multinational corporations have tapped into India’s wealthy, urban populations, few have attempted to reach the poor. Yet multinational corporations have a greater breadth of key capabilities, such as technological know-how, distribution networks, marketing experience, and financial backing, that enable them to combat public-health problems such as IDD at a profit. The key to tackling epidemics such as IDD is the collaboration between nonprofits and multinational corporations.

Unlike other parts of the world, mineral salt only comprises 5 percent of the Indian salt market because India’s topography does not lend itself to salt mines. Ninety-five percent of Indian salt is obtained by “salt farming,” a lengthy evaporation process whereby seawater is pumped and stored in man-made inland pans. The salt market attracts a large number of producers, despite its being a low-unit-price business. Salt margins can be quite high, and although the absolute values of revenues and profits are not as high as some consumer products, such as soaps and detergents, the return on capital employed make for an attractive business. India’s salt market is dominated by more than 300 local players producing unbranded products of varying quality. A few branded manufacturers produce 500,000 to 600,000 tons per year, whereas most local producers sell less than 1,000 tons.^[4] Because it is virtually impossible to differentiate refined salt on the basis of taste, smell, or color, and because honest packaging laws are inadequately enforced, Indian consumers face unique challenges:

Under pressure from the world health community, China (1995) and India (1997) banned the sale of noniodized salt. India’s Universal Salt Iodization law mandated that all salt manufacturers add at least 15 parts per million (ppm) of iodine to edible salt.^[5] The law was hailed as a positive step by the health community. However, it was vehemently protested by independent salt producers who accounted for nearly one third of India’s salt production that was consumed by 200 million people. These producers argued they could not afford the additional cost of purchasing iodine, machinery, and packaging to iodize salt.^[6] Salt industry employees continued to consume noniodized salt. (This population is now afflicted with some of the highest incidences of IDD.) Succumbing to intense lobbying by the producers, many of whom operated manual 10-acre coastal plots that were leased from the government, the government of India repealed the Universal Salt Iodization law in July 2000. Although a few manufacturers voluntary added iodine, most uneducated consumers continued to purchase the lower-priced uniodized salts, perpetuating IDD. Since 2000, a few individual states, including Gujarat, have reversed the federal government’s repeal and forced manufacturers to iodize salt.

Environmental factors such as air moisture, high temperatures, poor quality of raw salt, impurities in salt, low environmental pH, and time before consumption can all exaggerate the instability of salt iodized with potassium iodate, resulting in excess iodine loss. Most Indian salt is farmed in desert areas near India’s coastline and must be transported long distances to reach consumers, adding storage time and exposure to external conditions. According to the National Institute of Nutrition (NIN) in Hyderabad, India: “Under Indian climate and storage conditions, iodine loss in fortified salt has been observed to be 25 percent to 35 percent in the first three months and 40 percent to 70 percent by one year.”^[7]

Indians’ unique cooking style leads to further iodine loss. Traditional Indian cooking calls for salt to be added before food is fully heated, boiled, fried, or cooked; this contrasts with most Western cooking, in which salt is added for taste after food has been completely cooked. In addition, the varying pH levels of Indian spices interact with salt and result in further iodine loss. “The loss of iodine in Indian culinary practices ranges from 20 percent to 70 percent.”^[8] The cumulative effect of heat, storage, and cooking can result in an almost complete loss of iodine by the time the consumer eats salt. Since salt is the primary carrier of iodine and a typical adult consumes 10 grams of salt per day, iodized salt must be able to deliver 15 ppm of iodine upon consumption to achieve the recommended daily allowance of 150 milligrams of iodine per day. Acknowledging that iodine is lost during storage and transport, the Indian Prevention of Food Adulteration law of September 2000 mandated that manufacturers of iodized salt add at least 30 ppm of iodine to ensure that 15 ppm are delivered to the consumer at retail. This law, however, did not take into account the iodine lost during “Indian cooking.”^[9]

A few national players dominate the Indian salt market, which is also saturated with numerous local players. Although many brands of salt are also iodized, Annapurna, a product of Hindustan Lever Ltd. (HLL), was the first to be marketed based on the iodized and healthful platforms. As the government of India and the International Council for the Control of Iodine Deficiency increased attention on the problems of iodine deficiency and the role salt could play to combat IDD, HLL seized the opportunity to become the first to market salt on an iodized platform. Though other branded salts were iodized, none were advertised as such. HLL became the first corporation to address IDD-related health concerns such as mental retardation and goiters, and subsequently earned an endorsement from the International Council for the Control of Iodine Deficiency.

When determining which part of the salt market to enter, HLL considered which segments offered the greatest potential. HLL created the Annapurna brand for its new line of salt and atta (milled wheat flour). Annapurna (an means food or grain; purna means to prepare) is also the name of the Hindu goddess of abundance. In 1995, after considering input from brand managers and executives, Gunender Kapur, director of foods division, led his team to enter the refined salt market with the primary goal of upgrading the 75 percent unrefined market (bottom-of-the-pyramid consumers) to Annapurna and the secondary goal of converting branded consumers to Annapurna.

The 1997 launch of Annapurna salt forced HLL to compete at the lowest price point of any product in the history of HLL; the brand team realized the need to differentiate the commodity in the increasingly competitive salt market. After the launch, sales and market research indicated consumers were more interested in the appearance and taste of salt than its chemical properties.

HLL made sure its product actually was more effective in conveying iodine. Its research lab developed a proprietary product, K15, a stable iodine released only in a very acidic environment such as the human stomach, which ensures that as much iodine as possible gets into human systems instead of being lost in the cooking process. The salt team believed all mothers are motivated by the same dreams of bright, healthy children. As a result, all of Annapurna’s subsequent advertisements conveyed this message. During the 2001 relaunch of Annapurna with K15, HLL aired a puppet show about IDD on Doordharshan, an Indian government-run television network, sharing costs equally with the network. The infomercial was extremely successful. According to HLL market analysis, the target group viewed Annapurna advertisements an average of four times. Although the long-term retention is unknown, the immediate recollection of the advertisement’s message was about 90 percent.

Transport times can be very long because of India’s poor road infrastructure. HLL also had to look to getting its product to market swiftly. Because the shelf life of salt is only one year, minimizing storage time in the godowns (storage areas), decreasing transport distances, and increasing the number of consumer purchase points are vital. The Annapurna salt supply chain varies significantly from region to region and takes between one and a half and six months (from natural evaporation of sea salt to a customer’s purchase), the bulk of which is during the salt farming stage. In response to these concerns, HLL successfully executed a salt supply-chain innovation in the beginning of 2001. HLL began to use rail, mitigating some of the problems with trucking and earning an edge on competitors.

HLL also recognized the bottom of the pyramid’s inability to for large packages of salt. Annapurna responded by introducing 200g and 500g low-unit-price packs to appeal to these consumers. Although the proportionate cost of manufacturing low-unit-priced packs is currently higher than that of the 1kg bag, HLL is researching technologies that would drive the cost down. Another way HLL aims to increase consumer demand for Annapurna salt is by aggressively increasing volumes in retail outlets. Although stockists educate retailers on HLL brand differentiation, most retail outlets are driven primarily by margins and schemes (promotions). Most dealers sell brands from a variety of companies, many of which offer competitive schemes. Annapurna salt successfully penetrated many retail chains and converted shopkeepers with superior promotions. These schemes have spawned price wars among manufacturers and resulted in even less brand loyalty from store owners.

The company also had to develop means beyond standard mass marketing to reach India’s poor. As Vindi Banga, chairman and CEO, HLL, says, “One of the greatest challenges with rural India is that the media only reaches 50 percent of the population. This leaves over 500 million people that don’t see your message. The population lives in 600,000 villages, and over half don’t have motorable roads, so we needed unique means to communicate to them. This challenge is the same in other emerging markets.” This awareness led to Project Shaki. Shakti (meaning strength in Sanskrit) is a direct-to-consumer initiative targeted at individuals in the bottom of the pyramid in rural India.

Project Shakti utilizes women’s self-help groups (SHGs) for entrepreneur development training to operate as a “rural direct-to-home” sales force, educating consumers on the health and hygiene benefits of HLL brands and nurturing relationships to reinforce the HLL message. This direct-to-consumer initiative is expected to not only stimulate demand and consumption to earn huge profits for HLL, but also to change the lives of people in rural India, something that mass marketing alone cannot accomplish.

Project Shakti utilizes women’s self-help groups (SHGs) for entrepreneur development training to operate as a “rural direct-to-home” sales force, educating consumers on the health and hygiene benefits of HLL brands and nurturing relationships to reinforce the HLL message. A Shakti dealer or Shakti amma (mother) works as an HLL direct-to-consumer distributor, selling primarily to individuals from her SHG. She also relies on smaller distributors, retailers, and consumers in six to ten satellite villages to supplement her business. Most training is in a market setting (versus a classroom) with dealers learning selling, business, and record-keeping skills. Although sharing success stories with other dealers in a classroom could be beneficial, HLL has found the logistics difficult to manage.

The Shakti pracharani or communicator is a person hired on a fixed monthly sum and typically earns less than a Shakti dealer. An ideal pracharani is confident and outspoken, with excellent communication skills. Unlike the dealer, whose travel is limited to her village and a few satellite villages, the pracharani must travel throughout the district. She is paid bonuses for attending more than her required number of SHG meetings. At such meetings, she facilitates games and tests members’ knowledge with questions such as how to identify Annapurna salt from an imitation product. True to HLL’s vision…

From the corporate perspective, Shakti’s greatest challenge is distribution with India’s underdeveloped infrastructure. For the sales managers on the front line, training rural women to work on their own for the first time poses the primary hurdle. For dealers and pracharanis, educating rural consumers about the quality of HLL products continues to prove difficult since most villagers are accustomed to less-expensive, unbranded, local products. Even if they are convinced of HLL’s marketing message, many imitation products cloud the market and confuse consumers.

HLL is demonstrating that for multinational corporations, the bottom of the pyramid can serve as a profitable impetus of innovative technology and marketing savvy, and that corporations, together with nongovernmental organizations, can address social problems at affordable costs. Annapurna salt’s K15 technology is uniquely positioned to combat IDD, a worldwide health problem, while delivering substantial profits to HLL. Similarly, Project Shakti is proving to be a repeatable model that can empower the bottom of the pyramid to enhance their quality of life and help pave a road from the bottom of the neglected social strata to a sought-after market. Although these accomplishments are admirable, several questions still remain. It is unclear whether Annapurna consumers truly appreciate the breakthrough technology embedded within the salt and purchase it because of K15, or whether most sales are a result of margin-driven shopkeepers who push Annapurna over other brands. HLL has not yet determined whether consumers are willing to pay a price premium for Annapurna based on the technology alone. Only time will tell; until then, HLL is working to decrease costs, which in turn can lead to a price decrease of Annapurna salt if the market demands it.

Should HLL keep the K15 technology proprietary? If K15 alone is not a differentiator in the sale of the product, would HLL earn higher profits by licensing the technology to other salt manufacturers and, at the same time, battle the IDD endemic on a larger scale?

HLL acknowledges that for Project Shakti to be a significant part of the company’s rural penetration, dealers and communicators must be well trained. It is unclear how dealers will perform in an expanded infrastructure. Also, HLL will need to determine whether the Project Shakti model is repeatable in other countries. Indian family structure and village interaction provide a unique diffusion mechanism that is an effective vehicle for Shakti. Whether this model would succeed in Africa, South America, or other parts of Asia (considering the cultural differences in village structures) must be further explored.

Even though these questions remain unanswered, HLL has developed an innovative model that other corporations can examine to determine how they might utilize the bottom of the pyramid to enhance their bottom line.