Aug
9
Social business vs CSR: the Grameen / Danone joint venture
August 9, 2009 |
At the end of July I attended the BEI workshop on social business, funded by DFID, and listened to Dr R Sobhan discuss the Grameen / Danone social business. Dr Sobhan raised some interesting points and I’d like to just recount some of the discussion here. The joint venture was conceived to bring high nutrient food at low cost to the rural poor. Danone has the experience of creating yoghurt and Grameen has the links with many millions of rural poor Bangladeshis. The yoghurt would be produced with nutrients added and sold rurally at very low cost to benefit the rural poor children. Yunus strongly believes that social business must be non-profit and so this venture was set up in this way, with any potential profits to be re-invested. So what was the point that Dr Sobhan was making?
The yoghurt is sold for 6k for a very small tub in rural villages and for 12tk for the same tub in the smart upmarket supermarkets of Dhaka. The type of people who buy the yoghurt in Dhaka are expats like me, and those who have travelled like Dr Sobhan. It’s great, I used to buy costly imported yoghurt for my children for about 100tk a small tub and now I pay only 12tk! It is foreign style yoghurt and not to the taste of many locals who prefer the traditional Bangladeshi yoghurt.
Grameen have a marketing plan for the villages and a lifesize cartoon character travels around informing the villagers of the nutritional benefits of this yoghurt.
40% of Bangladeshis live on less than a dollar a day - thats about 68 tk, and whilst the yoghurt is cheap in comparison to imported yoghurt, it is an expensive luxury in a village where families have many children and need volume to feed them.
Dr Sobhan made an interesting point that maybe Grameen could create more benefit if they were to distribute the yoghurt free of charge to the poor children - maybe through the Brac network of primary schools - and sell the yoghurt in Dhaka at a higher price to cover this cost. This suggestion sounds more like CSR to me - making a product and selling it for a profit and then using some of the profit to give charity to the poor.
I am a great fan of social business but maybe in this case CSR would better achieve the objective.
This brings me back to an earlier blog on the bottom of the pyramid http://www.clearlyso.com/bangladesh/?p=41
and the discussion that the first need is to unlock the productive potential at the bottom of the pyramid and increase the incomes of the poor before trying to sell them allsorts of things they don’t currently have.
Samantha
Comments
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Dear Samantha,
Yes, the comment of Mr. Rehman Sobhan has obviously got some logic. I was present at the same event and I was confused with the explanation of Dr. Yunus. The poor children will never ever get support from their poor parents to consume a cup of Yogurt which costs Tk. 6.00. Its nothing for us, but rightly as you said, for the people earning less than a dollar a day, its nothing but luxury. The idea to give it free to the poor children in the rural areas is not a bad idea at all. Social business is not a charity but a business, so to make a contribution, Grameen-Danone can contribute this hygienic yogurt to the less fortunate people without any charge and even through a public awareness programme and sell it to the city inhabitants at a relatively higher cost. Even, Tk. 20 would not be that much for them. But, as the “Shakti Yogurt” is already been sold at Tk. 12, people will not accept a changed price. So, now Grameen-Danone should think about a new strategy. Their current practice is a weak example of CSR (or social responsibility I should say)and its not very well focused or planned. It didn’t content the value of CSR at its initial stage. I think they should consider the comments of Prof. Sobhan seriously and adopt a new strategy focusing more on its objective of Social Responsibility.
Thanks.
Hi Samantha,
I’m wondering about the role of the Bangladesh government. Is there a Ministry of Education that could be involved? The goverment is faced with so many social challenges, they may be interested in participating in this program.
Cheers,
Apart from the cost, which is rightly discussed as a barrier for families who struggle to afford rice let alone nicely packaged tubs of danone sweetness, I’m concerned about the nutritional, environmental and cultural messages involved.
In Bangladesh, garbage disposal is a significant problem. Trying to promote a food product which comes highly packaged - in plastic - to people who can’t afford (low packaged) dal at the local market is environmentally irresponsible.
Meanwhile trying to get people eating danone yoghurt, which is not part of the traditional diet, is seeped in problems for me. Surely this is just another case of pushing products onto the poor that they do not need, as you discuss in another post? It’s an extreme comparison, but the Nestle milk powder disaster comes to mind.
Needless to say, I’m not a fan of this parternship.
Shafiq,
You are absolutely correct that to change the pricing now would be very difficult. This is why the concept needs to be really well thought out before we start a social business. Having said that, this whole field is in its infancy and it’s really important that we study all existing examples of social business and learn from them and aim to build on those models as we move forward. Good for Grameen that they were able to bring such a huge name to Bangladesh and set up a non-profit business with them. Let’s learn from this and make the next joint venture much more successful.
Samantha
Sandra,
Thanks for your comment. In fact in Bangladesh the government does face many challenges. This is probably why the NGO sector is so strong with more than 45,000 registered NGOs and Brac as the largest NGO in the world. I think there is an argument that NGOs can fulfill some of the social needs of the country. Hopefully going forward, social business will take on much more of this role in a sustainable way.
Samantha
Lyrian,
Thanks for your comment. You clearly know a lot about Bangladesh and your insight is welcomed. I was under the impression that the packaging was intended to be biodegradeable and certainly I would hope so in a country where polybags are banned! Maybe someone from Grameen can confirm this for us.
Thanks also for picking up on the point about selling products to the poor. It seems to me that so many poverty alleviation strategies are aimed at selling products to the poor when in reality they need strategies which bring them income. If only we could put as much imagination into creating employment for the poor as we do into tempting them into consumerism.
I’m sure you are also aware that whereever you go in Bangladesh there are shops with a variety of products to buy. If the rural poor had more money then certainly new shops would open with ever more exciting products. There is no lack of innovation or ingenuity in this country. The lack is one of income for the poor and if only we could release the productive capacity of the poor then this country would steam ahead.
Maybe we should start a blog on ideas for creating employment in rural Bangladesh …..
Samantha
Interesting Discussion.
I have few points to make.
1. I would go by the opinion of first unlocking the productive potentive of rural poors before trying to sell something to them. But also cant discuount the importance of providing nutrient food to rural poor children. This simply means there is a trade-off between above mentioned two statements.
2. May be CSR works better in this case but providing anything for free comes up with its own problems. I need not to go in detail on this but why not charging only nominal amount (say 1 tk) for yoghurt from rural poors cover deficits from urban selling. But increase in price in urban / dhaka market should not be steep but phase-wise.
3. I am not much aware about sales channel for selling yoghurt in rural Bangladesh but you must have heart about ‘mid-day meal’ scheme in India. This scheme is run by the govt. and provide lunch to all children who come to schools in rural India. Till now it covered 120 million rural children under the scheme. Although, this scheme to an extent was aimed at providing nutrient food to children to save them from malnutition but the biggest benefit that came out was ‘tremendous increase in schoold participation and completion rates’.
The limited point I am trying to make is any food scheme for children best works through school channel only at least in Indian scenario and yoghurt in Bangladesh should also be sold through this channel.
4. In India, I have seen many rural producers organizations to do welfare activities for its producers apart from business operational transactions. Like in case of Amul (talking abt one of their cooperative where I stayed for 1 week to study their operations), one of their welfare activities is to gift utensils out of profit surplus apart from paying for milk to producers. Would it be a good idea to try something like selling ‘yoghurt’ at nominal price as part of welfare activities of few existing producers’ organization (like Hathay Bunano) in Bangladesh? Just a thought.
Thanks,
Madhukar
i poveri della terra devono produrre per il loro consumo ad un costo loro accessibile cercando di immettere nella filiera il maggior numero di lavoratori per una piu allargata distribuzione del reddito da lavoro. domenico
and for those of us who don’t speak Italian - here’s the google translation;
the poor of the earth must produce for their consumption at a cost of trying to open their place in the chain the highest number of workers for a wider distribution of income. domenico
[...] of our favorite examples would have to be the partnership between Grameen and Danone. Grameen Donane has been designed to provide children with many of the key nutrients that are [...]
Hi Samatha, I am writing my dissertation for my master degree in Social Business and I would love to hear your opinion about this new business configuration. Are there any email that I can comunicate directly with you?