130226 Case Studies of Inclusive Businesses

7/29/2019 130226 Case Studies of Inclusive Businesses

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Case studies of inclusive businesses in Asia and Latin

America

Inclusive Business Workshop

Tokyo, Feb-Mar 2013


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Inclusive business in Asia and Latin America by engagement model

Source: IDB Inclusive Business Forum, 2010

SECTOR COMPANY COUNTRY

SUPPLIER Amul India

Calypso Foods India

Colineal Equador

FabIndia India

Interfaceflor India

ITC e-Choupal India

Jaipur Rugs India

Mundo Verde Brazil

Natura Brazil

Nestle Pakistan

Pronaca Equador

Sabmiller India

Starbucks Latin America

EMPLOYEE Aravind Eye Care India

Guangsha Construction China

LabourNet India

LifeSpring Hospitals India

Teamlease India


DISTRIBUTOR Holcim Apasco Mexico

Nestle Ate Voce Brazil

CONSUMER Amanco Mexico

Aravind Eye Care India

Caixa Economica Brazil

Cases Bahia Brazil

Cemex Mexico

Fincomun Mexico

ING Vysya Bank India


Proctor & Gamble Venezuela

Reuters Market Light India

Ruralfone Brazil

Sunlabob Laos

Unilever Annapurna IndiaUnilever Lifebuoy India

Union Fenosa Colombia


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Inclusive business in Asia and Latin America by sector

Source: IDB Inclusive Business Forum, 2010


AGRIBUSINESS Amanco Mexico

Amul India

ITC India

CONSTRUCTION CEMEX Mejora Tu Calle Mexico

Guangsha Construction China

Holcim Apasco Mexico

CONSUMERPRODUCTS Natura Brazil

Procter & Gamble Venezuela

Unilever Annapurna India

Unilever Lifebuoy India

FINANCIALSERVICES Caixa Economica Brazil

Fincomun Mexico

ING India

FOODANDBEVERAGES Calypso Foods India

Nestle Brazil Brazil

Nestle Pakistan Pakistan

Pronaca Equador

SABMiller India

Starbucks Latin Am


HEALTHCARE Aravind Eye Care India


HOMEFURNISHINGS Colineal Equador

Fabindia India

InterfaceFlor India

Jaipur Rugs India

ICT Reuters India

Ruralfone Brazil

RETAIL Casas Bahia Brazil

Mundo Verde Brazil

Wal-Mart Nicaragua

STAFFING LabourNet India

TeamLease India

UTILITIES Sunlabob Energy Laos

Tecnosol Nicaragua

Union Fenosa Columbia


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CONSUMER: AMANCO (MEXICO)

What is the BoP Model? Consumer basic product or service

What is the product? Irrigation systems and equipment

What was the problem or

opportunity?

Many small-scale farmers are located near water sources, but cannot

afford irrigation equipment and thus struggle to achieve high levels of

productivity

What was the solution? Amanco standardized basic, small-scale irrigation systems to make themmore 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

What was the result? Small-scale farmers using Amanco irrigation systems have been able toincrease their productivity up to 22%, while reducing labor costs by up

to 33% and saving significant quantities of water

What can we learn from

Amancos experience?

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 customersto make larger investments

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: AMUL (INDIA)

What is the BoP Model? Supplier BoP-owned cooperative

What is the product? Milk and other dairy products, including yoghurt, buttermilk, cheese,

ice-cream, soups, and beverages


opportunity?

There was no effective and efficient way to collect milk from the

thousands of small-scale dairy farmers in rural India

What was the solution? An extensive dairy cooperative structure to collect milk, includingvillage-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

What was the result? Generates annual revenues of over $1.5 billion Produces 2.3 billion liters per year

Sources from 2.79 million dairy farmers


Amuls experience?

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

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


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EMPLOYEE: ARAVIND EYE CARE (INDIA)

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

What is the BoP Model? Employee deskilling Consumer basic product or service

What is the product? Low-cost eye screening and surgery


opportunity?

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

What was the solution? 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 stillproviding low-cost, high-quality, high patient throughput

What was the result? Aravind grew from one hospital with 11 beds in1976 to seven hospitalswith 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

What can we learn fromAravinds experience?

Division of operations into simple, discrete tasks can optimize scarceresources 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
http://www.aravind.org/http://www.aravind.org/


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CONSUMER: CAIXA ECONOMICA (BRAZIL)

What is the BoP Model? Consumer new or customized product

What is the product? Banking services (opening of checking and savings accounts, debit card

transactions) Other financial services such as payments, credit cards, etc


opportunity?

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

What was the solution? Agent banking: delivering financial services through retail agentsincluding post offices, local shops, and lottery kiosks, already prevalent

in previously unbanked communities

What was the result? Households in all of Brazils more than 5,600 municipalities can accessbanking 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


Caixa Economicas experience?

Sharing point-of-sale (POS) terminals with retailers allows for significant

reduction of the fixed costs associated with building service outlets in

remote areas

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


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SUPPLIER: CALYPSO FOODS (INDIA)

What is the BoP Model? Supplier direct purchase

What is the product? Specialty fruits and vegetables, including gherkins, pineapples,mangoes, and jalapenos


opportunity?

Cost of production is high due to need for leasing or purchase of land,

hiring of workers, and management of production

What was the solution? Contract production of fruits and vegetables with 5,000 small-scalefarmers 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 was the result? Calypsos cost of production are 30-40% lower using contractproduction with small-scale farmers

Farmers incomes rise by an average of 125%


Calypso Foods experience?

Contract production agreements can be used to overcome barriers to

initial investment by BoP suppliers

Businesses engaging in contract production agreements with BoPsuppliers should carefully consider downside risk of fluctuations in

market prices and demand

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


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CONSUMER: CASAS BAHIA (BRAZIL)

What is the BoP Model? Consumer purchase financing

What is the product? Diversified household goods, including appliances and electronics

What was the problem oropportunity?

BoP consumers have high demand, but insufficient income to purchasehousehold appliances and electronics

What was the solution? Casas Bahia created passbooks that allow BoP customers to make smallinstallment payments for merchandise

Credit analysts at each store evaluate credit requests and build long-

term relationships with customers

Credit analysis system also evaluates existing clients for potential new

purchases and facilitates cross-selling

What was the result? Casas Bahia is the largest retail chain in Brazil, with annual revenue of4.2 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%


Casas Bahias experience?

Businesses can tap the purchasing power of the BoP by offering micro-

credit for product purchases

Tracking of client information (e.g. payment histories) can be utilized to

strategically cross-sell and increase revenue

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


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CONSUMER: CEMEX MEJORA TU CALLE(MEXICO)

What is the BoP Model? Consumer purchase financing

What is the product? Cement


opportunity?

Low-income neighborhoods have difficulty paving streets as

municipalities are typically short of funds

What was the solution? Residents receive individual microloans and then pool resources tofinance half the cost of street pavement for the neighborhood, with the

municipality contributing the other half of the cost

What was the result? The initial phase of the program is being implemented in 12 cities, with35,000 families expected to benefit from microloans

The second phase will extend to a total of 60 cities


CEMEXs experience?

Public-private partnerships can be effectively incorporated into BoP

business models

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 product? Household furniture


There are 50,000 small woodworkers in Ecuador whose businesses arecharacterized by low profitability and obsolete or home-made

machinery

Small woodworkers present an opportunity for low-cost outsourcing of

manufacturing, but require technical assistance

What was the solution? Colineal developed a program to source furniture from woodworkers inAzuay 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 result? Small producers have benefited from more secure markets, betterprices, and access to knowledge and innovation

Products reach market through 17 megastores and express shops

owned by Colineal

What can we learn fromColineals experience?

Working with fragmented, small-scale suppliers is facilitated whensuppliers are located in the same geographic area

Upfront investments, especially in manufacturing technology, may be

required to help small-scale suppliers become more productive

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


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SUPPLIER: FABINDIA (INDIA)


What is the product? Retail clothing and home decor


opportunity?

Difficult to engage unorganized craft artisans productively as many

change jobs frequently in search of a better deal and have difficulty

honoring agreements

What was the solution? Fabindia set-up 17 Community Owned Companies that coordinatesupply 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 withCOCs

What was the result? Fabindia is Indias largest private platform for products made fromtraditional techniques

Fabindia grew from 65 in 2007 to 95 stores in 2009


Fabindias experience?

Cooperatives can be an effective way to organize and aggregate

individual BoP suppliers

Co-ownership structure can help create long-term stable relationshipswith individual BoP suppliers

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


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CONSUMER: FINCOMUN (MEXICO)


What is the product? Microcredit loans


opportunity?

Fincomun wanted to grow its client base, but lacked information about

the payment patterns of its potential clients

What was the solution? Fincomun created a partnership with Grupo Bimbo and sent its loanagents 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

What was the result? Within two years of the partnership, 20% ofFincomuns businessoriginated through Bimbo

As its clients gained access to microcredit, Bimbo reduced its amount of

bad debt and its customers loan payback period


Fincomuns experience?

Mutually beneficial strategic partnerships can be developed around

BoP consumers and products

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


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EMPLOYEE: GUANGSHA CONSTRUCTION (CHINA)

What is the BoP Model? Employee demand-led training

What is the product? Construction services


opportunity?

Guangshas constructions were poorly trained, which led to a number

of costly on-site accidents

What was the solution? Guangsha created free-tuition vocational schools at each constructionsite 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

What was the result? 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


Guangshas experience?

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)

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


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DISTRIBUTOR: HOLCIM APASCO (MEXICO)

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

What is the BoP Model? Consumer last mile to BoP

What is the product? Cement and other essential home building material


opportunity?

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

What was the solution? Creation of Mi Casa building material depots which are located closerto BoP households

Holcim reduced prices at Mi Casa depots by removing distributionintermediaries

Architecture and civil engineering students placed in Mi Casa depots

provide BoP consumers with practical advice

What was the result? There are 120 Mi Casa centers around the country Mi Casa has supported the construction or improvement of 400,000

homes

What can we learn fromHolcim Apascos experience?

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


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CONSUMER: ING VYSYA BANK (INDIA)

What is the BoP Model? Consumer new or customized service

What is the product or

opportunity?

Basic banking services, including wage and pension disbursement


opportunity?

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

What was the solution? ING Vysya employees identify villagers with the help of governmentofficials 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

What was the result? 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

What can we learn fromING Vysyas experience?

Innovative technologies (e.g. biometric cards) can overcome challengingcharacteristics 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

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

( )


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SUPPLIER: INTERFACEFLOR (INDIA)

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

What is the BoP Model? Supplier third party aggregator

What is the product? Flooring of all types, including tile and carpet


opportunity?

InterfaceFLOR did not have products to satisfy its customers demand

for socially-conscious products

What was the solution? InterfaceFLOR partnered with the Indian social enterprise Industree todevelop 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

What was the result? 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


Reuters experience?

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

SUPPLIER ITC E CHOUPAL (INDIA)


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SUPPLIER: ITC E-CHOUPAL (INDIA)


What is the product? Soybean, wheat, rice, pulses, and other agricultural commodities


opportunity?

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

What was the solution? Village level e-Choupal internet kiosks provide information on cropprices, weather forecasts, and farming techniques, improving

production and effectively reducing the power of middlemen ITC purchases produce from farmers at central collection hubs

What was the result? Rural farmers receive higher prices for crops and ITC pays less for cropsas 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


ITC E-Choupals experience?

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

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

SUPPLIER JAIPUR RUGS (INDIA)
http://www.itcportal.com/http://www.echoupal.com/http://www.echoupal.com/http://www.itcportal.com/http://www.itcportal.com/


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SUPPLIER: JAIPUR RUGS (INDIA)


What is the product? Traditional artisan rugs


Jaipur Rugs wanted to scale production quickly without having to makelarge upfront investment and management costs

What was the solution? Production processes are contracted out to local artisans, thus makinglabor and raw material costs variable

Purchases from BoP suppliers also reduces capital equipment needed

for washing, dyeing, etc

Lean management staff structure oversees contractors

What was the result?

Jaipur Rugs is the largest manufacturer and exporter of Indian hand-knotted 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)


Jaipur Rugs experience?

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


EMPLOYEE LABOURNET (INDIA)


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EMPLOYEE: LABOURNET (INDIA)

What is the BoP Model? Employee outsourcing

What is the product? Contract-basis blue collar workers from the unorganized sector


opportunity?

Demand and supply of unskilled workers exist in India, but businesses

have difficulty identifying appropriate unskilled workers and vice versa

What was the solution? 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 healthinsurance for its registered workers

What was the result? 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


LabourNets experience?

BoP workers are interested in entering organized employment supply

chains, provided appropriate incentives are in place (e.g. stability of

work, insurance)

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

CONSUMER: LIFESPRING HOSPITALS (INDIA)


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CONSUMER: LIFESPRING HOSPITALS (INDIA)

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

What is the BoP Model? Consumer basic product or service Employees deskilling tasks

What is the product? Hospital focusing on maternal and child health, particularly labor anddelivery


opportunity?

BoP households have high demand for quality hospital services, but

existing hospital prices are out of reach

What was the solution? 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

What was the result? LifeSpring averages five times the number of deliveries compared toprivate 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


LifeSprings experience?

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)

SUPPLIER: MUNDO VERDE (BRAZIL)
http://www.lifespring.in/http://www.lifespring.in/


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SUPPLIER: MUNDO VERDE (BRAZIL)


What is the product? Health and wellness products, including food


Mundo Verdes customers want a diverse selection of health consciousproducts and respond to products that are marketed as locally and

sustainably produced, but it is difficult to work with many small informal

suppliers

What was the solution? Mundo Verde actively built relationships with small suppliers, includingmany 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

What was the result? Mundo Verde has 127 stores serving 45,000 clients daily 1,200 current suppliers with approximately three new suppliers added

each day


Mundo Verdes experience?

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

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

Leaders Forum, June 2008

SUPPLIER: NATURA (BRAZIL)


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SUPPLIER: NATURA (BRAZIL)

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


What is the product? Skin care, cosmetics, perfume, and hair care products


opportunity?

Natura did not have a product line that met demand for sustainableand environmentally-friendly products from Brazil

Natura wanted to improve brand value and growth

What was the solution? Source inputs from low-income communities in the Amazon, ensuringthat 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 sustainableand environmentally-friendly materials

What was the result? The EKOS line accounts for 10% ofNaturas sales Natura has 56 natural asset supply agreements in Latin America, 19 of

which are with traditional communities and local providers of raw

materials


Naturas experience?

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)

DISTRIBUTOR: NESTL AT VOC (BRAZIL)
http://www.natura.net/http://www.natura.net/


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DISTRIBUTOR: NESTL AT VOC (BRAZIL)

What is the BoP Model? Distributor last mile to BoP Distributor increasing points of sale

What is the product?

Household packaged food products


opportunity?

Nestl could not reach BoP consumers because its typical distribution

model using a full truck would not work infavelas with narrow streets

What was the solution? Nestl identified a network of distributors and micro-distributors whowould buy products and assemble assortments appropriate for

distribution to micro-retailers infavelas

Distributors also assembled pre-packaged kits for direct sales to families

in their homes, using trusted direct sales agents from local communities

What was the result? Nestl increased sales among BoP consumers infavelas Nestl created jobs by recruiting informal workers to become direct

sales agents and micro-distributors


Nestls experience?

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

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

Forum, June 2008.

SUPPLIER: NESTL (PAKISTAN)


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SUPPLIER: NESTL (PAKISTAN)


What is the product? Milk and dairy products


opportunity?

Nestle needed a reliable supply of milk, but large dairy farmers were

expensive due to their significant bargaining power

What was the solution? Nestle set up its own supply chain by setting up Village Chilling centerswhere 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)

What was the result? Nestle collects milk directly from 160,000 farmers, taking in 50 millionliters per year and earning a profit of $20.7 million on revenues of $456

million


Nestles experience?

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 chainsincorporating the BoP

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

CONSUMER: PROCTER & GAMBLE (VENEZUELA)
http://www.nestle.pk/http://www.nestle.pk/


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CONSUMER: PROCTER & GAMBLE (VENEZUELA)

What is the BoP Model? Consumer small unit size product

What is the product? Consumer products such as shampoo, detergent, and diapers


P&G wanted to increase sales to BoP consumers, but knowledge ofconsumption habits and distribution channels among BoP was limited

P&G products were often too expensive and inaccessible to BoP

consumers

What was the solution? P&G began selling shampoo, detergent, and diapers in bulk to buyersclubs that could then reduce the unit price sold to BoP consumers in

smaller quantities

P&G complimented sales with community activities, such as training ofhair stylists, which further increased revenues

What was the result? Sales and affordability of shampoo, detergent, and diapers increased,leading to the creation of beauty salons, laundry facilities, and child

care services


P&Gs experience?

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 jobsrelated to BoP products (e.g. beauty salons)

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

SUPPLIER: PRONACA (ECUADOR)


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SUPPLIER: PRONACA (ECUADOR)

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


What is the product? Wide variety of household processed foods


opportunity?

Pronaca faced challenges in terms of the stability and price of maize, a

key input in its supply chain

What was the solution? Pronaca integrated local small-scale maize producers into thecompanys supply chain

Pronaca offered farmers training, access to credit, and new technology

to increase productivity and develop an additional crop rotation

What was the result? Pilot has grown from 80 small maize producers to 200, with plans toincrease to 650

Productivity increased by 20%, which has raised farmer income from

$0.63 to $2 per capita per day

234 new jobs created


Pronacas experience?

Integrating local, small-scale suppliers can decrease production costs

and improve stability of critical inputs

Working with small-scale producers at the BoP requires capacity-

building in addition to financial assistance

CONSUMER: REUTERS MARKET LIGHT (INDIA)


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( )

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


What is the product? Fee-based mobile service providing Indian farmers information about

commodity price, crop, and weather data via SMS


opportunity?

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 50-mile 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 full-time professionals, covering news and data on over 250 crops, 1,000

markets, and 2,000 weather locations in 11 states

What was the result? In two years, Reuters sold 300,000 quarterly subscriptions to nearly135,000 farmers in over 15,000 villages

Some farmers have increased revenue by $8,000 using the service

which costs only $5 per quarter

What can we learn fromReuters experience?

BoP will pay for high-quality information and content, especially whenit 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

CONSUMER: RURALFONE (BRAZIL)
http://www.reuters.com/http://www.reuters.com/


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What is the BoP Model? Consumer new or customized product Distributor increasing points of sale


Telecommunications services


opportunity?

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

What was the solution? Ruralfone launched a tailored product consisting of unlimited voiceminutes 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

What was the result? 2,600 subscribers have signed up in area of Quixada with EBITDAgreater than 50%

Ruralfones subscriber acquisition cost is only $5 as compared to $60 for

other Brazilian operators

What can we learn fromRuralfones experience?

Although most BoP business models are high volume, low margin, it ispossible 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

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)


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What is the BoP Model? Supplier third party aggregator

What is the product? Beer


By sourcing barley from only large scale commercial farmers or largeintermediaries, 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

What was the solution? In partnership with Cargill, SABMiller is supporting the development ofa 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

What was the result? Initiated in 2005, participating farmers increased from 1,574 in 2005-2006 to 6,024 in 2007-2008

Quality and consistency of barley has improved, allowing SABMiller to

increase brewing efficiencies


SABMillers experience?

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

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)
http://www.sabmiller.com/http://www.sabmiller.com/


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What is the product? Coffee


Consumers demand coffee with various combinations of the followingcharacteristics: high quality, sustainable production, fair trade,

traceability, and improved social conditions in farming communities.

What was the solution? Starbucks created the C.A.F.E. practices, which guide farmers to producehigher-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 asufficiently high C.A.F.E. score

What was the result? 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


Starbucks experience?

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 inproducts that engage the BoP in sustainable ways

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

Forum, June 2008

CONSUMER: SUNLABOB RENEWABLE ENERGY (LAOS)


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What is the BoP Model? Consumer pay-per-use service Consumer new or customized product


Solar lanterns with rechargeable batteries that provide light for up to10 hours at a time


opportunity?

BoP households in rural Laos prefer electric light to petrol lamps and

candles, but cannot afford it

What was the solution? 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

What was the result? Villagers save up to $3 per month by using solar lanterns instead ofkerosene lamps

Village franchises that rent solar lanterns earn profit between $20 - $50

per month


Sunlabobs experience?

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)

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

EMPLOYEE: TEAMLEASE (INDIA)
http://www.sunlabob.com/http://www.sunlabob.com/


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What is the BoP Model? Employee outsourcing

What is the product? Temporary workers, primarily for formal sector clients in services

industries (e.g. banking, IT)


opportunity?

Formal sector clients have difficulty identifying qualified workers and

vice versa

What was the solution? TeamLease takes requirements from employers and identifies andrecruits 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 toemployers

What was the result? TeamLease is second largest private employer in India, with 1,000clients, 80,000 employees, and over 600 locations

Places 10,000 employees a month


Team Leases experience?

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 andemployees) can be an efficient and cost-effective way for interacting

with BoP clients and employees

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

CONSUMER: TECNOSOL (NICARAGUA)


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What is the product? Solar photovoltaic, wind, and hydroelectric power systems, as well asaccessories such as lighting systems, refrigerators, and fans


opportunity?

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

What was the solution? Tecnosol offered prepackaged systems at many different levels ofaffordability, including a small 14-watt PV system for poorer people

Full-service installation of all energy systems and high quality follow-up

customer service

What was the result? Over 50,000 energy systems have been installed and Tecnosol now has17 branches throughout the country

Sales have doubled each year of operation


Tecnosols experience?

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 ofmouth through existing customers is a primary driver of business among

rural BoP consumers


CONSUMER: UNILEVER ANNAPURNA (INDIA)


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What is the product? Annapurna, Hindustan Unilevers brand of iodized salt


BoP households do not consume iodized salt because it is moreexpensive 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

What was the solution? 200g and 500g low-unit-price packs to appeal to BoP consumers withlower price points

Roll-out of a direct-to-home sales force through Project Shakti, which

utilizes women from self-help groups to sell Hindustan Unileverproducts and educate other women about their benefits

Use of trains in order to get Annapurna to market faster

What was the result? 45,000 Shakti entrepreneurs now cover more than 135,000 villagesacross 15 states


Hindustan Unilevers experience?

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


CONSUMER: UNILEVER LIFEBUOY(INDIA)


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36Source: www.unilever.co.id, WBCSD The Inclusive Business Challenge Presentation, December 2009.

What is the BoP Model? Consumer basic product or service

What is the product? Lifebuoy hand soap


opportunity?

Many BoP consumers in India are not familiar with health and hygiene

education, and thus purchase less hand soap

What was the solution? Unilever launched a hygiene education program called SwasthyaChetna (Health Awakening) that promoted basic hygiene habits,

including hand washing with soap

What was the result? Launched in 2002, the hygiene education campaign has reached 120million people in nearly 51,000 villages

Sales of lifebuoy hand soap have increased in districts where the

campaign has been run


Reuters experience?

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

CONSUMER: UNION FENOSA (COLOMBIA)


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What is the BoP Model? Consumer pay-per-use service

What is the product? Electricity


opportunity?

Union Fenosa had high energy losses and lower than expected revenues

in Colombia, partly due to the illegal electricity connections of 269,000families at the BoP

What was the solution? Innovative collection method that established local enterprises tomeasure 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 becomeutility contractors within local enterprises

What was the result? 60% increase in revenues from billings ($2.9 billion) after implementingchanges

Regulation changed to allow for more flexible payment periods in order

to take into account BoP income patterns


Union Fenosas experience?

Business should develop strategies for engaging the BoP as consumers,

not only to increase revenues, but also to minimize downside risks andcosts (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

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

SUPPLIER: WAL-MART(NICARAGUA)


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What is the product? Fruits and vegetables


Wal-Mart wanted to diversify its supply chain to include local suppliersand rely less on imports

Many small-scale local farmers did not have the capacity to supply

produce to Wal-Mart

What was the solution? Wal-Mart, through its affiliate Hortifruti, instituted the Tierra Fertilprogram 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

What was the result? Partly as a result of Wal-Marts efforts, Nicaraguan imports of fruits andvegetables 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


Wal-Marts experience?

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 tohave a significant impact on the lives of local producers

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
http://www.cuentadelmilenio.org.ni/http://www.cuentadelmilenio.org.ni/

130226 Case Studies of Inclusive Businesses

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