Case studies of inclusive businesses in Asia and Latin America

Inclusive Business Workshop

Tokyo, Feb-Mar 2013

Inclusive business in Asia and Latin America by engagement model

SECTOR
SUPPLIER

COMPANY
Amul
Calypso Foods Colineal FabIndia Interfaceflor ITC e-Choupal Jaipur Rugs Mundo Verde Natura Nestle Pronaca Sabmiller Starbucks

COUNTRY
India
India Equador India India India India Brazil Brazil Pakistan Equador India Latin America India China India India India

SECTOR
DISTRIBUTOR
CONSUMER

COMPANY
Holcim Apasco
Nestle Ate Voce Amanco Aravind Eye Care Caixa Economica Cases Bahia Cemex Fincomun ING Vysya Bank LifeSpring Hospitals Proctor & Gamble Reuters Market Light Ruralfone Sunlabob Unilever Annapurna

COUNTRY
Mexico
Brazil Mexico India Brazil Brazil Mexico Mexico India India Venezuela India Brazil Laos India

EMPLOYEE

Aravind Eye Care Guangsha Construction LabourNet LifeSpring Hospitals Teamlease

Unilever Lifebuoy
Union Fenosa

India
Colombia

Source: IDB Inclusive Business Forum, 2010

Inclusive business in Asia and Latin America by sector

SECTOR
AGRIBUSINESS

COMPANY
Amanco Amul ITC

COUNTRY
Mexico India India Mexico China Mexico Brazil Venezuela India India Brazil Mexico India India Brazil Pakistan Equador India Latin Am

SECTOR
HEALTHCARE

COMPANY
Aravind Eye Care LifeSpring Hospitals

COUNTRY
India India Equador India India India India Brazil Brazil Brazil Nicaragua

CONSTRUCTION

CEMEX Mejora Tu Calle Guangsha Construction Holcim Apasco

HOME FURNISHINGS

Colineal Fabindia InterfaceFlor Jaipur Rugs

CONSUMER PRODUCTS

Natura Procter & Gamble Unilever Annapurna Unilever Lifebuoy

ICT

Reuters Ruralfone

FINANCIAL SERVICES

Caixa Economica Fincomun ING

RETAIL

Casas Bahia Mundo Verde Wal-Mart

FOOD AND BEVERAGES

Calypso Foods Nestle Brazil Nestle Pakistan Pronaca SABMiller Starbucks

STAFFING

LabourNet
TeamLease

India
India Laos Nicaragua Columbia

UTILITIES

Sunlabob Energy Tecnosol Union Fenosa

Source: IDB Inclusive Business Forum, 2010

CONSUMER: AMANCO (MEXICO)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?
Consumer basic product or service Irrigation systems and equipment Many small-scale farmers are located near water sources, but cannot afford irrigation equipment and thus struggle to achieve high levels of productivity Amanco standardized basic, small-scale irrigation systems to make them more affordable Amanco offers basic, small-scale systems at wholesale prices to social entrepreneurs who can then pass them on to farmers at a lower price; social entrepreneurs also help farmers access microloans to purchase equipment Small-scale farmers using Amanco irrigation systems have been able to increase their productivity up to 22%, while reducing labor costs by up to 33% and saving significant quantities of water Businesses can use social entrepreneurs to aggregate demand, as well as act as sales agents and distributors to BoP consumers Product demonstrations may be necessary to convince BoP customers to make larger investments

What was the result?

What can we learn from Amancos experience?

Source: Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008.

SUPPLIER: AMUL (INDIA)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Supplier BoP-owned cooperative Milk and other dairy products, including yoghurt, buttermilk, cheese, ice-cream, soups, and beverages There was no effective and efficient way to collect milk from the thousands of small-scale dairy farmers in rural India An extensive dairy cooperative structure to collect milk, including village-level producer societies, district-level dairy unions, and an overall cooperative body Individual farmers did not become large integrated dairies; rather, the number of farmers within the cooperative structure grew Generates annual revenues of over $1.5 billion Produces 2.3 billion liters per year Sources from 2.79 million dairy farmers Cooperative structures utilizing BoP producers can be reliable and scalable sources of inputs, but require upfront investments in network infrastructure BoP business models may want to utilize soft funding when available; Amul used government grants to develop extensive collection infrastructure

What was the result?

What can we learn from Amuls experience?

Source: www.amul.com, Emerging Markets, Emerging Models, Monitor Group, March 2009.

EMPLOYEE: ARAVIND EYE CARE (INDIA)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Employee deskilling Consumer basic product or service Low-cost eye screening and surgery Lack of high skilled resources, such as doctors, made eye screening and surgery expensive High cost of eye screening and surgery limited the potential market, excluding the BoP as a possible consumer End-to-end business model that divided operations into simple, discrete, assembly-line like tasks using less-skilled professionals Division of labor allowed for greater utilization of doctors, while still providing low-cost, high-quality, high patient throughput Aravind grew from one hospital with 11 beds in1976 to seven hospitals with 3,590 beds $2.5 million patients screened per year Over 300,000 eye surgeries per year Profitable, even though two thirds of surgeries are to the BoP Division of operations into simple, discrete tasks can optimize scarce resources and allow for high-quality, high-volume services Longer investment horizons may be required to achieve scale; Aravind took a decade to perfect operating model

What was the result?

What can we learn from Aravinds experience?

Source: www.aravind.org, Emerging Markets, Emerging Models, Monitor Group, March 2009.

CONSUMER: CAIXA ECONOMICA (BRAZIL)

What is the BoP Model? What is the product?
Consumer new or customized product Banking services (opening of checking and savings accounts, debit card transactions) Other financial services such as payments, credit cards, etc The poor are often unable to access conventional bank branches branch penetration averages only two branches per 100,000 people in the poorest country quintile Agent banking: delivering financial services through retail agents including post offices, local shops, and lottery kiosks, already prevalent in previously unbanked communities Households in all of Brazils more than 5,600 municipalities can access banking services including deposits, payments, transfers and, in some cases, credit, through 95,000 non-bank agents - between 2002 and 2004, more than 9 million bank accounts were added to the existing 45 million Of clients who use Caixa Economicas correspondent banking services, 88% earn below the national poverty line Sharing point-of-sale (POS) terminals with retailers allows for significant reduction of the fixed costs associated with building service outlets in remote areas

What was the problem or opportunity? What was the solution?

What was the result?

What can we learn from Caixa Economicas experience?

Source: Expanding Bank Outreach through Retail Partnerships, World Bank, 2006.

SUPPLIER: CALYPSO FOODS (INDIA)

Supplier direct purchase Specialty fruits and vegetables, including gherkins, pineapples, mangoes, and jalapenos Cost of production is high due to need for leasing or purchase of land, hiring of workers, and management of production Contract production of fruits and vegetables with 5,000 small-scale farmers organized into clusters of several hundred farmers Calypso provides initial inputs (e.g. seeds, fertilizer, pesticide) to farmers on affordable credit as well as technical assistance Farmers paid every two weeks for produce

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

What was the result?

Calypsos cost of production are 30-40% lower using contract production with small-scale farmers Farmers incomes rise by an average of 125% Contract production agreements can be used to overcome barriers to initial investment by BoP suppliers Businesses engaging in contract production agreements with BoP suppliers should carefully consider downside risk of fluctuations in market prices and demand

What can we learn from Calypso Foods experience?

Source: www.calypsofoods.net, Emerging Markets, Emerging Models, Monitor Group, March 2009

CONSUMER: CASAS BAHIA (BRAZIL)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?
Consumer purchase financing Diversified household goods, including appliances and electronics BoP consumers have high demand, but insufficient income to purchase household appliances and electronics Casas Bahia created passbooks that allow BoP customers to make small installment payments for merchandise Credit analysts at each store evaluate credit requests and build longterm relationships with customers Credit analysis system also evaluates existing clients for potential new purchases and facilitates cross-selling Casas Bahia is the largest retail chain in Brazil, with annual revenue of 4.2 billion real, 330 stores, 10 million customers, and 20,000 employees 77% of clients are repeat purchasers Low default rate for sector of 8.5% Businesses can tap the purchasing power of the BoP by offering microcredit for product purchases Tracking of client information (e.g. payment histories) can be utilized to strategically cross-sell and increase revenue

What was the result?

What can we learn from Casas Bahias experience?

Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009

CONSUMER: CEMEX MEJORA TU CALLE (MEXICO)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

Consumer purchase financing Cement Low-income neighborhoods have difficulty paving streets as municipalities are typically short of funds Residents receive individual microloans and then pool resources to finance half the cost of street pavement for the neighborhood, with the municipality contributing the other half of the cost The initial phase of the program is being implemented in 12 cities, with 35,000 families expected to benefit from microloans The second phase will extend to a total of 60 cities Public-private partnerships can be effectively incorporated into BoP business models

What was the result?

What can we learn from CEMEXs experience?

Source: www.iadb.org, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009

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SUPPLIER: COLINEAL (ECUADOR)

What is the BoP Model? What is the product? What was the problem or opportunity?
Supplier direct purchase Household furniture There are 50,000 small woodworkers in Ecuador whose businesses are characterized by low profitability and obsolete or home-made machinery Small woodworkers present an opportunity for low-cost outsourcing of manufacturing, but require technical assistance Colineal developed a program to source furniture from woodworkers in Azuay and San Antonio de Ibarra, where there was a high concentration of skilled woodworkers Colineal provides clearly defined specifications, technical assistance and, in some cases workshop space, to improve quality and reduce manufacturing costs

What was the solution?

What was the result?

Small producers have benefited from more secure markets, better prices, and access to knowledge and innovation Products reach market through 17 megastores and express shops owned by Colineal
Working with fragmented, small-scale suppliers is facilitated when suppliers are located in the same geographic area Upfront investments, especially in manufacturing technology, may be required to help small-scale suppliers become more productive

What can we learn from Colineals experience?

Source: Inclusive Business: Profitable business for successful development, SNV-WBCSD, March 2008.

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SUPPLIER: FABINDIA (INDIA)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Supplier BoP-owned cooperative Retail clothing and home decor Difficult to engage unorganized craft artisans productively as many change jobs frequently in search of a better deal and have difficulty honoring agreements Fabindia set-up 17 Community Owned Companies that coordinate supply from 13,000 individual artisans who make products according to Fabindia specifications Fabindia co-owns COCs with supplier artisans themselves; ownership provides incentives for artisans to join and honor commitments with COCs Fabindia is Indias largest private platform for products made from traditional techniques Fabindia grew from 65 in 2007 to 95 stores in 2009 Cooperatives can be an effective way to organize and aggregate individual BoP suppliers Co-ownership structure can help create long-term stable relationships with individual BoP suppliers

What was the result?

What can we learn from Fabindias experience?

Source: www.fabindia.com, Emerging Markets, Emerging Models, Monitor Group, March 2009.

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CONSUMER: FINCOMUN (MEXICO)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Consumer new or customized product Microcredit loans Fincomun wanted to grow its client base, but lacked information about the payment patterns of its potential clients Fincomun created a partnership with Grupo Bimbo and sent its loan agents on delivery runs with Bimbo supply trucks Fincomun gained access to potential customers, as well as information about their payment patterns Bimbo customers learn about Fincomun products and can sign up for further consultations Within two years of the partnership, 20% of Fincomuns business originated through Bimbo As its clients gained access to microcredit, Bimbo reduced its amount of bad debt and its customers loan payback period Mutually beneficial strategic partnerships can be developed around BoP consumers and products

What was the result?

What can we learn from Fincomuns experience?

Source: Emerging Markets, Emerging Models, Monitor Group, March 2009.

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EMPLOYEE: GUANGSHA CONSTRUCTION (CHINA)

What is the BoP Model? What is the product?
Employee demand-led training Construction services

What was the problem or opportunity?

What was the solution?

Guangshas constructions were poorly trained, which led to a number of costly on-site accidents
Guangsha created free-tuition vocational schools at each construction site of more than 50,000 meters Semi-permanent day laborers are required to pass four training exams in order to get official GuangSha contracts Training certificates are only valid for one year and must be renewed annually or at the start of each project, whichever is sooner In 2005, Guangsha had net profits of $19 million and an output value of $670.7 million 90% of students receive training certificate on their first attempt Providing training for BoP employees can reduce costs, mitigate risks, and improve employee retention Training programs for BoP employees often require large upfront investments (e.g. Guangsha invested $3.65 billion to start schools)

What was the result?

What can we learn from Guangshas experience?

Source: Emerging Markets, Emerging Models, Monitor Group, March 2009.

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DISTRIBUTOR: HOLCIM APASCO (MEXICO)

What is the BoP Model?
What is the product? What was the problem or opportunity?
Consumer last mile to BoP Cement and other essential home building material Housing shortage is high and rising, especially among the BoP, thus stimulating demand for construction materials Points of sale are currently far from BoP households, requiring 2-3 intermediary distributors to reach consumers BoP households lack technical construction knowledge Creation of Mi Casa building material depots which are located closer to BoP households Holcim reduced prices at Mi Casa depots by removing distribution intermediaries Architecture and civil engineering students placed in Mi Casa depots provide BoP consumers with practical advice There are 120 Mi Casa centers around the country Mi Casa has supported the construction or improvement of 400,000 homes Close proximity of distribution outlets to BoP consumers can both increase sales and reduce costs by eliminating intermediary distributors Combination of technical knowledge and high quality products are attractive to BoP consumers

What was the solution?

What was the result?

What can we learn from Holcim Apascos experience?

Source: www.wbcsd.org , The Inclusive Business Challenge Presentation, WBCSD, December 2009.

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CONSUMER: ING VYSYA BANK (INDIA)

What is the BoP Model? What is the product or opportunity?
Consumer new or customized service Basic banking services, including wage and pension disbursement Rural BoP households have limited or no access to organized banking services BoP households must go to post offices, which are few and often far away, present documents, take fingerprints, and fill out paperwork to receive wage and pension disbursements ING Vysya employees identify villagers with the help of government officials and enroll them in INGs banking system Enrolled villagers receive a personalized smart card that carries information from personal records ING Vysya employees visit villages on specific days and disburse funds when villagers present smart cards 55,000 people received smart cards in first pilot project ING hopes to expand the function of the smart card to include micro savings, investment, and insurance Innovative technologies (e.g. biometric cards) can overcome challenging characteristics that make it difficult to reach the BoP as consumers (e.g. illiteracy) Businesses have opportunity to use technology to distribute multiple products (e.g. disbursements, savings, insurance) to the BoP
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What was the problem or opportunity?

What was the solution?

What was the result?

What can we learn from ING Vysyas experience?

Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.

SUPPLIER: INTERFACEFLOR (INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?
Supplier third party aggregator Flooring of all types, including tile and carpet InterfaceFLOR did not have products to satisfy its customers demand for socially-conscious products InterfaceFLOR partnered with the Indian social enterprise Industree to develop and bring to market a new product line called FairWorks Industree works with skilled artisans in India to produce flooring tiles with traditional textile designs made from locally available materials Industree aggregates and sells products to InterfaceFlor The first product in the FairWorks line, Just, was launched in 2008 Over 150 families in three villages are involved in FairWorks and many artisans have tripled their income over a three year period Partnerships with organizations already working with the BoP can be an effective way to begin BoP engagement Traditional designs from BoP suppliers can be modified to appeal to consumers in developed countries

What was the result?

What can we learn from Reuters experience?

Source: www.interfaceflor.eu, The Inclusive Business Challenge Presentation, WBCSD, December 2009.

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SUPPLIER: ITC E-CHOUPAL (INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity?
Supplier direct purchase Soybean, wheat, rice, pulses, and other agricultural commodities Fragmented farms, weak infrastructure, and the involvement of numerous middlemen made it costly to source agricultural products from rural farmers Poor information caused rural farmers to accept low prices from middlemen, who could then resell at a high margin Village level e-Choupal internet kiosks provide information on crop prices, weather forecasts, and farming techniques, improving production and effectively reducing the power of middlemen ITC purchases produce from farmers at central collection hubs Rural farmers receive higher prices for crops and ITC pays less for crops as mark-up from middlemen is eliminated Four million farmers access e-choupal services through a network of 6,500 internet kiosks and 180 collection hubs Direct purchasing from the BoP can reduce input costs by eliminating costly intermediate transactions An alternative to centrally organizing suppliers into cooperatives is to give producers good information and allow them to self-organize

What was the solution?

What was the result?

What can we learn from ITC E-Choupals experience?

Source: www.itcportal.com , www.echoupal.com , Emerging Markets, Emerging Models, Monitor

Group, March 2009.

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SUPPLIER: JAIPUR RUGS (INDIA)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Supplier direct purchase Traditional artisan rugs Jaipur Rugs wanted to scale production quickly without having to make large upfront investment and management costs Production processes are contracted out to local artisans, thus making labor and raw material costs variable Purchases from BoP suppliers also reduces capital equipment needed for washing, dyeing, etc Lean management staff structure oversees contractors Jaipur Rugs is the largest manufacturer and exporter of Indian handknotted rugs, with fiscal year revenue of $21.2 million Compound annual growth rate of 38% from 2005 2008 40,000 contract BoP employees (e.g. weavers) Use of BoP suppliers enables businesses to shift fixed costs to variable costs and thus improve profitability Technological innovations (e.g. rug construction maps) can facilitate greater utilization of the BoP as suppliers

What was the result?

What can we learn from Jaipur Rugs experience?

Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.

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EMPLOYEE: LABOURNET (INDIA)

Employee outsourcing Contract-basis blue collar workers from the unorganized sector Demand and supply of unskilled workers exist in India, but businesses have difficulty identifying appropriate unskilled workers and vice versa LabourNet registers and collects data on businesses, as well as workers, foremen, and contractors Businesses notify LabourNet of unskilled worker requirements and LabourNet announces openings to its registered workers LabourNet provides basic training, as well as accident and health insurance for its registered workers Over 6,000 unskilled workers have registered with LabourNet Half of all business inquiries result in immediate referrals to crew that meet criteria for location, skill, and availability BoP workers are interested in entering organized employment supply chains, provided appropriate incentives are in place (e.g. stability of work, insurance)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

What was the result?

What can we learn from LabourNets experience?

Source: www.labournet.in, Emerging Markets, Emerging Models, Monitor Group, March 2009.

20

CONSUMER: LIFESPRING HOSPITALS (INDIA)

Consumer basic product or service Employees deskilling tasks Hospital focusing on maternal and child health, particularly labor and delivery BoP households have high demand for quality hospital services, but existing hospital prices are out of reach No frills hospital with narrow focus on child labor and delivery Reduced costs by standardizing procedures, cutting unnecessary expenses (e.g. canteen), outsourcing pharmacy and lab, renting property, and increasing doctor and equipment utilization LifeSpring averages five times the number of deliveries compared to private clinics and the cost of a doctor per patient is one fourth the cost in a private clinic LifeSpring has a 43% market share in its flagship hospital in the outskirts of Hyderabad Delivered over 5,500 healthy babies A narrowly focused business model (e.g. gynecology and obstetrics) can reduce costs and improve asset utilization Within the BoP market, it is critical to have a targeted marketing approach (e.g. LifeSpring focuses on husbands and mothers-in-law)
21

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

What was the result?

What can we learn from LifeSprings experience?

Source: www.lifespring.in, Emerging Markets, Emerging Models, Monitor Group, March 2009.

SUPPLIER: MUNDO VERDE (BRAZIL)

What is the BoP Model? What is the product? What was the problem or opportunity?
Supplier direct purchase Health and wellness products, including food Mundo Verdes customers want a diverse selection of health conscious products and respond to products that are marketed as locally and sustainably produced, but it is difficult to work with many small informal suppliers Mundo Verde actively built relationships with small suppliers, including many small and micro enterprises that started in the informal sector; franchises can source 30% of products locally Mundo Verde requires suppliers to incorporate with the national small business association and facilitates purchases by allowing supplier to bring products to a central distribution hub Mundo Verde has 127 stores serving 45,000 clients daily 1,200 current suppliers with approximately three new suppliers added each day Companies can enhance the sustainability of their BoP suppliers by encouraging them to formalize as businesses Internal regulations (e.g. allowing 30% of products to be sourced locally) can be used to encourage businesses to engage more with local BoP suppliers

What was the solution?

What was the result?

What can we learn from Mundo Verdes experience?

Source: Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008

22

SUPPLIER: NATURA (BRAZIL)

What is the BoP Model?
What is the product? What was the problem or opportunity? What was the solution?
Supplier direct purchase Skin care, cosmetics, perfume, and hair care products Natura did not have a product line that met demand for sustainable and environmentally-friendly products from Brazil Natura wanted to improve brand value and growth Source inputs from low-income communities in the Amazon, ensuring that materials are extracted or planted sustainably Develop a Relationship Quality System to assess Naturas links with the communities it sources from Create a new line of products (EKOS) marketed for its use of sustainable and environmentally-friendly materials The EKOS line accounts for 10% of Naturas sales Natura has 56 natural asset supply agreements in Latin America, 19 of which are with traditional communities and local providers of raw materials Use of BoP suppliers can contribute to new product development and increased brand value BoP suppliers may need initial support from companies to become part of the supply chain (e.g. Natura acted as a guarantor for micro-medium loans)

What was the result?

What can we learn from Naturas experience?

Source: www.natura.net, The Inclusive Business Challenge Presentation, WBCSD, December 2009.

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DISTRIBUTOR: NESTL AT VOC (BRAZIL)

What is the BoP Model? What is the product?
Distributor last mile to BoP Distributor increasing points of sale Household packaged food products Nestl could not reach BoP consumers because its typical distribution model using a full truck would not work in favelas with narrow streets Nestl identified a network of distributors and micro-distributors who would buy products and assemble assortments appropriate for distribution to micro-retailers in favelas Distributors also assembled pre-packaged kits for direct sales to families in their homes, using trusted direct sales agents from local communities Nestl increased sales among BoP consumers in favelas Nestl created jobs by recruiting informal workers to become direct sales agents and micro-distributors BoP can be effective distributor of products to Hiring local staff (e.g. direct sales agents) with relationships of trust within the community can increase direct sales to BoP consumers

What was the problem or opportunity?

What was the solution?

What was the result?

What can we learn from Nestls experience?

Source: Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008.

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SUPPLIER: NESTL (PAKISTAN)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

Supplier direct purchase Milk and dairy products Nestle needed a reliable supply of milk, but large dairy farmers were expensive due to their significant bargaining power Nestle set up its own supply chain by setting up Village Chilling centers where local individual farmers could deposit milk Nestle hires a Village Milk Collection Agent who is responsible for overseeing milk collection, quality assurance, cash payment to farmers, and organizes extension services (e.g. veterinary) Nestle collects milk directly from 160,000 farmers, taking in 50 million liters per year and earning a profit of $20.7 million on revenues of $456 million Organizing BoP suppliers can be an effective way of building a low cost and reliable supply chain, but initial set-up of infrastructure is time and cost-intensive Finding high quality staff who can interact effectively with individual BoP suppliers (e.g. VMC agent) is critical to the success of supply chains incorporating the BoP

What was the result?

What can we learn from Nestles experience?

Source: www.nestle.pk, Emerging Markets, Emerging Models, Monitor Group, March 2009.

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CONSUMER: PROCTER & GAMBLE (VENEZUELA)

What is the BoP Model? What is the product? What was the problem or opportunity?
Consumer small unit size product Consumer products such as shampoo, detergent, and diapers P&G wanted to increase sales to BoP consumers, but knowledge of consumption habits and distribution channels among BoP was limited P&G products were often too expensive and inaccessible to BoP consumers P&G began selling shampoo, detergent, and diapers in bulk to buyers clubs that could then reduce the unit price sold to BoP consumers in smaller quantities P&G complimented sales with community activities, such as training of hair stylists, which further increased revenues Sales and affordability of shampoo, detergent, and diapers increased, leading to the creation of beauty salons, laundry facilities, and child care services Bulk sales to an intermediary is a strategy to improve product affordability for the BoP BoP businesses can have second order social impact by creating jobs related to BoP products (e.g. beauty salons)

What was the solution?

What was the result?

What can we learn from P&Gs experience?

Source: Corporate Social Responsibility in Latin America: Responsible Solutions to Business Problems, IDB, December 2005.

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SUPPLIER: PRONACA (ECUADOR)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

Supplier direct purchase Wide variety of household processed foods Pronaca faced challenges in terms of the stability and price of maize, a key input in its supply chain Pronaca integrated local small-scale maize producers into the companys supply chain Pronaca offered farmers training, access to credit, and new technology to increase productivity and develop an additional crop rotation Pilot has grown from 80 small maize producers to 200, with plans to increase to 650 Productivity increased by 20%, which has raised farmer income from $0.63 to $2 per capita per day 234 new jobs created Integrating local, small-scale suppliers can decrease production costs and improve stability of critical inputs Working with small-scale producers at the BoP requires capacitybuilding in addition to financial assistance

What was the result?

What can we learn from Pronacas experience?

Source: www.pronaca.com, The Inclusive Business Challenge Presentation, WBCSD, December 2009.

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CONSUMER: REUTERS MARKET LIGHT (INDIA)

What is the BoP Model?
What is the product? What was the problem or opportunity?
Consumer new or customized product Fee-based mobile service providing Indian farmers information about commodity price, crop, and weather data via SMS Nearly two-thirds of Indias population depends on agriculture for a living, but poor irrigation and distant markets mean that farmers are vulnerable to shifts in prices or weather conditions

What was the solution?

Reuters Market Light provides farmers with weather reports over a 50mile radius and local crop prices within a 5-hour journey via SMS and in a subscribers local language Reuters Market Light develops its own content using hundreds of fulltime professionals, covering news and data on over 250 crops, 1,000 markets, and 2,000 weather locations in 11 states
In two years, Reuters sold 300,000 quarterly subscriptions to nearly 135,000 farmers in over 15,000 villages Some farmers have increased revenue by $8,000 using the service which costs only $5 per quarter BoP will pay for high-quality information and content, especially when it directly relates to their livelihood Products distributed through platforms with deep penetration (e.g. mobile phones) can be quickly rolled-out and adopted by the BoP

What was the result?

What can we learn from Reuters experience?

Source: www.reuters.com, The Inclusive Business Challenge Presentation, WBCSD,December 2009.

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CONSUMER: RURALFONE (BRAZIL)

What is the BoP Model? What is the product?
Consumer new or customized product Distributor increasing points of sale Telecommunications services Consumers were charged high monthly rates, even though they rarely called people outside of their village Consumers did not always purchase refill cards immediately after finishing another card Ruralfone launched a tailored product consisting of unlimited voice minutes at a low monthly fee for calls within ones village Ruralfone hired local residents as sales coordinators and delivery personnel; customers call sales coordinators when they need a new card and sales coordinators send a delivery person on motorbike to deliver the card 2,600 subscribers have signed up in area of Quixada with EBITDA greater than 50% Ruralfones subscriber acquisition cost is only $5 as compared to $60 for other Brazilian operators Although most BoP business models are high volume, low margin, it is possible to have successful low volume, high margin businesses by carefully tailoring products to target markets When selling to the BoP in rural areas, customers may respond well to relationship-oriented sales and customer services
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What was the problem or opportunity?

What was the solution?

What was the result?

What can we learn from Ruralfones experience?

Source: Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008.

SUPPLIER: SABMILLER (INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity?
Supplier third party aggregator Beer By sourcing barley from only large scale commercial farmers or large intermediaries, SABMiller faces greater pricing risk, availability risk, and costs from intermediate transactions Small-scale farmers were uninterested in producing barley because they were familiar with feed-grade barley that could not command a good price In partnership with Cargill, SABMiller is supporting the development of a high-quality local barley malt industry by offering small-scale farmers certified seeds and agricultural skills training Hybrid model where SABMiller may purchase from a third party contractor, but still provides inputs and supervision support directly to farmers Initiated in 2005, participating farmers increased from 1,574 in 20052006 to 6,024 in 2007-2008 Quality and consistency of barley has improved, allowing SABMiller to increase brewing efficiencies Incorporating large numbers of BoP suppliers into a supply chain can help reduce price risk, availability risk, as well as costs Education and outreach to agricultural BoP suppliers is important, especially when promoting adoption of new crops
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What was the solution?

What was the result?

What can we learn from SABMillers experience?

Source: www.sabmiller.com, Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008.

SUPPLIER: STARBUCKS (LATIN AMERICA)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?
Supplier direct purchase Coffee Consumers demand coffee with various combinations of the following characteristics: high quality, sustainable production, fair trade, traceability, and improved social conditions in farming communities. Starbucks created the C.A.F.E. practices, which guide farmers to produce higher-quality, environmentally friendly, sustainable coffee Conservation International and other agencies help farmers implement C.A.F.E. practices Starbucks commits to purchase coffee from farmers who have a sufficiently high C.A.F.E. score By fiscal year 2007, Starbucks made 65% of its purchases from C.A.F.E. approved suppliers and hopes to increase that percentage to 80% by 2013 Even without greater interaction, a commitment to purchase can serve as a powerful way to engage BoP suppliers Consumers in developed countries are increasingly interested in products that engage the BoP in sustainable ways

What was the result?

What can we learn from Starbucks experience?

Source: Supporting Entrepreneurship at the Base of the Pyramid through Business Linkages, IFC, Harvard Kennedy School, International Business Leaders Forum, June 2008

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CONSUMER: SUNLABOB RENEWABLE ENERGY (LAOS)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

Consumer pay-per-use service Consumer new or customized product Solar lanterns with rechargeable batteries that provide light for up to 10 hours at a time BoP households in rural Laos prefer electric light to petrol lamps and candles, but cannot afford it Sunlabob rents out solar-recharging stations to village franchises Village franchises purchase lanterns and rent them out to villagers Lantern rental fees cover cost of renting solar-recharging stations and provide additional income for village franchises Villagers save up to $3 per month by using solar lanterns instead of kerosene lamps Village franchises that rent solar lanterns earn profit between $20 - $50 per month Rental schemes can access BoP consumers who might otherwise be inaccessible BoP products can create intermediary business opportunities for BoP households (e.g. village franchises)

What was the result?

What can we learn from Sunlabobs experience?

Source: www.sunlabob.com, Emerging Markets, Emerging Models, Monitor Group, March 2009.

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EMPLOYEE: TEAMLEASE (INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?
Employee outsourcing Temporary workers, primarily for formal sector clients in services industries (e.g. banking, IT) Formal sector clients have difficulty identifying qualified workers and vice versa TeamLease takes requirements from employers and identifies and recruits individuals to fill positions TeamLease administers payroll and benefits for duration of contract with employer and also provides employee training TeamLease charges recruiting, training, and placement fees to employers TeamLease is second largest private employer in India, with 1,000 clients, 80,000 employees, and over 600 locations Places 10,000 employees a month By acting as an intermediary without major upfront infrastructure and investment requirements, BoP businesses can scale quickly Technology platforms (e.g. TeamLease portal for employers and employees) can be an efficient and cost-effective way for interacting with BoP clients and employees

What was the result?

What can we learn from Team Leases experience?

Source: www.teamlease.com , Emerging Markets, Emerging Models, Monitor Group, March 2009.

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CONSUMER: TECNOSOL (NICARAGUA)

What is the BoP Model?
Consumer small unit size product

What is the product?

What was the problem or opportunity?

Solar photovoltaic, wind, and hydroelectric power systems, as well as accessories such as lighting systems, refrigerators, and fans
91% of the population in Tecnosols target market does not have access to electricity The government does not have the capacity to make sufficient investments to bring electricity to all rural populations of Nicaragua Tecnosol offered prepackaged systems at many different levels of affordability, including a small 14-watt PV system for poorer people Full-service installation of all energy systems and high quality follow-up customer service Over 50,000 energy systems have been installed and Tecnosol now has 17 branches throughout the country Sales have doubled each year of operation Businesses may want to target specific brackets within the BoP (e.g. high end vs. low end) through differentiated product offerings and market strategies Product quality and service satisfaction are critical because word of mouth through existing customers is a primary driver of business among rural BoP consumers

What was the solution?

What was the result?

What can we learn from Tecnosols experience?

Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.

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CONSUMER: UNILEVER ANNAPURNA (INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity?
Consumer small unit size product Annapurna, Hindustan Unilevers brand of iodized salt BoP households do not consume iodized salt because it is more expensive than non-iodized salt and because there are a large number of imitation products on the market Only about 25% of edible salt in India is iodized, which can lead to iodine deficiency disorder 200g and 500g low-unit-price packs to appeal to BoP consumers with lower price points Roll-out of a direct-to-home sales force through Project Shakti, which utilizes women from self-help groups to sell Hindustan Unilever products and educate other women about their benefits Use of trains in order to get Annapurna to market faster 45,000 Shakti entrepreneurs now cover more than 135,000 villages across 15 states Low-unit-price packs are an effective way to make products more affordable for BoP consumers, but small packaging typically results in increased costs and lower margins Aggressive marketing required to differentiate generic products (e.g. salt) in saturated markets with many competitors

What was the solution?

What was the result? What can we learn from Hindustan Unilevers experience?

Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.

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CONSUMER: UNILEVER LIFEBUOY(INDIA)

What is the BoP Model? What is the product? What was the problem or opportunity? What was the solution?

Consumer basic product or service Lifebuoy hand soap Many BoP consumers in India are not familiar with health and hygiene education, and thus purchase less hand soap Unilever launched a hygiene education program called Swasthya Chetna (Health Awakening) that promoted basic hygiene habits, including hand washing with soap Launched in 2002, the hygiene education campaign has reached 120 million people in nearly 51,000 villages Sales of lifebuoy hand soap have increased in districts where the campaign has been run Tailored marketing and consumer education may be required to increase sales of BoP products BoP products and affiliated services can not only increase revenue, but also brand value by being seen as a sign of corporate social responsibility

What was the result?

What can we learn from Reuters experience?

Source: www.unilever.co.id, WBCSD The Inclusive Business Challenge Presentation, December 2009.

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CONSUMER: UNION FENOSA (COLOMBIA)

What is the BoP Model?
Consumer pay-per-use service Electricity Union Fenosa had high energy losses and lower than expected revenues in Colombia, partly due to the illegal electricity connections of 269,000 families at the BoP Innovative collection method that established local enterprises to measure usage, collect payments, and provide customer and repair services Using community knowledge, these local enterprises were able to establish collective billing systems Recruited former illegal electricity connectors (maraneros) to become utility contractors within local enterprises 60% increase in revenues from billings ($2.9 billion) after implementing changes Regulation changed to allow for more flexible payment periods in order to take into account BoP income patterns Business should develop strategies for engaging the BoP as consumers, not only to increase revenues, but also to minimize downside risks and costs (e.g. electricity losses) Strong understanding and inclusion of all relevant stakeholders (e.g. maraneros) is critical, especially given complex social dynamics within the BoP
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What is the product?

What was the problem or opportunity? What was the solution?

What was the result?

What can we learn from Union Fenosas experience?

Source: Corporate Social Responsibility in Latin America: Responsible Solutions to Business Problems, IDB, December 2005.

SUPPLIER: WAL-MART (NICARAGUA)

What is the BoP Model? What is the product? What was the problem or opportunity?
Supplier BoP-owned cooperative Fruits and vegetables Wal-Mart wanted to diversify its supply chain to include local suppliers and rely less on imports Many small-scale local farmers did not have the capacity to supply produce to Wal-Mart Wal-Mart, through its affiliate Hortifruti, instituted the Tierra Fertil program which provided technical assistance and support to small fruit and vegetable producers Wal-Mart began sourcing fruits and vegetables from local suppliers, such as BoP-owned cooperatives Partly as a result of Wal-Marts efforts, Nicaraguan imports of fruits and vegetables have fallen from 50% to 10% (from $40 million to $6 million) and Nicaragua now exports paraffin-dipped yucca, cucumbers, and bananas to neighboring countries BoP suppliers can play an important role in creating a stable, diversified supply chain By incorporating the BoP in supply chains, large corporations are able to have a significant impact on the lives of local producers

What was the solution?

What was the result?

What can we learn from Wal-Marts experience?

Source: Inclusive Business: Profitable business for successful development, SNV-WBCSD ,March 2008; Cuenta Reto del Milenio, Issue No. 273, www.cuentadelmilenio.org.ni, April 2010

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