Please highlight the ideas related to the performance measures from all the case study. Please SAGE Sage Business Cas (C) 2015 Graduate School of Business Administration, University of the Abstract In late 2013, Nando's, a global chicken restaurant chain, marked the successful implementation of a project for ethical sourcing of African bird's eye chillies (ABE) - the signature ingredient of the brand. The initiative had set Nando's on the road to securing its annual requirement of ABE from traceable sources, while improving the lives of participating small- scale farmers in Mozambique and Zimbabwe. However, Jed Goldstein, programme manager of the initiative, wondered whether Nando's could sustain ethical sourcing of ABE in a context where procurement of other goods and services continued unchanged. Case In late 2013, Nando's, a global chicken restaurant chain, marked the successful implementation of a proje for ethical sourcing of African bird's eye chillies (ABE) - the signature ingredient of the brand. The initiati had set Nando's on the road to securing its annual requirement of ABE from traceable sources, while proving the lives of participating small-scale farmers in Mozambique and Zimbabwe. However, Jed Goldste programme manager of the initiative, wondered whether Nando's could sustain ethical sourcing of ABE context where procurement of other goods and services continued unchanged. Background on Nando's The origins of Nando's traced back to a 1987 visit by friends Robert Brozin and Fernando Duarte to a sm caf called Chickenland, located in Rosettenville, Johannesburg Over the preceding years, this sou ern suburb of the city had become home to immigrants from Portugal and the former Portuguese colony Mozambique. 2 The caf served a dish developed by settlers in Mozambique: chicken marinated in a sau containing ABE chillies - the sauce was called peri-peri sauce - and then grilled (see Exhibit 1). and Duarte were so impressed by Chickenland's version of this dish that they subsequently bought the out for about R80 000, renaming it "Nando's" after Duarte. 44 Local and international expansion followed, with the business establishing its first overseas outlet in Portug in 1989. 5 By 2013, Nando's had about 1000 branches in South Africa and about 700 abroad in countri spanning Africa, Europe, Australasia, the Middle East and North America. Globally, Nando's employed sor Page 2 of 29 Nando's Chilli Sourcing: Innovation for Social Imp. SageBusines nandos-chilli-sourci... 2015 Graduate School of Business Administration, University of the 102% 23000 staff in 2013. South Africa, the United Kingdom (UK) and Australia were the leading marko. do's, which was headquartered in Lorentzville, southern Johannesburg. - The company formed part of the "fast casual" segment of the food chain sector: more upmarket than a simple takeaway, but less exclusive than conventional restaurants. Fast casual chains offered food that was somewhat healthier than the proce.

1. Please highlight the ideas related to the performance measures from all the case study.
Please
SAGE Sage Business Cas (C) 2015 Graduate School of Business Administration, University of
the Abstract In late 2013, Nando's, a global chicken restaurant chain, marked the successful
implementation of a project for ethical sourcing of African bird's eye chillies (ABE) - the
signature ingredient of the brand. The initiative had set Nando's on the road to securing its annual
requirement of ABE from traceable sources, while improving the lives of participating small-
scale farmers in Mozambique and Zimbabwe. However, Jed Goldstein, programme manager of
the initiative, wondered whether Nando's could sustain ethical sourcing of ABE in a context
where procurement of other goods and services continued unchanged. Case In late 2013,
Nando's, a global chicken restaurant chain, marked the successful implementation of a proje for
ethical sourcing of African bird's eye chillies (ABE) - the signature ingredient of the brand. The
initiati had set Nando's on the road to securing its annual requirement of ABE from traceable
sources, while proving the lives of participating small-scale farmers in Mozambique and
Zimbabwe. However, Jed Goldste programme manager of the initiative, wondered whether
Nando's could sustain ethical sourcing of ABE context where procurement of other goods and
services continued unchanged. Background on Nando's The origins of Nando's traced back to a
1987 visit by friends Robert Brozin and Fernando Duarte to a sm caf called Chickenland, located
in Rosettenville, Johannesburg Over the preceding years, this sou ern suburb of the city had
become home to immigrants from Portugal and the former Portuguese colony Mozambique. 2
The caf served a dish developed by settlers in Mozambique: chicken marinated in a sau
containing ABE chillies - the sauce was called peri-peri sauce - and then grilled (see Exhibit 1).

2. and Duarte were so impressed by Chickenland's version of this dish that they subsequently
bought the out for about R80 000, renaming it "Nando's" after Duarte. 44 Local and international
expansion followed, with the business establishing its first overseas outlet in Portug in 1989. 5
By 2013, Nando's had about 1000 branches in South Africa and about 700 abroad in countri
spanning Africa, Europe, Australasia, the Middle East and North America. Globally, Nando's
employed sor Page 2 of 29 Nando's Chilli Sourcing: Innovation for Social Imp. SageBusines
nandos-chilli-sourci... 2015 Graduate School of Business Administration, University of the 102%
23000 staff in 2013. South Africa, the United Kingdom (UK) and Australia were the leading
marko. do's, which was headquartered in Lorentzville, southern Johannesburg. - The company
formed part of the "fast casual" segment of the food chain sector: more upmarket than a simple
takeaway, but less exclusive than conventional restaurants. Fast casual chains offered food that
was somewhat healthier than the processed fare traditionally provided by take-outs, and they also
tended to be eclectic in appearance (see Exhibit 2). 7 In South Africa and elsewhere, the firm
continued to generate headlines with its use of adverts that satirised political and social trends, or
capitalised on controversies. 8 Sunday Times journalist Loni Prinsloo noted: "A Nando's advert
can go viral within minutes, but often lands it in hot water." 9 Social media played an important
role in the company's marketing strategy. Nando's had established a presence on numerous social
media sites, including YouTube, Twitter and Facebook, where promotional material in the firm's
characteristically irreverent tone was posted on country-specific (sometimes even branch-
specific) pages. 10 A survey of social media pages designed for the UK by food and beverage
brands, conducted by the London-based online marketing consultancy eDigitalResearch, later
found Nando's to have more followers on Facebook and Twitter than any other firm a 11
"Nando's doesn't advertise in Britain because it doesn't need to. Its customers are, in industry
jargon, its best "brand advocates'," observed journalist Mick Brown in The Telegraph. "The
Twittersphere is filled with people extolling Nando's, photographing themselves eating at
Nando's... and just occasionally rubbishing Nando's..." 12 Nando's had long sought to
differentiate itself from other well-known chains, insisting that it was not a provider of fast food
in the mould or on the scale of chains such as Kentucky Fried Chicken or McDonald's. However,
as noted in an article by The Economist, the growth of the company was inexorably placing
Nando's in a position where it attracted the same degree of scrutiny as that directed at leading
global brands. 14 Concern about Supply Chains Issues raised in relation to global companies
included critiques of the supply chains that served these firms. A series of controversies had
revealed shortcomings in sourcing and production across a range of sectors, Page 3 of 29
Nando's Chilli Sourcing: Innovation for Social Impact SageBusiness SAGE Sage Business Cases
(C) 2015 Graduate School of Business Administration, University of the from the textile trade to

3. the electronics industry. 15 As had been proved by the experiences of Nike, Procter & Gamble,
McDonald's and a host of others, there was vast brand risk to firms in being revealed to have
supply lines that did not meet standards for social justice, animal welfare, environmental
sustainability and product quality. 16 Furthermore, companies could not content themselves with
monitoring only the first tier in a lengthy chain of providers. "In the old days, I could mount a
plausible defence that what happened further down the supply chain was nothing really to do
with me; this has become increasingly unacceptable," noted Steve New, lecturer in operations
and supply-chain management at the Sad Business School, and Dana Brown, professor in
strategy at EMLYON Busine' I, in the European Business Review. 17 The power of social media
amplified the risks about the full scope of a supply chain. "YouTube, Twitter, and other social
media have... transformeu now activists launch campaigns against supply chain practices," wrote
New elsewhere. "The explosion of global electronic communication empowers those who
Concern about Supply Chains Issues raised in relation to global companies included critiques of
the supply chains that served these firms. A series of controversies had revealed shortcomings in
sourcing and production across a range of sectors, Page 3 of 29 Nando's Chilli Sourcing:
Innovation for Social Impact SageBusiness SAGE Sage Business Cases 2015 Graduate School
of Business Administration, University of the from the textile trade to the electronics industry. 15
As had been proved by the experiences of Nike, Procter & Gamble, McDonald's and a host of
others, there was vast brand risk to firms in being revealed to have supply lines that did not meet
standards for social justice, animal welfare, environmental sustainability and product quality.
Furthermore, companies could not content themselves with monitoring only the first tier in a
lengthy chain of providers. "In the old days, I could mount a plausible defence that what
happened further down the supply chain was nothing really to do with me; this has become
increasingly unacceptable," noted Steve New, lecturer in operations and supply-chain
management at the Sad Business School, and Dana Brown, professor in strategy at EMLYON
Business School, in the European Business Review. The power of social media amplified the
risks of ignorance about the full scope of a supply chain. "YouTube, Twitter, and other social
media have... transformed how activists launch campaigns against supply chain practices," wrote
New elsewhere. "The explosion of global electronic communication empowers those who wish
to pull down corporate reputations just as it offers firms the chance to build trust.' Reviewing
Nando's Chilli Supply Chain It was in this context that Nando's embarked on a process of
establishing the exact source of its ABE - a journey that would culminate in the Peri-Peri Ethical
Sourcing Initiative (PPES). "In 2008 and 2009, there were a lot of articles popping up in The
Guardian and elsewhere about cocoa supply chains and big brands which were coming under
some scrutiny because of the child labour situation, and Paul Appleton [group marketing director

4. of Nando's at the time] came up with the question, 'Where does our African bird's eye come
from?' And also, 'Under what conditions is it grown?"' said Goldstein. "Paul realised that we had
to find out whether the farmers involved with cultivating our key ingredient were getting paid
fairly, and whether there were other potential problems with the chilli supply.' Nando's described
itself as the world's biggest consumer of ABE, requiring 200 tonnes of the crop annually by 2013
, at a cost of about US $1.2 million. 20 Nevertheless, the company was far removed from its
chilli supply chain. In the case of the peri-peri marinades and sauces used to prepare and serve
Nando's chicken, for instance, Nando's was in a joint venture partnership with McCormick South
Africa to manufacture the products. In turn, McCormick obtained spice packs containing ABE
from various spice processing firms. It was these Page 4 of 29 Nando's Chilli Sourcing:
Innovation for Social Impact Sage Business
"The company probably took the supply of African bird's eye chillies for granted, and simply
assumed that everything was OK with the status quo. But in doing that, it left an opportunity for
brand risk," said Goldstein. 22 The risk extended beyond the firm's principal offering of chicken,
as ABE was also an important ingredient of many other menu items, and of Nando's products
supplied to the retail market. The image and associations of the ABE chilli were, furthermore,
central to the company's identity and marketing initiatives, from the "PERi-ometer" on the menus
to the stylised chillies used to embellish Nando's websites (see Exhibit 3). 23 , To answer
Appleton's questions, in November 2008 Nando's commissioned a multifaceted review of its
chillr supply chain that sought to establish, among others, where and under what conditions ABE
was being produced in Africa - as well as the possibilities for developing a supply of ethically
sourced chillies from Mozambique, given the historical importance of this country to Nando's. 24
The study was conducted by Earth Capital, an investment management company based in Cape
Town that provided a range of services to clients, including guidance on aligning business
activities with social and environmental objectives. 25 Erratic Supply Earth Capital presented the
report on the location and nature of ABE production to Nando's in January 2010. The findings
indicated that Malawi was the leading supplier of ABE globally, exporting between 400 and 500
tonnes of dried ABE annually. A handful of other African states produced lesser amounts of
ABE on what the document termed "a more speculative basis". 26 Most ABE cultivation in
Malawi was undertaken by farmers with smallholdings or medium-sized farms, who found
themselves buffeted by a "boom and bust" cycle (see Exhibit 4). High prices for the commodity
in one season would typically lead to an oversupply of chillies in subsequent years, ultimately
depressing the market. This, in turn, would prompt lower prices - and scarcity the following
season. The erratic nature of ABE supply and the volatile prices of the commodity were
problematic for Nando's in several respects. "A new competitor could conceivably enter the

5. market and offer a consistent price for the chilli and so secure the farmers' production support,"
noted Earth Capital in its report. Of more immediate concern was the fact that spice processors
confronted with shortages of ABE were mak- Page 5 of 29 Nando's Chilli Sourcing: Innovation
for Social Impact SageBusiness SAGE Sage Business Cases 2015 Graduate School of Business
Administration, University of the ing up the deficit with chillies from outside Africa that could
be sourced more readily by the agents with whom they worked. This strategy clearly posed
dangers for a company that had tied its identity so closely to ABE. "Indications were that some
chillies were coming from India, China - just a variety of different places. That obviously then
debunks the whole notion of African bird's eye chilli, because it's not African bird's eye chilli
any more. It has to grow on the continent for it to be that," said Tanner Methvin, formerly a
director of Earth Capital (the firm ultimately merged with Impact Amplifier, a consultancy based
in Cape Town and Johannesburg that focused on social enterprise development and supply chain
transformation, with Methvin becoming a partner at Impact Amplifier). Furthermore, noted
Goldstein "The quality of the product that the spice processors were getting was variable - and
the exact condi which it was farmed unknown.'
Uncertainty about Pricing The ABE supply chain from start to finish involved several parties
(farmers in Malawi and other countries, agents, the spice processors and others) with the price
per kilogram ( kg) of ABE varying markedly between farmer and processor (see Exhibit 5 and
Exhibit 6). 30 In addition, information about the market price of ABE at any one time was
limited as, unlike cocoa, coffee and other leading commodities, the crop did not trade on regional
or international exchanges. Smallholder farmers would make decisions on whether to plant ABE
based on word-of-mouth information about the crop's price from neighbouring communities, but
have little knowledge about ABE beyond these areas. This lack of transparency worked in favour
of others in the supply chain, observed Goldstein. "If the farmers don't have information as to
what price the product is fetching in South Africa, Spain or the UK, then that presents
opportunities to traders: the trader's margin is in that level of information arbitrage that they can
play," he said. "So, you would have the traders at the top who would be dealing with
international clients, and then underneath them there would be a whole slew of informal guys
with pick-up trucks that would go out to these areas, and they would just try to squeeze the
farmer to get the absolute best price for the season.' Concerning Mozambique, Earth Capital's
research indicated that ABE production in that country was overwhelmingly at a subsistence
level: only 5% was farmed as a cash crop, and there was no large-scale cultivation of ABE in
Mozambique. Several factors had undermined the competitiveness of Mozambican ABE on the
Page 6 of 29 Nando's Chilli Sourcing: Innovation for Social Impact SageBusiness SAGE Sage
Business Cases (C) 2015 Graduate School of Business Administration, University of the global

6. market, including a poor-quality product - difficulties that reflected low investment in the
agricultural sector. However, Mozambican authorities were putting incentives in place to make
the sector more attractive, and developing programmes to promote rural development. Overall,
there were significant prospects for developing a guaranteed line of ABE supply from
Mozambique for Nando's if farmers could be organised into networks, or large-scale production
be undertaken. Redesigning the Supply Chain The Earth Capital report emphasised that any
significant attempt by Nando's to introduce farm-to-fork traceability of ABE and ensure reliable
provision of the commodity would require a "fundamental shift" in the company's understanding
of its role in the supply chain. Instead of remaining at arm's length from procurement, the firm
might have to intervene across the chain - even with the production of ABE. Initially, Nando's
was uncertain about how to proceed with these findings, said Methvin - not least in terms of how
an intervention might both secure supply and achieve a positive social impact: "Are we - I'm now
speaking as Nando's prepared to ramp up our own chilli production process? Do we want to be
farmers? How do we secure our own supply chain, but do it in an ethical way? What skills do we
need to manage that? Can we actually do it in Mozambique? All these were unknowns." 34 The
logjam was broken by Goldstein, even though he had not been involved with the ABE review in
its initial stages. In 2011, Brozin had offered Goldstein the management of a slightly different
initiative that involved sourcing chillies on a small scale from Elephant Pepper, a farm in
southern Mozambique that had produced Tabasco chillies and which was active in development
initiatives. Brozin's initiative also included elements of
The logjam was broken by Goldstein, even though he had not been involved with the ABI stages.
In 2011, Brozin had offered Goldstein the management of a slightly different ini sourcing chillies
on a small scale from Elephant Pepper, a farm in southern Mozambique that had produced
Tabasco chillies and which was active in development initiatives. Brozin's initiative also
included elements of tourism and malaria prevention. "I think Rob viewed it simply as a
shareholder special project. But, a lot of my friends do interesting work on social
entrepreneurship, and I'd read about big companies using their supply chains to push for positive
change," said Goldstein. "So while Rob had given me a pretty loose brief, I thought: OK, maybe
this could be bigger than what he's presented to me. And all credit to him, he gave me the room
to go with it." Goldstein made contact with Methvin, and the two began discussing how to
reconfigure Nando's chilli procurement in a way that would secure a supply of authentic ABE
while offering the firm an opportu Page 7 of 29 Nando's Chilli Sourcing: Innovation for Socia
Sage Business SAGE Sage Business Cases (c) 2015 Graduate School of Business
Administration, University of the corporate social investment. 36 With ABE being a labour-
intensive crop rather than one that lent itself to mechanised cultivation on large commercial

7. farms, the redesign of the supply chain offered an opportunity to advance the interests of a
critically important sector for Africa: smallholder farmers. 37 According to the Washington-
based International Food Policy Research Institute, any meaningful efforts to alleviate destitution
and hunger on the continent would have to focus on smallholders, who were largely mired in
poverty even though they accounted for about 80% of agricultural production in Africa
(agriculture, overall, provided employment for nearly two-thirds of the continent's labour force,
along with a third of Africa's gross domestic product). 38 The initiative they first envisaged was
modest: an exploratory operation in Mozambique that was expected, initially at least, to have a
fairly minor effect on the supply chain. 39 In part, the small scale of the project in its initial
conception stemmed from the fact that Goldstein and Methvin had a limited budget at their
disposal, the endorsement of Brozin notwithstanding. In 2011, Nando's shareholders had
approved a three-year budget for the programme that allowed for approximately US$150 000
annually. 40 "Generally speaking, people are risk-averse about shifting the way that supply
chains work," said Methvin. "The thinking tends to be, we know how this system of supplying
our fundamental ingredient functions. Now, you want to give us another system. But, we don't
know how this new system works, we don't know if it's going to be successful, we may lose our
existing supply chain - and you want us to pay for the privilege of doing that? So, not too long
after Jed started, we thought, let's see if we can get some external funding for this so that we can
achieve a broader social impact." 41 Partnering with FRICH In June 2012, Nando's secured
additional financing for the PPES from the UK Department for International Development under
its Food Retail Industry Challenge Fund (FRICH). R FICH provided the PPES with
approximately UD $1 million, to be disbursed over 18 months. Nando's was required to match
the grant, which it did in cash and kind. The awardi. FRICH funds was a pivotal development
for the initiative, enabling the firm to introduce the proj Ile that would significantly alter existing
procurement: Goldstein and Methvin could now undertake o ins in Zimbabwe as well as
Mozambique. In addition, the funds were intended to bring the PPES to commercial viability at
the end of the grant period, allowing for the
traded). In addition, Nando's thought that buying chillies from small-scale farmers would do
more to address basic needs than sourcing the crop from larger farms, which drew wage labour
from rural communities. 47 The significance of smallholders in Africa notwithstanding, there
were many proponents of the view that the best path forward for agriculture on the continent lay
in centralising production on large, industrialised farms. 48 The PPES was initially implemented
in Mozambique and Zimbabwe, where some 70% and 62% of the population, respectively, lived

8. in rural areas and depended on agriculture for a living. In addition, in Zimbabwe, 72.3% of
people were estimated to be living at or below national poverty lines d, while 59.6% of people in
Mozambique lived below the international poverty line of US $1.25 a day. 49 The historical
associations of Mozambique aside, the two countries were chosen in part because both had
small-scale farmers with access to irrigation. Nando's introduced the initiative at three sites in
south-eastern Zimbabwe - the villages of Chipendeke and Fuve Panganai, and the communal
area of Tshovani - and at four locations in Mozambique, all in the south of the country. Two of
the Mozambiquan sites were in the Marracuene area, one in the Matchia area, and another in one
of the Maputo Green Zones e (see Exhibit 7). One of the Marracuene sites consisted of land on
the Elephant Pepper farm that was allotted for cultivation to employees of the farm and
smallholders not on staff - a group collectively referred to as the Marracuene "In-growers". The
second group of farmers from this area was named the Marracuene "Out-growers". In addition,
the PPES in Mozambique included five participants termed "emerging farmers" who were active
in several locations, but much better off than the smallholders with regard to the amount of land
that they owned and their financial circumstances. None of the participating farmers in
Zimbabwe or Mozambique had grown ABE before as a cash crop. As Nando's was not in the
business of farming, it appointed Elephant Pepper to implement the PPES in Mozambique, and
Better Agriculture - an organisation that provided management consultancy services to small
farmers - in Zimbabwe. 51 Elephant Pepper and Better Agriculture had to recruit and contract
smallholders for the programme, and ensure that they were provided with the support services
and goods essential for maximum yields. These included seedlings (all of an ABE variety
developed for Nando's, to ensure that PPES chilli met company requirements), fertilizers and
herbicides (termed "inputs"), as well as technical as- Page 10 of 29 Nando's Chilli Sourcing:
Innovation for Social Impact SageBusiness SAGE Sage Business Cases (c) 2015 Graduate
School of Business Administration, University of the sistance in the use of these agricultural
products and with the various stages of the ABE growing process. Farmers could purchase inputs
on credit, with payment to be deducted from the amount received in the sale of ABE to Elephant
Pepper or Better Agriculture. 52 Elephant Pepper and Better Agriculture operated differently in
their implementation of the PPES. While maintaining overall responsibility for the project,
Elephant Pepper subcontracted certain duties to other organisations. These included iDE, a
global non-profit that was involved in a range of projects to benefit poor rural households, and
the Peace Parks Foundation, a Stellenbosch-based group that supported initiatives which helped
safeguard transfrontier conservation areas (in this case, the Maputo Special Reserve, which was
in proximity to Matchia). n Zimbabwe, Better Agriculture employed extension officers to
manage and assist its ABE farmers. Both farming organisations were required to grade, dry and
bag the ABE produced by smallholders, and ship it to South Africa. 54

9. Predictable Pricing A key goal of the PPES was that participating growers be paid a price for
their harvests that was both fair and consistent. To this end, the initiative made provision for a
system of fixed pricing throughout the supply chain: - Elephant Pepper and Better Agriculture
committed to paying growers a fixed price per kilogram of ABE, with this price being made
known to farmers at the beginning of the season. The two organisations also agreed to buy all
ABE produced by growers, provided that it met Nando's specifications. - Elephant Pepper and
Better Agriculture would then sell the ABE to Nando's at a fixed price that allowed the farming
organisations both an acceptable profit margin and the means to pay farmers their fair and agreed
rate per kilogram. Nando's, in turn, committed to buying all the ABE on offer from Elephant
Pepper and Better Agriculture, providing it fell within its specifications. - Nando's would
subsequently sell the ABE to the spice processors at a price that the company and processors had
settled on ahead of the growing season (this fixed price would also be the means by which
agreed costing further upstream in the supply chain could be assured). The amount paid by the
spice processors would essentially be the same price that Nando's had paid to Elephant Pepper
and Better Agriculture. Page 11 of 29 Nando's Chilli Sourcing: Innovation for Social Impact
Sage Business SAGE Sage Business Cases 2015 Graduate School of Business Administration,
University of the Nando's involvement in the supply chain was not for purposes of making a
profit on ABE, but rather to ensure the smooth functioning of the new procurement model during
its introduction (the company would later step back from the supply chain, allowing spice
processors to purchase directly from Better Agriculture and Elephant Pepper). Nando's was also
obliged to carry out certain tasks that had previously been assumed by agents, such as the
warehousing of the ABE during its journey from the farms to the premises of the spice
processors. The offer of guaranteed purchase at a known price allowed farmers some security in
an environment where the market for other crops was largely unpredictable, said Goldstein. "It's
the biggest thing you can do in terms of development and in terms of alleviating poverty,
because it allows for everyone in the chain to understand their cash flows and to plan their
financial lives. It's not so much paying more for the product that's important. It's that guaranteed
contract at the beginning of the season. That was critical." (Methvin added, however, that there
were limits to the confidence inspired by guaranteed contracts - see Difficulties on Site.) The
first growing season of the PPES began in July 2012 with 119 Mozambican and 145
Zimbabwean farmers (see Exhibit 8). Nando's set a production target of 70 tonnes of dried
chillies for the season Establishing Baseline Living Conditions From September to November
2012, Impact Amplifier carried out a socio-economic and environmental baseline study in
participating communities to provide Nando's with the means to assess the effects of the
initiative.

10. Establishing Baseline Living Conditions From September to November 2012, Impact Amplifier
carried out a socio-economic and environmental baseline study in participating communities to
provide Nando's with the means to assess the effects of the initiative. The baseline study
surveyed living conditions of PPES communities in seven categories: housing, water, effluent
removal, energy, food security, healthcare and education. 59 Using information gained from
interviews with participating farmers and other sources, Impact Amplifier rated how growers
were faring in each of the categories on a scale of one to 10 , with a top score representing good
conditions for the category in question. Each category would be scored again during a second, or
"impact", study conducted a year later, to review whether conditions had changed as a result of
income from the PPES. Although the picture of living circumstances that emerged was not
uniformly negative, it did reveal that the growing communities faced substantial challenges. For
instance: Page 12 of 29 Nando's Chilli Sourcing: Innovation for Social Impact SageBusiness
SAGE Sage Business Cases (c) 2015 Graduate School of Business Administration, University of
the - Residents of Chipendeke had brick houses of solid construction, but none of the houses had
running water. Residents had to fill 20 litre drums at a water source two to three times a day, and
carry these home over an average distance of 300 metres from source to home. In Fuve Panganai,
certain residents had to carry such drums up to 3.5 kilometres from source to home. - In Matchia,
disposal of human waste was via the bush system as well as pit latrines. g - While electricity was
available to the inhabitants of Fuve Panganai about three days a week, most people were unable
to afford a connection, and resorted to using wood, paraffin and candles for their energy needs. -
People from the Marracuene Out-grower community reported that there were instances where
they missed meals as a result of having insufficient food or money: 64% indicated that in the
week preceding their interviews, there were days when they had not had enough to eat. For In-
growers, the proportion was 42%. - Farmers who cultivated land in the Maputo Green Zone had
access to various clinics and hospitals where healthcare was affordable, but also often
unavailable due to lack of funding and staff. - Both primary and secondary schools had been
established in the Tshovani area, but residents were typically unable to afford school fees,
uniforms and the like. As a result, children missed out on schooling, while families became
indebted to schools. 60 Range of Challenges As Goldstein began liaising with the spice
processing companies that had procured ABE for Nando's to inform them of changes to the
supply chain, he found himself encountering resistance from two of the processors with which
the company dealt closely. This was prompted by fears that Nando's intervention - while
wellmeaning - was also ill-advised. "Their thinking was: this is our business. We understand how
to engage in this spice trading world, and Nando's is just going to mess it all up. They think that
they're saving Africa, but it doesn't work like that," said Goldstein. 61 The resistance manifested

11. itself in limited cooperation with Nando's when it sought information on issues central to
ensuring that the new supply chain functioned efficiently, such as data on the processors' annual
consumption of ABE, the Scoville Heat Unit range of chillies sourced through the traditional
supply chain and the pricing history of ABE - the latter to enable Nando's to establish a viable
price for PPES chilli. In fact,
Range of Challenges As Goldstein began liaising with the spice processing companies that had
procured ABE for Nando's to inform them of changes to the supply chain, he found himself
encountering resistance from two of the processors with which the company dealt closely. This
was prompted by fears that Nando's intervention - while wellmeaning - was also ill-advised.
"Their thinking was: this is our business. We understand how to engage in this spice trading
world, and Nando's is just going to mess it all up. They think that they're saving Africa, but it
doesn't work like that," said Goldstein The resistance manifested itself in limited cooperation
with Nando's when it sought information on issues central to ensuring that the new supply chain
functioned efficiently, such as data on the processors' annual consumption of ABE, the Scoville
Heat Unit range of chillies sourced through the traditional supply chain and the pricing history of
ABE - the latter to enable Nando's to establish a viable price for PPES chilli. In fact, Page 13 of
29 Nando's Chilli Sourcing: Innovation for Social Impact SageBusiness SAGE Sage Business
Cases ( 2015 Graduate School of Business Administration, University of the there was decided
opposition to the very notion of a fixed price for ABE, a sentiment that became particularly acute
when the Malawian ABE market - in oversupply, and trading at unsustainable levels - crashed
just as Nando's was negotiating its pricing contracts for 2012/2013. Why, the processors asked
Goldstein, should they agree to a price above the bargain rate of US $2 per kilogram that was
then on offer from traders? 62 "I was going into a lot of these meetings with the spice processors,
and one of the representatives would tell me, 'You're messing with the free market! This is a
commodity. It's subject to market forces, and by offering this guaranteed price, you're just
destroying capitalism, '" recounted Goldstein. "And so I would go home and think: jeez, I'm
destroying capitalism through this programme. But then I'd remember that capitalism is
dependent on efficient markets and full transparency of information - and there's very little of
that in the ABE supply chain, particularly for small-scale farmers. So, how can you say this is a
free market?" However, Goldstein did concede some cause for concern among the processors in
that there were no guarantees that they would be able to recoup added costs through sales of the
spice packs to the manufacturer of Nando's marinades and sauces. 63 His attempts to deal with
processor reluctance were further complicated by the fact that no one at Nando's had overall
responsibility for the procurement of spice packs by various subsidiaries. "I didn't have the
power to force the issue, and there wasn't this one person who could just push and make it

12. happen," said Goldstein. 64 "Overall, I think the spice processors were just hoping that they
would outlast me and Nando's resolve," he added. "Perhaps what they were most concerned
about is Nando's taking away their sovereignty, emasculating them to a certain degree. And,
there could have been a concern that it might be chillies today, and then what is it tomorrow?'
Goldstein countered resistance with persistence. "It was just a lot of showing up to meetings and
not letting go. Just demonstrating that this isn't going away. But, also understanding your
pressure points, understanding your leverage. You don't want to go in there feeling entitled,
because the spice processors could very well say, 'You know what? This is more trouble than it's
worth.'" 66 He also noted that a decision by Nando's shareholders to appoint Georg Gruber, chief
executive officer of Nando's Grocery, to assist in negotiations and in general PPES programme
management, had underscored to spice processors the importance of the ethical sourcing
initiative - and perhaps eased some of their resistance. According to Earth Capital's 2010 report
on production of ABE, the cost of ABE had fluctuated between US $2000 and US$5 000 dollars
a tonne from 2001 to 2007. Generally, prices for a kilogram of dried ABE
ranged from US$3 and US$14, with processors paying an average of US$5 dollars for the
commodity. 67 Nando's and the spice processors ultimately settled on a price of US $5 per
kilogram of dried PPES chilli harvested in the 2012/2013 season. This allowed for smallholders
in Zimbabwe to earn approximately US $2.70 per kilogram of dried ABE, and those in
Mozambique to receive between US $2.70 and US $3.30 for a kilogram. Certain growers in
Mozambique were paid more than US $2.70 to compensate them for some failures in delivery of
inputs and technical assistance that arose in the course of the first season, compromising yields
(see Difficulties on Site). 68 Corporate Inertia As the sourcing initiative encountered technical
and logistical hiccups, Goldstein also found himself wishing that people within Nando's would
be more accommodating to the new challenges sparked by the changing ABE supply. Trading
and logistics staff at the company had been somewhat unresponsive in a number of instances,
including when the need arose to ship samples of ethically sourced ABE abroad to be tested by
manufacturers supplying Nando's in the UK and Australia. This required various clearance
certificates, as well as extensive arrangements for transport via sea and air freight. "I don't have
any logistics background, and I'm not opposed to learning more about how that world works.
But, it would have been great if they could have just said, 'Jed, I'll get it sorted out because that's
what I do.' But, there wasn't that. Pushing was required to get them to assist," said Goldstein. 69
"Everyone says they're behind this project, because how could you say you're not behind this
project? But in terms of actually helping us develop, that was more limited. Once you start to ask
people to do things differently, they push back to a certain extent. They resist moving away from
existing systems that are familiar to them, that they understand. That said, the support of Rob,

13. Fernando, Georg [Robert Brozin, Fernando Duarte and Georg Gruber] and others went a long
way to ensuring that these internal barriers were roadblocks rather than dead ends." 70
Difficulties on Site In Mozambique, implementation of the PPES proved to be uneven. While
certain smallholders had access to Page 15 of 29 Nando's Chilli Sourcing: Innovation for Social
Impact SageBusiness SAGE Sage Business Cases (C) 2015 Graduate School of Business
Administration, University of the the full range of goods and services envisaged under the
project, others received almost no support. For instance, Elephant Pepper had planned that a non-
profit would provide technical assistance to the Marracuene Out-growers, but this did not
materialise. In addition, the Out-growers did not receive sufficient seedlings from Elephant
Pepper. As a result, only four of the 17 contracted farmers were able to sow. Logistical problems
aside, the soil in certain areas proved unsuited for ABE cultivation, and farmers in one location
experienced flooding. 71 The difficulties experienced in Mozambique cast doubt on the
suitability of Elephant Pepper as an implementing partner for the PPES. Goldstein was
concerned about the organisation's reliance on third-party entities to manage the farmers, as well
as its failure to meet deadlines for ABE delivery and its need for donor support to cover
expenses. To make the PPES viable ir 'Je, Nando's had been obliged to subsidise ABE purchased
from Elephant Pepper by US $1 for e 1 , bringing the total earned by the organisation to US $6
per kilogram.
In Zimbabwe, implementation of the PPES was compromised by events on the ground, including
flooding, cut-offs of water used for irrigation, instances of political discontent and uncertainty
about the bona fides Better Agriculture. In Chipendeke, many farmers were deeply suspicious of
the PPES as a result of a pre ous experience with another agricultural firm that had contracted
them to grow paprika for an agreed price but which subsequently reneged on its commitments,
leaving the farmers in debt for the seedlings and fertilizer that they had purchased. Ultimately,
45% of contracted farmers in this area did not participate fully in the programme or dropped out
altogether - the highest rate of farmer attrition in Zimbabwe. 73 According to Methvin, the
broader environment also served to make smallholders cautious. "Don't forget that that these
farmers live almost exclusively in a context in which nothing is reliable, absolutely nothing.
Creating any kind of long-term agreement is something unfathomable under these circumstances.
The growers don't have a frame of reference for it," he said. "So, there are a lot of hurdles to get
over, to get to a place where someone says, 'I will put my effort and energy into this crop that I
may never get anything out of." 74 Page 16 of 29 Nando's Chilli Sourcing: Innovation for Social
Impact SageBusiness SAGE Sage Business Cases (C) 2015 Graduate School of Business
Administration, University of the Outcome of the First Season The project met its production
target for the first season, with growers delivering the required 70 tonnes of dried ABE (see

14. Exhibit 9). 75 Concerning the individual performance of participating countries, most of the
project's aims for its first year were achieved in Zimbabwe, but not in Mozambique. Average
farmer earnings per quarter hectare (ha) in Mozambique were approximately half those in
Zimbabwe (US$358 vs US$744), while average yield per hectare in Mozambique was half that
in Zimbabwe (1 721kg vs 3416kg, fresh weight chilli). According to an analysis of the first
season conducted by Impact Amplifier, Mozambique's relatively poor performance in the PPES
could, in part, be chalked up to farmer attrition: the grower retention rate was 80% in Zimbabwe
and only 51% in Mozambique h. Other problems in Mozambique included inadequate technical
support and provision of inputs, as well as inadequate plot sizes. While plot sizes at the four sites
typically ranged from 0.07 to 0.25 ha, it had become evident that farmers needed at least 0.25 ha
to generate sufficient profits to make the significant improvements in living conditions sought by
the PPES. Most of the plots in Zimbabwe were about 0.25ha, and some as large as 0.5 ha
(overall, Zimbabwe had 40.12 ha under cultivation, compared to 28.23 ha in Mozambique).
Impact Amplifier also found the following to be among factors important for success: -
Individual responsibility for plots - in Matchia, there had been an attempt to have growers farm
collectively on a single 3.3 ha plot, but certain farmers did not pull their weight, obliging the
Peace Parks Foundation to spend inordinate amounts of time tracking the work done by
individual farmers to ensure fair remuneration. - Trust in the implementing agency - trust was
fundamental to smallholders' willingness to take a risk in joining the PPES and to maintaining
their commitment over the season. In the Impact Amplifier analysis, Methvin noted that Better
Agriculture had overcome suspicions in Chipendeke about its trustworthiness. Farmers who
remained in the programme there had earned more from ABE than any other crop, had managed
to pay off debt accrued during the failed paprika project, and were now in a position to benefit
meaningfully from the PPES. 76
The sum of the findings on the first season of the PPES was that it provided a viable model for
achieving Nando's aims of traceable procurement and social responsibility, and that there was a
strong argument for using the programme as the sole approach for sourcing the firm's ABE.
Goals for the future of the PPES included attaining 250 tonnes of ABE annually by 2016 - just
over 80% of the company's projected requirement of some 300 tonnes for that year. Furthermore,
as intended under the FRICH funding, the initiative had become commercially viable in
Zimbabwe - but not yet in Mozambique, where Elephant Pepper continued to be in need of
subsidy at the conclusion of the season. 84 "Country partners... in the programme are critical to
ensuring its success. As such, clear conditions of performance should be contractually

15. established," wrote Methvin, adding: "If the partners cannot perform to these conditions, they
must be replaced with those that can." Page 19 of 29 Nando's Chilli Sourcing: Innovation for
Social Impact Sage Business SAGE Sage Business Cases (C) 2015 Graduate School of Business
Administration, University of the The Future For Goldstein, the gains of the PPES over 2012 and
2013 were significant, but fragile. The slightest misstep, he feared, could undo the relationships
and understandings that had been so painstakingly assembled to get the programme operational -
and which needed tending for it to continue functioning. "We have this model that's barely
holding together right now," he explained. "It's like toothpicks forming a bridge, and it all needs
to be managed in a very sensitive way." 86 Methvin added: "I still don't feel like there's a shared
consensus amongst the processors and Nando's that, with ABE, it's better for everybody to have
stability in price. Yet, coming to closure on a stable price is so insignificant for everybody. You
want to say, don't get fussed about what the market's doing, because the market rises, and the
market falls. One year you may lose, but the next, you'll win." 87 The vulnerability of the PPES,
in Goldstein's view, stemmed from the fact that the overall Nando's supply chain system could
not easily accommodate what he termed the "soft angles" of the initiative, particularly the fact
that the project could not be managed on the purely commercial basis that governed procurement
of other products. The social component of the project brought with it the possibility of added
costs - the subsidy to Elephant Pepper, for instance - that took tremendous energy to defend. 88
Goldstein felt that these challenges might be more easily dealt with if ethical procurement
became a goal across product lines and throughout the company. "There needs to be this
consistency across the entire Nando's universe, so that it's not only my activity, on the ground,
managing all of these stakeholders. If there's formality and it's institutionalised, it becomes
easier, because then there are standard procedures to be followed, a standard way to evaluate it,"
he said. "But, if the programme remains confined to African bird's eye chilli, I just wonder how
successful and sustainable it ultimately can be. Also, in terms of getting the right talent to
continue managing it, having this confined to African bird's eye is constraining. Where you
could get people excited - and so attract good talent - is if you try to identify what the key values
are that are driving this type of programme and roll it out to other components of our supply
chain.' Methvin had a slightly different view: "I don't think the PPES is unsustainable. I agree
that it finds itself in a challenged position, because it's running against the core of the culture.
But, I don't think it runs the risk of actually being shut down, because there are fundamental,
commercial reasons for it to be successful. It's al-
Methvin had also noted that the farming networks that Nando's had established in Mozambique
and Zimbabwe might be considered for cultivating additional crops, so as to build the strength of
these communities. 92 "But, whether we're talking about existing farming communities or new

16. networks of growers, they need the market. They need the opportunity. They need the skills," he
said. "So, I think there's ample opportunity to grow beyond this, but that's going to take will,
work, energy, effort and possibly another round of external funding." 93 Notes a. The June 2014
report, 'Social Media Benchmark: Food and Beverages', indicated that Nando's had
approximately 1.4 million more Facebook followers than TGI Fridays and 1.46 million more
than Starbucks. In all, Nando's had almost 2.78 million Facebook followers. On Twitter, Nando's
logged 1.36 million Twitter followers, nearly 800000 more than Domino's Pizza and about
930000 more than Starbucks in third place. [Source: PR Newswire (2014), "Nando's on top when
it comes to social media", 27 June, available at: www.prnewswire.co.uk/news-releases/nandos-
on-top-when-it-comes-to-social-media-264871621.html (accessed 27 March 2015).] b. Launched
in 2009 , FRICH was aimed at supporting equitable, commercial partnerships between
companies and African farmers in sub-Saharan Africa (excluding South Africa) that would help
the farmers improve their lives through exporting to European markets, where the presence of
African food products was low compared to exports from Asia, Latin America and South
America. [Sources: GOV.UK (2013), "Food Page 21 of 29 Nando's Chilli Sourcing: Innovation
for Social Impact SageBusiness 21/2 SAGE Sage Business Cases CC 2015 Graduate School of
Business Administration, University of the Retail Industry Challenge Fund (FRICH)", available
at: www.gov.uk/food-retail-industry-challenge-fund-frich (accessed 4 February 2015); Methvin,
T. (2014), "Nando's peri-peri ethical supply initiative socio-economic impact review - Zimbabwe
and Mozambique", Nando's; Department for International Development (2009), "Press Release
Issued by DFID", 10 June, available at: www.leafuk.org/resources/000/337/491/Press Release
Issued by DFID.pdf (accessed 30 March 2015).] C. Capital assets included vehicles, chilli driers
and other equipment. [Source: Methvin, T. (2014), "Nando's peri-peri ethical supply initiative
socio-economic impact review - Zimbabwe and Mozambique", Nando's.] d. Zimbabwean
authorities made use of both a food poverty line (FPL) and a total consumption poverty line
(TCPL) for assessing poverty levels in the country. In April 2013, the FPL was put at US$1.16
per day, while the TCPL stood at about US $3.60 a day. [Source: Moyo, R. (2013), "Poverty
datum line increases by 1%" ", The Zimbabwean, 20 April, available at:
www.thezimbabwean.co/business/65141/poverty-datum-line-increasesby.html (accessed 20 May
2015).] e. There were four Green Zones in Mozambique's capital, Maputo. These were areas of
farmland located close to the city, onto which people had moved following independence in
1975. [Source: Methvin, T. (2014), "Nando's peri-peri ethical supply initiative socio-economic
impact review - Zimbabwe and Mozambique", Nando's.] f. While ABE was used in a variety of
Nando's products, the PPES focused at first only on phasing in traceable ABE for the sauces and
marinades manufactured for restaurants and retail. All of these products were produced in South
Africa. [Sources: Goldstein, J. (2014), "Peri-peri ethical sourcing - White Paper review",

17. Nando's; Hobbs, J. (2014), Interview with Jed Goldstein on 23 September, Johannesburg.] g.
Matchia had not been confirmed as a growing location at the time of the baseline study, and thus
did not feature in the 2012 review. Information about living circumstances in the area was,
however, gained in the 2013 impact study. h. The analysis did not review in detail the effects of
the PPES on the emerging farmers in Mozambique,