GRAMEEN DANONE FOODS: A joint venture social business to
serve Bangladeshs BoP
Presented by: -Dharma Penugonda (103951627) - Mengjiao Fu (103989454) - Muhe Shang (103787129) - Preethi Naravar (104087583)
Bangladesh, one of the world`s developing countries
Total population 160 million, with 72.9% rural population and 32% aged below 14 One child out of two is suffering from malnutrition especially in rural areas.
Highly densed with average family size of 4.9 and subject to frequent natural disasters Average daily income of bottom 40% of its income pyramid is less than $2.66. This group is below the poverty line and hardly afford for socio cultural needs like food, housing and clothing
Grameen Bank
Founded by Mohammed Yunus in 1974 First bank to lend loans to women in Bangladesh and to achieve this Yunus had to convince religious opposition
Most of the loans are given for small income generating activities
Given non interest loans to more than 70000 beggars and about 2000 beggars have given up begging altogether. About 97% of GBs loans go to women and audits show a repayment rate of 98% Supported non interest loans as well Banks such as Citigroup and Deutsche Bank have also used Grameen Bank as a model
Groupe Danone
Largest French food company operates in dairy (worlds largest with Danone being common word for yogurt), bottled water(second globally), baby food(second globally) and medical nutrition(largest in Europe)
Operates in all continents except Antarctica
Most of its products aimed at higher end consumers.
What is a social business, according to Mohammed Yunus, founder of Grameen Bank and 2006 Nobel prize winner
A business designed to meet a social goal, pays no dividends. It sells products at prices that makes it self-sustaining. The owner of the company can get back the amount invested in the business over a period of time, but no profit is paid to investor in the form of dividend. Instead any profit made is reinvested in the business to finance expansion, create new products and do more good for the world.
Mission: To reduce poverty by a unique
proximity business that will provide daily health nutrition to the poor of Bangladesh.
Objectives:
- Health through nutrition at a very affordable price
- Improve living conditions of the poorest in the community by involving them in all stages of the business model
- Preserve natural resources as much as possible
- To ensure a sustainable activity while seeking profitability.
Components of business model / Marketing Strategies
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Strategic Orientation: Joint venture agreed that product and production would be as green as possible. The factory covers 7500 square feet, only one percent of Danone`s standard factories elsewhere. Equipped with latest equipment like treating of incoming and outgoing water, and solar panels to generate renewable energy. Product Policies: The plant only makes yogurt, a high nutrition value with 30% of the daily need for vitamin A, zinc and Iodine. The joint venture also acquired a Chinese technology so that containers can be converted to fertilizer. Pricing: To keep prices low and still be profitable, the plant must keep its costs low. The plant obtains all ingredients locally, mainly from small suppliers. Avoids expatriate`s compensation by training and employing local personnel Promotion: Most promotion is word of mouth Branding: The joint venture puts Grameen before Danone because the former name was already well recognized in Bangladesh. Distribution: Bangladesh`s high under employment attracted more than enough women to work part time selling yogurt thereby contributing to the objective of reducing poverty by providing employment. Maintaing yogurt quality is important because of the lack of refrigeration in hoes and negative consequences if customers become ill from eating spoiled product. So, it provided insulated bags to saleswomen and give a minimum inventory so as to reduce spoilage.
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Does Danones decision to set up a social business was motivated by wanting to be socially responsible or believing the move would help its performance ?
Already amassed many fortunes Maturing of traditional wealthier countries
Developing new markets in LDCs Benefit for Danones reputation and long-term marketing
Marketing pitfalls that might Danone face if it tries to duplicate its Bangladesh experience to serve BoP customers in another countries
Different eating habits
Hard to find support from similar banks
Competition with other social business
Advantages and disadvantages might encounter by first serving the BoP
Advantages:
Reduce costs of raw material Commitment of environmental stability Promote local community development Be able to establish a very valuable product Effectively reaching the target population.
Disadvantages:
Not yet financially successful Lack of conclusive framework.
How to improve their performance
Assess the impact of saleswomen
Consider about target populations requirements
What could be Danones next products to the BoP?
Oatmeal can be one of the best choice to add to sell to the BoP.
The Benefits of Oatmeal:
Boost immune system Stabilizes blood sugar Reduce risk of heart disease
Contain a lot of nutrition
The feasibility of providing oatmeal:
Danone foods are able to produce various kinds of food
Raw material can be obtained locally thus can cater at a low cost
Oatmeal is quick and convinient Oatmeal is easy to store It is a simple way to fight against malnutrition.
Companies that might not be suitable for social business
Whose main objective is dividends beyond amount invested i.e., profit maximization
Ex: Social media Ex: Luxury cars, Air travel
Whose products are not limited to the basic needs of the population in BoP
Unnecessary consumes like Telecom, certain utilities which does not fall under the basic requirements to low income population.
Political influences on a social business
Starts once the business appeals to the BoP for a variety of reasons like political mileage, easy fame etc.
In 2010, Bangladeshi prime minister Sheikh Hasina said that Grameen Bank had been sucking money out of people after giving loans. This made Yunus resign from the bank
Affect of Yunus resignation on Grameen Danone Joint venture:
It sends out a threatening message to the rest of civil society, NGOs, and the social businesses that vibrantly support the life of the poorest in the country
