Grameen Danone Foods Ltd

logo_danon_actualA Social Business Joint Venture

The Grameen Group and Groupe DANONE joined forces since March 2006 to create Grameen Danone Foods Ltd, a social business based in Bangladesh. Grameen Danone Foods Ltd’s mission is to reduce poverty by a unique proximity business model that will provide daily healthy nutrition to the poor of Bangladesh. Grameen Danone Foods Ltd is the first investment supported by ‘danone.communities’, an investment fund, created to support businesses that aim to be sustainable, but make social and societal goals their objective.

Nutritional Situation in Bangladesh

One child out of two in Bangladesh is suffering from malnutrition, especially in rural areas.

Grameen Danone Foods’ Objectives include, bring health through nutrition at very affordable price for all Bangladeshi children; improve living conditions of the poorest of the community by involving them in all stages of the business model (supply, production, sales), creating jobs and improving local competencies; preserve non-renewable resources as much as possible; be profitable to ensure economic sustainability.

A Local Supply Business Model

This is a Local Supply Business Model where milk is a key challenge Shokti+ is produced by Grameen Danone Foods Ltd in a small modern factory in Bogra, built with the Danone know-how on quality and food safety. The main ingredient in Shokti+ is milk. Since 90% of the Bangladeshi milk market operates on an informal basis, organizing milk supply is a big challenge for GDFL. Until end 08, Grameen Danone mainly bought its milk from a milk cooperative of micro-farms: the Grameen Livestock Foundation, 30km from the factory. Since 2009, Grameen Danone has started to collect milk from local micro-farms around the plant (320 farmers in Sept. 10). Grameen Danone is also buying from ICMSE, the integrated farm of Dr Mostaq Ahmed, with more than 100 milking cows and that provides technical assistance and training to 370 micro-farmers. This ensures more than 75% of the milk consumption. By extending partnerships with farmers, GDFL would decrease spot purchase, enabling better milk quality insurance and providing better income to farmers. Through the previous creation of chilling centers, the cooperation with existing chilling centers (ex. Grameen), and the development of local farmers, the objective is to reduce spot buying to 10% in the next 5 years.

A Job Creating and Environmentally Friendly Mini Factory

The Grameen Danone Bogra factory’s yearly capacity was initially of 1600 tons, and was equipped in Apr. 2010 to double this capacity. In Sept. 10, the plant is used at 55% of this new capacity. Priority is to reach plant capacity through proximity sales in a radius of 50km. This is in order to maximize penetration and level of consumption among local communities. And also to allow proximity transportation with rickshaw vans and small motorized vehicles with natural gas (CNG).
Nevertheless in order to reach this capacity quicker, decision was made to sell in Dhaka from November 08.

The Grameen Danone plant in Bogra has been designed to rely on local labor rather than sophisticated machinery. This avoids expensive maintenance problems, enables to create 65 jobs and develops local competencies. The factory has been designed in an environmentally friendly way, to minimize use of non- renewable resources. It is partially sourced with solar energy, it is collecting rain water, it is provided with a bio digester that can produce natural gas.

“2 legs” Distribution Model

Shops: Except in Dhaka, with some modern trades shops, shops are small proximity stores, located in urban areas as well as in rural villages. Shops represent 80% of current Grameen Danone sales.

Door-to-door sales in rural areas through a network of sales ladies : These “Grameen Danone ladies” are micro-entrepreneurs. They are supplied with yogurts, trained and coached by Grameen Danone staff. They get one-day sales credit, reimburse the cost of cups through their sales and keep a margin on each sold cup. End 2010, number of ladies exceeds 820. By selling 60 cups per day, their income is 78 tk in a day. For these ladies that are often among the poorest in their community, this activity is a source of empowerment and valuable additional income for their family. Door-to-door sales through ladies are slightly more than 20% of Grameen Danone sales.

Expansion

After fixing its distribution model that encountered a bit of problem in 2008 GDFL went for accelerated expansion. Parallel to the rural distribution GDFL board decided to expand its market to use the excess capacity of the plant. Increase in production was necessary to decrease the per unit fixed cost. Dhaka price was set to get a margin to offset the loss in rural market. : a 60gr cup of Shokti+ doi reinforced in proteins, is priced at 8 tk. Company also launched new products like a valorized mango Shokti+ (8tk for 60g and 12 tk for 80g). First TV advertising campaign was launched in March 09. In October 09, a new TV campaign involving Pr. Yunus enabled to reach the level of 100 tons per month and above from November 09. To support rural sales in 2009, 1270 proximity mini-events took place in villages. School nutrition programs were also organized in rural and urban schools reaching 80 000 pupils among B-C-D social economic classes.

Status and Way Forward

At the beginning of the 2011, 1 kid out of 4 around Bogra within SEC C & D declares to eat at least one shokti+ / week in the last 3 months. NGO GAIN (Global Alliance for Improved Nutrition) and John Hopkins University are about to deliver results of a clinical study on health impact of Shokti+ by the end of 2010. 820 ladies were getting an additional income of 50 to 100 tk / day by selling Shokti+ products door-to-door: this is limited but contributes to improve their living conditions. They benefit from having a regular source of income, new social capital related to their formal job, more freedom to move in public space, and an improved self-esteem. 370 micro-farmers around the plant sell daily to Grameen Danone, getting a regular fixed income, without having to go to the market. Dr. Mostaq Ahmed’s farm also provides technical assistance and training to 300 micro-farmers around, like chilling center and health services. Grameen Danone has directly created 250 jobs. By 2015, GDFL expects to have created 400 jobs, to impact living conditions of approximately 2250 farmers and 6500 sales ladies, and to impact the heath of 1.5 million kids.