Pots of gold
The GuardianAs a French multinational and Bangladeshi villagers join forces to help people work their way out of poverty,Liam Black finds a lesson for British business - and banks Liam Black. The Guardian
As a French multinational and Bangladeshi villagers join forces to help people work their way out of poverty, Liam Black finds a lesson for British business - and banks Liam Black.
The Grameen-Danone yoghurt factory in Bogra, Bangladesh. Photograph: Rex Features/Sipa Press.The west's beleaguered banking system could learn a thing or two from an illiterate Bangladeshi villager called Sobi Rani. She is a Grameen Lady, one of the thousands of grassroots activists who are the bedrock of the Grameen phenomenon, which, with nearly 30 businesses, is probably the largest financially viable social enterprise in the world. The cornerstone is the Grameen Bank, founded 33 years ago by Muhammad Yunus, superstar social entrepreneur and 2006 Nobel Peace Prize winner. The purpose today is the same as it ever was: to provide the landless poor of Bangladesh with real chances of working their way out of penury.
The microfinance bank, which has provided the equivalent of billions of US dollars in small loans to millions of people with no collateral, is built upon a precious resource that our ruined western banks have long ago abandoned - trust.
I would love to round up the CEOs of these banks and push them in front of Rani so that she could explain the secret of sustaining a profitable banking business that has the respect and love of its customers. She "gets" the basics of successful banking - unlike the banking executives in Britain and elsewhere who have been accused of leading their firms to the brink of extinction and their industry into contempt.
Yunus is scathing about a global banking industry now kept afloat by taxpayers' money: "They don't mind writing off a trillion dollars in a sub-prime crisis, but they still shy away from lending $100 to a poor woman, despite the fact that such loans have a near 100% repayment record."
Grameen's latest joint venture in social business is with Danone, the French multinational company. The idea for a food-based enterprise was hatched when Yunus met Danone chief executive Franck Riboud in Paris in October 2005. Although the $1m Danone put up to build a factory was small beer, both parties have a lot at stake in terms of reputation.
When French football star Zinedine Zidane opened the factory a year later, Grameen Danone Foods (GDF) had an ambitious goal: to manufacture a micro-nutrient "power yoghurt" called Shokti Doi in a purpose-built, state-of-the art factory - solar-powered, of course - that provided jobs for local unemployed people. Sales were to be driven by the bank's foot soldiers, the Grameen Ladies, such as Rani, who would take the yoghurt door to door in the villages and make a little money on each pot they sold.
As always with any business venture, social or otherwise, reality didn't match the originators' glorious vision. A sharp rise in the price of milk pushed the retail price up well beyond the pockets of poor villagers. The Grameen Ladies had little incentive and sales slumped. Rani left her uniform hanging on the door. And, as if that wasn't enough, the target customers, the undernourished children of the villages around Bogra, didn't like the taste of the yoghurt.
Danone threw some of the best people from its Paris laboratories and marketing departments at the problems. A new managing director - Wahidum Nabi, who had many years of experience in marketing and sales, much of it with ICI in Britain - was recruited to improve the business. The recipe was changed. A marketing drive was started in Dhaka, the capital, to sell the yoghurt at a higher price so as to allow Rani to charge less in the villages.
Because yoghurt is seen in Bangladesh as more like an ice-lolly snack than a dessert, Shokti Doi is now also on sale at a few of the bigger town centre stores in Bogra and at corner retail outlets, alongside cigarettes, crisps and Coke.
Sales are now building and the no-nonsense Nabi is confident that the business will break even this year and move into profit in the first quarter of 2010. The fast-moving consumer goods business is tough anywhere, but ensuring that the "cold chain" between factory and customer stays unbroken is particularly tricky in a country with irregular electricity supply and 40C temperatures in the summer. So plans to open 50 factories over the coming years have been scaled back - "to maybe a dozen," says Nabi, "if we get this one right."
When I visit the villages, I'm surrounded by a crowd of curious children, farm labourers and women with babies on their hips. I ask the children if they like the yoghurt and the response is enthusiastic. Shokti Doi is marketed more on taste than nutritional value. "Eat it because it tastes good," Rani tells her customers, "not because it's medicine!"
A few weeks ago, a yoghurty drink was introduced alongside the original Shokti Doi product and new flavours are planned once market share increases.
Although the company is owned 50/50, it is obvious that Danone is in the driving seat and won't let this social business experiment fail. The belief that Shakti Doi can become a national product, as visible in stores all over Bangladesh as the products of Nestlé and Unilever, is strongly held by everyone I meet, including the buyers at supermarkets who have no emotional investment in Grameen.
A recently launched TV advertising and press campaign led by Yunus will no doubt increase sales volume. Time will tell if this means increased margin and profit.
Cross-subsidy model
As a social business in the Yunus style, GDF does not have investors banging on the door for quick profits, so the business will get more time to establish itself than a private start-up would be allowed. This is just as well, given the complexity of the cross-subsidy model and the huge job of education that's needed to create demand. How do you communicate a difficult message to illiterate consumers in Bangladesh's villages, and what do they make of the product's quality?
Danone Communities has been created to invent business models that benefit the most disadvantaged populations, and its investment fund helps finance these new ventures. It is headed by Paris-based Emmanuel Marchant, who says that social business is not a "peripheral corporate social responsibilty" (CSR) project for the French conglomerate, but simply a case of following through on a commitment to get high-quality products to everyone. "This is not about charity for us. This is about business and building our brand," he says. He believes that Danone was taught something about innovation and getting close to customers through its involvement with Grameen. "The lessons we learnt when we had to get the price down, without compromising quality, and improve taste, are valuable across our business."
Undeterred by the recession, Danone recently announced new partnerships with social entrepreneurs in Senegal and Cambodia.
It's early days, so there is no evidence yet that a daily intake of Shokti Doi is having the desired effects on the children of the poor. But a long-term study of 100,000 children by Johns Hopkins University in the US is now exploring health benefits.
There is clearly a culture clash between the highly educated and experienced Danone professionals and the more laid-back and less skilled Bangladeshis of Grameen. I imagine there is a lot of anxious biting of lips in Paris as things don't move as quickly as the professionals expect. But these two disparate organisations are together pioneering something potentially important in the way business can achieve financial and social goals.
Public consciousness
Social entrepreneurs in the UK would do well to take a lead from Yunus's ambition and willingness to take risks to achieve Grameen's social objectives. Too many social enterprises here are small and of a niche kind that rarely stirs the public consciousness. Collaboration with a private-sector business that has the capacity and personnel to increase the scale of social innovations and have a big impact is rare in this country. But how many multinationals - especially in the current slump - will take social business as seriously as Danone appears to, and as Yunus believes they should?
• Liam Black is co-founder of Wavelength, a company that brings together the private sector and social entrepreneurs around the world. Details of Inside Grameen 2009 are at thesamewavelength.com
Link: http://www.guardian.co.uk/society/2009/feb/18/liam-black-bangladesh
