Self Sustaining Social Enterprise: A Promising Model

Social innovation as a strategy to reach low income groups of the society has vast untapped potential. This potential which, on one hand reaches out to a billion dollar market, on the other hand require a very different approach in order to be successful. As the reading correctly points out that, products targeted towards the bottom of the economic pyramid should be based on the following four characteristics: 1) Affordability 2) Acceptability 3) Availability and 4) Awareness (Source: Strategic Innovation at the Base of the Pyramid, Anderson and Markides, MIT Sloan Management Review, July 2010).

This reminded me of the Sehat First (Read: Health First) Project started in Pakistan by Unilever. Sehat First is an initiative of Unilever Pakistan to deliver basic health and pharmaceutical services across Pakistan. In the beginning, a network of 500 health centers and retail outlets will be setup under this project to provide affordable healthcare which is easily available through this extensive network. The project is being undertaken in collaboration with the Department of Health so that an acceptable service to the customers can be provided. Volunteers from the customer & development department in Unilever Pakistan have been working on this project since January 2008, in developing the:

1. Retail outlets
2. Advising & assisting the set-up of retail outlets
3. Inventory and store management
4. Selecting and training retail entrepreneurs
5. Advise on sales generation in rural retailing
6. Strategic input

Project link: http://www.unileverpakistan.com.pk/sustainability/casestudies/economic-development/sehat-first.aspx

This would facilitate the awareness and availability of this service to the remotely located low income population of Pakistan. The important thing to note here is each shop is established with the aim to generate profit. So this can be termed as a social cause targeted, with going the non-profit route. Projects like these make one thing that,

1. Can projects like these continue to be profitable in the long run?
2. Will the aim change or deviate from a purely social one if the profit factor is retained?
3. Is it only large companies like Unilever that can risk such kind of ventures?
4. Is for-profit social business to risky of an endeavor? What are the chances for success?

The Power of Yogurt

While focusing on venture development and growth, this week’s readings further explored the idea of providing social solutions for bottom of the pyramid markets without “going the nonprofit route.” In this post, I would like to highlight one such company that fits this model. Grameen-Danone Foods was launched in 2006 as a social business enterprise union of the international food giant Danon and the Bangladeshi non-profit Grameen, which is primarily known for its work in microfinance. Muhammad Yunus, the founder of Grameen, proposed a joint venture between Grameen and Danone with the objective of supplying nutritious food to poor Bangladeshi children. According to UNICEF’s 2008 State of the World’s Children report, 30% of all Bangladeshis and 56% of Bangladeshi children under the age of 5 suffer from moderate to severe malnutrition. To address this problem, Grameen Danone Foods Ltd. produces a yogurt called “shakti doi” (power yogurt), which is made from pure full cream milk that contains protein, vitamins, iron, calcium, zinc, and other micronutrients. This yogurt is primarily intended for children, but it can be eaten by adults as well. One of the most exciting aspects of this yogurt is its affordability. The price of each 80 gram cup of yogurt is 5 taka or 5 cents. Factories have been set up to produce this “power yogurt” all over Bangladesh, employing large numbers of people, and plans to expand this model to other countries are in the works. The Grameen-Danone Foods model is currently a “no loss, no dividend” one, and the company is confident that investment will remain strong. Because the product is suitable in much of South Asia and the model itself can be adapted all around the world, shareholders continue to invest although they are not currently being paid dividends. The framework for strategic innovation at the base of the pyramid, as discussed in the MIT Sloan Management Review article, stresses affordability, acceptability, availability, and awareness. I believe that Grameen-Danone’s success stems from its business strategy that focuses on these very areas. “Yogurt” for thought: Will paying shareholders dividends change the culture of the organization? If so, in what ways?