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NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
GROUP MEMBERS
BS VII
Afshan Shah B08107002
Anum Khan B08107005
Ayesha Iqbal B08107010
Rahila Altaf B08107039
Owais Naseem B08107041
Sabra Shaikh B08107042
SUBMITTED TO
DR. ASIM
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
ABSTRACT
The purpose of this research is to offer a preliminary case study exploration of the corporate
social responsibility (CSR) and development of sustainability .This case begins with a short
discussion that Red chilies are widely used by south Asian people since many years but
unfortunately in Pakistan red chilies production was suffering from a fungal toxin contamination.
At that time national foods limited observed these complex challenges with regard to
sustainability – social, environment and economic. In order to prevent aflatoxin contamination of
red chilies, NFL developed a Value Chain Empowerment business model for Red Chilies
detoxification and modified drying. Although NFL concerned through chili grow, research
specialists and NGOs. Finally with a lot of efforts they used geo textile technique which was
proved to be success. Through this new opportunity
(Geo textile technique) NFL basically work for the improvement and better quality of chilies and
expansion of aflatoxin free in the country, so that they can bring sustainable economic benefits to
wider communities. The increasing significance of such issues has become a key factor in
business growth and strategy. Significant amounts of research have been produced on sustainable
development or sustainability and CSR. Geo textile project is an initiative by NFL; they focus on
integrating CSR into sustainability and understanding CSR.
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
INTRODUCTION
National Foods began its journey in 1970 as a branded spice company, with a revolutionary
product that popularized the concept of having clean, healthy food.
National Foods marked its beginning in a rented warehouse in Dinar Chambers with initial sales
amounting to Rs 16, 487 in its first fiscal year. Later, the company established a spice mill and a
packaging plant that eventually evolved into a large factory complex where most of its
manufacturing facilities still reside.
Today, National Foods provides a complete food experience to its customers in 33 countries
around the world. National Foods produces over 300 SKU's in 12 major product categories
including meal solutions, pickles, sauces, ketchup's, jams and desserts.
In 1988, National Foods became the certified vendor of McCormick, USA. In the same year,
National Foods, then a Private Limited company was converted into a Public Limited, listed in
all the three stock exchanges of Pakistan. Up till 30th April 2012, market capitalization of
National Foods Limited was Rs.5, 831,086,380 with a paid up capital of Rs.414, 434,000.
Currently, National Foods is at second position out of a total 3500 brands marketed and sold in
Pakistan. National foods won brand elections 2010 and ranked second.
National Foods Limited is ISO 9001:2008 certified for Quality Management system, ISO
22000:2005 certified for Food Safety Management system and ISO 17025:2005 certified for
Laboratory Accreditation. The company has also got certification for Halal Foods and PSQCA
product certifications for all mandatory food products which includes Jams & Jellies,
Marmalades, Vinegar, Iodized Salt, Pickles, Red Chili, Turmeric and Curry Masala.
The vision and mission statement of national foods limited is
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
“ To be a Rs.50 billion food company by the year 2020 in the convenience food segment by
launching products and services in the domestic and international markets that enhance lifestyle
and create value for our customers through management excellence at all levels.”
CSR AT NATIONAL FOODS LIMITED PAKISTAN
National food limited has its origin in various philanthropic activities that that the company
initiated ever since its inception, based on a set of moral values that demanded of us to give back
to the society which supported the business of NFL business, in whatever it could.
NFL believes that corporate social responsibility should start off with providing highest quality
products and services at the least cost and least environmental impact. NFL’s business is driven
by this underlying philosophy, inline with Vision 2020. From this foundation, CSR edifice is to
growing to incorporate processes and activities that aim to strengthen society in a highly
sustainable manner.
NFL realized that its CSR commitment must reflect all sides of corporate personality- NFL as a
manufacturer, as an employer as a consumer itself of farm produce and other items and as an
industry leader, pioneering new processes and systems. NFL engages especially in areas related
to governance and strategic social investments, and strategic social investments, working to
empower and uplift communities.
NFL is Pakistan’s largest single purchaser of raw red chilies, an essential and prime
ingredient for many of its product. In Pakistan, red chilies production suffers from Aflatoxin (a
fungal toxin) contamination. NFL has pioneered post-harvest techniques to reduce Aflatoxin
levels in red chilies. Red chilies are widely used in South-Asian cuisine since last many decades.
Unfortunately red chillies in Pakistan undergo Aflatoxin contamination, which can occur in the
fields during the process of harvesting, post-harvesting, drying and storage. Pakistani chili
powder is failing international tests due to high levels of Aflatoxin, resulting in loss in export
potential. This study addresses the Aflatoxin issue pertaining to red chilies in Pakistan, highlights
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
the effort of National Foods Limited to address this problem, the importance of Chilies as a
commercial product and results of research work done in Kunri field. It is expected that this
study will help in alleviating this problem and give readers a clear idea of feasible solutions.
India is the largest producer of chilies in the world contributing 25 percent of the total
world production, of which only 4 percent is exported because of high domestic consumption.
Besides India, other major producers and exporters are China, Pakistan, Morocco, Mexico and
Turkey. Major importers of chilies from Pakistan are Gulf States, the US, Canada, Sri Lanka, the
UK, Singapore and Germany. It is exported in different forms that are: fresh chilies, stalk less
chilies, chili powder and oleoresin, as another form.
Export of red dried chilies from Pakistan has declined from Rs1.127 billion (during 2003-
2004) to Rs846 million after European Union food authorities have detected the presence of
aflatoxin (Pakistan Horticulture Development and Export Board (PHDEB). Its production fulfils
88 percent of the country’s requirement. Chili not only meets domestic consumption but also
helps in earning foreign exchange. The potential for increasing exports of whole, powder and
crushed chilies in consumer packs is very high, provided we meet the stringent quality
requirements of importing countries by preventing contamination from external sources during
harvesting, post-harvest handling, processing and storage.
China, India, Spain and Peru are the largest producers and exporters of chilies with the export
market share of 27%, 16%, 11% and 9% respectively in the world. The value of total import for
this product in the world is estimated to be US$ 602,343,000.
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
27%
16%
11%
9%
EXPORT MARKET SHARE
China India
Spain Peru
PIE CHART 1: Export market share of largest producers and exporters of chilies
BASIC ISSUE
Food security and safety is basic human need and it considered as hot issue for national and
international organizations in the recent past. Aflatoxin is produced by fungi growing on the chili
plant and fruit, and is carcinogenic. At least 13 different types of Aflatoxins exist where
Aflatoxin B1 is considered the most toxic. Aflatoxin belongs to a group of fungal toxins known
as myco-toxins. The incidence of human liver cancer increased when they ingest fungal
contaminated food and fodder from animal milk, meat etc. As aflatoxin is epidemiologically
implicated as carcinogen in humans and an environmental contaminant which is widespread in
nature, its possible chronic toxicity is of greater concern than acute toxicity.
Spices are exposed to a wide range of microbial contamination due to poor collection
conditions, unpretentious production process and extended drying times. The presence of
aflatoxin is major hot issue for chilli exporters from Pakistan. Contamination of the spices could
have taken place in the field, during processing, transportation and bad storage conditions. Once
spices and food are contaminated by aflatoxins, it is almost impossible to detoxify them by
normal cooking methods. Cooking food by either conventional gas or microwave oven does not
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
reduce the level of aflatoxins contamination. Aflatoxin maximum allowable limit (in Parts per
Billions PPB) in regulation of various countries is given below:
COUNTRIES ACCEPTABLE LIMIT
USA 20 PPBCanada 15 PPB
EU 05 PPBBrazil 30 PPB
Australia 15 PPBJapan 10 PPBChina 10 PPBIndia 30 PPBIran 10 PPB
Malaysia 35 PPBTABLE 1: Aflatoxin maximum allowable limit
In Pakistan, the Aflatoxin level in chili crop varies from 02 PPB to 100 PPB. With this level of
Aflatoxin; we cannot compete in the international market. High levels of aflatoxin left Pakistan’s
chili less competitive in the European market. The country’s export of red dried chili decreased
33% to Rs846 million by the end of 2006 against Rs1.13 billion in 2003-04. A lot of work is
required to improve the quality of chili crop
IMPACT ON ECONOMY
Besides causing health problems to humans, aflatoxins also cause adverse economic effect in
which it lowers the yield of food production and fiber crops as well as becoming a major
constraint of profitability for food crop producing countries .The frequent incidence of these
toxins in agricultural products have bad impact on the economy of affected regions, especially in
developing countries where proper postharvest techniques are not sufficient to prevent mold
growth. High levels of Aflatoxin, resulting in loss in export potential and lowers profitability for
agricultural countries. It has been reported that 25% of the world’s food crops are contaminated
by mycotoxins every year resulting in significant economic loss for these Livestock as well as
poultry producers are the most victim persons due to aflatoxin contaminated feeds which
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
ultimately cause significant economic loss by death of farm animals, destruction of their immune
system and reduction in body weight after intake of contaminated feed.
MEASURES UNDERTAKEN BY NATIONAL FOODS LIMITED
In order to prevent aflatoxin contamination of red chilies, NFL developed a Value Chain
Empowerment business model for Red Chilies detoxification and modified drying. As part of its
sustain-ability strategy, linkages were identified and developed, between the company’s growth
and stakeholder engagement, with the objective of bringing sustainable economic benefits to the
wider community. National Foods played host to a large group of chili stakeholders in Sept 2008
– including chili growers, research specialists and concerned NGOs. NFL has gone through a lot
of effort to understand and solve the Aflatoxin problem. One of the techniques, using geo-
textiles, proved to be a success.
Geo-Textile Pilot Project
The objective of this business model is the improvement in the quality of red chili and in
production and expansion of Aflatoxin free chili in the country, while bringing sustainable
economic benefits to the wider community and to eliminate or reduce Aflatoxin to minimum
levels without compromising other quality parameters like color and pungency. The project was
run on Lab scale for a three months period and validated in field (with collaboration from a large
Kunri farmer) during the two month harvesting period. Fresh chili was spread on geo-textile on
muddy floor while parallel fresh chili was spread on muddy floor as conventional practice is
conducted in Kunri fields. Validation part was conducted over a 150 square yard area.
Commercial Scale
Then the geo-textile experiment was run on commercial scale for approximate 80 MT, shipment
was sent to England in January 2010.
Results
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
Internal Test Report of National Foods Lab showed the chili powder sample to be within EU
limits for Aflatoxin & microbial contamination.
Report from PCSIR (Government accredited Lab) showed the chili powder sample to be within
EU limits for Aflatoxin and Pesticide Residue.
Report from CAMPDEN BRI EU lab Research showed the chili powder sample to be within EU
limits for Aflatoxin.
Lab Scale Kunri Field
1ppb
32ppb
2.62ppb
10.73ppb
Muddy Floor Geo Textile2
AFLATOXIN COMPARISON
GRAPH 1: Aflatoxin comparison
Graph 1 shows that when the project was tested on lab scale, the Aflatoxin level declines from
32ppb to 1ppb which is within the acceptable limit. The same test was conducted on larger scale
at Kunri Field which also proves to be successful as the Aflatoxin level reduced from 10.73ppb
to 2.62ppb that is up to standard.
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
Lab Scale Kunri Field
38000SHU
34000SHU
34000SHU 30000SHU
Geo textile Muddy Floor
PUNGENCY COM-PARISON
GRAPH 2: Pungency Comparison
Graph 2 shows the pungency comparison of two experiments. Lab scale test shows that the level
of pungency increases from 34000SHU to 38000SHU and an experiment in Kunri field also
illustrate an increasing level of pungency. Both the results were good enough as the purpose of
an experiment was to reduce Aflatoxin level without compromising the pungency of red chilies.
Lab Scale
Kunri Field
3854
3849
Muddy Floor Geo Textile2
KARACHI UNIVERSITY BUSINESS SCHOOL
COLOR COMPARISON
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
GRAPH 3: Color Comparison
Graph 3 depicts the color comparison between the chilies that were spread at muddy floor and
the one spread on geo-textile. The lab scale test shows the same color level in both the chilies
while in Kunri field experiment demonstrate the rise in color level from 49 to 54 in geo-textile
chilies, which was acceptable as the company was willing to maintain quality parameters.
First export of test product
A chilli powder shipment of 20 tons was sent to England in January 2010. Test results from
receiving port came at the end of February 2010. The shipment passed the required Aflatoxin
levels! To conclude, the techniques successfully pioneered by NFL need to be reapplied on a
wide scale with the help of the local farming community. Additionally, Pakistani Food Laws
should bring the allowed Aflatoxin levels at par with inter-national standards, including India
and the EU.
Financial Performance Analysis
2011 2010 2009 2008 2007Sales 5,520,780 4,489,946 3,758,706 3,061,746 2,391,746Gross profit 1,513,981 1,326,747 1,126,451 985,777 818,484Operating Profit 487,447 258,545 307,543 290,185 200,301Profit before taxation
361,751 159,181 220,702 233,947 191,722
Taxation (131,154) (72,622) (81,241) (77,401) (62,430)Profit after taxation 230,597 86,559 139,461 156,546 191,722Earnings per share 5.56 2.09 4.21 4.72
TABLE 2: Five Year Financial Performance Analysis of NFL
SOURCE: Annual Report on National Foods Limited
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
2007 2008 2009 2010 2011 -
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
SALES
SALES
GRAPH 4: Sales Analysis of Five Years
Graph 4 shows that the sales of NFL increase during five years from 2,391,746 to 5,520,780.
With the help of Geo Textile Project the company increases its sales during 2010 and 2011
because customers become more satisfied with NFL products.
2007 2008 2009 2010 2011 -
50,000
100,000
150,000
200,000
250,000
PROFIT AFTER TAXATION
PROFIT AFTER TAXATION
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
Graph 5: Profit Analysis of Five Years
Graph 5 shows that the ups and downs of profit after taxation. NFL faced great loss in 2010 but
with the help of detoxification process NFL reduce Aflatoxin to minimum levels without
compromising other quality parameters and increases customer satisfaction and loyalty with the
company. So due to this the sales and profit increases and the company can have a competitive
edge over the competitors.
As far as this case is concerned, the basic purpose of National Foods was to provide
sustainable economic benefit to a wider community. The step taken by the company proves to be
successful, not only for the company itself but also for stakeholders. Customers are highly
satisfied as now they are getting red chilies that contain an acceptable Aflatoxin level which is
suitable for their lives and are also getting good quality products because the objective of NFL is
to reduce Aflatoxin to minimum levels without compromising other quality parameters like color
and pungency. The geo-textile pilot project also results in export of red chilies which results in
increased revenue for the company and ultimately it will provide higher dividends to its
stakeholders. As a result of this experiment, the company can have a competitive edge over the
competitors and may result in increase sales revenue of red chilies.
CONCLUSION
After thoroughly going through this case we can say that keeping in mind that chilies cover a big
portion of Pakistan food business also the exportable items processed and unprocessed. Pakistani
chili powder is failing international tests due to high levels of Aflatoxin, due to this export
declines and also losing the international recognition. So a great attention should be given to this
issue in order to match the international standards as NFL done. So solving this issue is
important for us domestically and internationally as far as health issue is concerned and
economically as well that contributes great exports. Companies can also increase their sales and
profits by using any useful techniques which is beneficial for customers and for company as well
and through this the company and country achieve the competitive edge.
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
REFERENCES
TBL Sustainability Advocacy (n.d.) Case Studies: Profit – Supply Chain Sustainability
[online] available from http://www.tbl.com.pk/case-studies-profit-supply-chain-
sustainability/
2011. The collaboration that opened up EU for National Foods. The Express Tribune,
December 6th.
National Foods (n.d.) Certifications [online] available from
http://nfoods.com/contents/our-company/awards-and-achievements/certifications/
KARACHI UNIVERSITY BUSINESS SCHOOL
NATIONAL FOODS LIMITED
Creating Shared Value-A Step By National Foods Ltd.
Business News Pakistan (n.d.) National Foods Limited’s financial results for the year
ended 30th June 2011 [online] available from
http://www.businessnewspakistan.com/financial-results/national-foods-limited
%E2%80%99s-financial-results-for-the-year-ended-30th-june-2011.html
National Foods (n.d.) Annual Report 2009 [online] available from
http://nfoods.com/contents/wp-content/uploads/reports/AnnualRep2009.pdf
Review of Literature [online] available from http://prr.hec.gov.pk/Chapters/46S-2.pdf
KARACHI UNIVERSITY BUSINESS SCHOOL