Food
Poor people around the world typically spend more than half of their household budgets on food products, but nevertheless they often have to make do with poor quality and high prices. This situation is primarily the result of bad market infrastructure and lack of competition.
DIBD hosted a Food Sector Learning Lab in 2009 where among others the World Economic Forum shared their insights. WEC has worked extensively with the business opportunities in the food value chain. The following points summarize some of the conclusions of the event where DIBD also shared experiences on how to develop business models targeting the BOP food sector.
Size of the market
Global food companies increasingly realize that what consumers at the base of the pyramid lack in individual purchasing power, they make up in sheer volume. The BOP is a market of approximately 4 billion people who collectively spend an estimated 2.89 trillion dollar annually on food according to World Resources Institute. For companies that are able to adapt products and business models to the needs of these of the BOP, this market represents a significant potential for growth.
BOP household spending on food
The annual spending on food varies across countries and continents. The median value of the average annual spending in Africa is USD 2,087; USD 2,643 in Asia; USD 3,687 in Eastern Europe; and USD 3,050 in Latin America (World Resources Institute).
Where is the market?
The distribution of spending on food between urban and rural areas reflects the distribution of the BOP population. In Africa the largest food market is predominantly rural in nine of twelve countries, with Djibouti, Gabon, and South Africa being the exceptions. For these African countries the rural market is approximately 1.6 times larger than the urban. The distribution in Asia is similar to the African. In Asia the rural BOP market is approximately 2.5 times larger than the urban market (World Resources Institute). The large size of the rural market underlines the importance of developing effective distribution models that reach the rural BOP households.
What does the BOP buy?
Studies indicate that BOP spending patterns do not differ significantly from the mid-market segment. There is not an appreciably difference in regard to either the type of food purchased or the allocation of spending among these types. However, spending per household obviously differ between the BOP segment and the mid-market segment.
Future scenarios
The world is facing a major challenge in sustainably suplying food for 9 billion people in 2050. The Danish Academy of Technichal Sciences has provided seven recommendations as to how 9 billion people can be sustainably feed, creating an outlook for future policies.