Trip Start Jul 26, 2008
64Trip End Sep 27, 2008
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I started by meeting the original Executive Director and friend of Khalid Shams - Md. Imamus Sultan and then the current Executive Director - M. Wahidun Nabi in the Grameen Bank Buidling in Dhaka. I then traveled five hours ride away to Bogra where I met Engr. Probir Kr. Sarker - Plant Manager of Grameen Danone.
Grameen Danone (GD) is going through early struggles and challenges and is working to learn through experience, adjust to conditions both within and outside their control, make modifications and emerge successfully as many other of the Grameen businesses, starting with what Grameen Bank itself has done
Keeping costs down and prices at a level that the poor can afford has been a major challenge. The cost of milk, which is nearly 60% of the overall cost of the product, has nearly doubled in the last year. Labor costs - which represents 30% of the overall costs has also increased significantly.
Attempting to adjust to these cost increases - Grameen Danone increased the price from 5 taka to 8 taka for an 80 gram container of Yogurt and the poor could/would not absorb this increase and sales volume, which never achieved planned volumes, went down. GD has come out with a 60 gram, 6 taka version which has increased nutrient fortification so that a child still gets 30% of the necessary daily requirements from one cup of yogurt - which is now more affordable for the poor. An 80 gram, 8 taka cup is also being sold - primarily into shops.
Another major challenge is the lack of reliable refrigeration due to lack of refrigerators by most of the poor and numerous power blackouts for those that do have electricity. Currently, the yogurt has a 72 hour shelf life, which is proving to be inadequate in many cases - which has also negatively impacted sales. Danone has been tasked with the challenge of increasing the shelf life to 7 days and is working on it.
The original yogurt formula was not as thick as that desired in the Bogra area and the formula has been modified for the local desires for a thicker yogurt.
The factory is working wonderfully well
Sales/Distribution has been the key challenge. The yogurt ladies are women who are already Grameen Bank borrowers who are then trained two days to sell yogurt. They are often widows. Each lady is assigned a territory which typically includes two village organizations (50 - 80 Grameen borrowers in each village organization.) The yogurt ladies pick up their yogurt early in the morning (it was delivered in insulated containers earlier in the morning) from the bank branch. They load 48 containers of 60 grams of yogurt into an insulated carrying case and head off by rickshaw or foot to the villages. They do this four days a week and it typically takes them two hours to visit a village meeting, sell what they can in that meeting and then sell whatever is left (if any) door to door in the village. The yogurt lady buys and pays cash each day at wholesale - 5 taka, then sells at retail - 6 taka and keeps the 1 taka difference - meaning that she grosses 288 taka a day, pays 240 taka when she picks up her 48 cups of yogurt and keeps 48 taka. She typically pays 10 taka for the rickshaw to the village and then walks back - so she nets/keeps 38 taka a day times 4 days a week, times 4 weeks per month for a total of 608 taka or $9.50 per month
Yogurt is being distributed through five bank branches, each having 35 or so yogurt ladies or a total of 175 yogurt ladies through the branches. Closer to the factory, the factory manages 70 additional yogurt ladies. Sales are also made through local shops. Grameen Danone is looking at expanding the model and trucking yogurt to other cities - including Dhaka.
The Yogurt Lady I followed is a widow who took her yogurt to the village organization that she is already a member. She sold all 48 containers that she had in less than five minutes and the kids were scoffing down the yogurt in no time. She could have sold more yogurt had she had more stock with her - and she certainly did not need to go door to door. She carries a smaller amount of yogurt, as the program would rather have her have less to sell than more than she can sell - otherwise, the excess would have to be scrapped due to lack of refrigeration and short shelf life. Witnessing firsthand the incredible reception of the yogurt was very amazing and gave me hope that this program will eventually work.
A study to determine the nutritional impact on the kids began in August and will be completed after six months and one year
The plant has a capacity of 83,000 cups per day and is currently working at 1% of capacity. Break even is 45,000 cups per day. They are currently loosing around 1.5 taka per cup or a net loss of 25% per cup.
Not only was I amazed at the wonderful reception the borrowers and particularly the children have for the yogurt - even more amazing is that I am one who has never liked yogurt - and I found this yogurt delicious and scoffed down two cups quickly.
Back in Dhaka at Grameen Bank I met with Emmanuel Marchant - Deputy General Manager of Danone Communities which oversees the Danone Social Business projects. He serves on the Board of Directors of Grameen Danone. Emmanuel had not had a chance to review my observations but provided me his insights into this business
Emmanuel feels that the greatest challenge has been the issue of Governence and working out the roles of Grameen and Danone and particulary the direction and culture that would emerge in managing Grameen Danone. Although Grameen and Danone were very compatible with and committed to doing social good - there individual approaches and cultures are quite different which has caused significant challenges and kept the program from moving forward at an optimum rate.
It took them a considerable amount of time to recruit an Executive Director that was neither from Grameen or Danone - but has the business sense of Danone and the social - heart felt passion of Yunus/Grameen.
Emmanuel feels that being able to lower the costs to allow a profit at a price that the poor can afford as well as extending the shelf life are both quite doable in the future - whereas the challenges will primarily be working through the governence issue and expanding the distribution through the yogurt lady program.
Emmanuel indicated that Yunus' book "Creating a World Without Poverty: Social Business and the Future of Capitalism" coming out in paperback (January 2009 according to Amazon.com) will have updates on what has been happening with Grameen Danone since Yunus wrote the original hardback book a year ago
I appreciate Grameen Danone management for sharing the challenges faced in such a first of a kind start up as this. There openness will aid others as they may face their own challenges in creating a Social Business - a business to do good - while not losing money - rather than a business to make a profit.
Professor Yunus Update – written approximately September 2008, Published January 2009. Afterward in the paperback version of Creating a World Without Poverty – Social Business and the Future of Capitalism
Page 253 – "Grameen Danone, the yogurt business we created in partnership with France's Groupe Danone to bring nutritious, affordable food to the poor villagers of Bangladesh, is up and running with our first plant in Bogra in full operation. Around four hundred small milk producers and 250 'Grameen ladies’ have been employed to supply the raw materials for the yogurt and to sell the product in the surrounding villages.
The growth of the yogurt business, while steady, has been slow. Owing to the current global food crisis, which has sharply increased the prices of all food production inputs, from milk to the electrical power, costs have increased and the spending power available to the rural poor has fallen. As a result, it has been difficult for the members of our target market, the rural poor in Bangladesh, even to buy essentials. Consequently, sales of yogurt have fallen below the levels that we had hoped for. Nonetheless, yogurt remains quite popular, especially among schoolchildren. We are confident that our product – Shokti Doi – will have long-term appeal for children in rural areas and a beneficial effect of their health, and we are going ahead with ground-breaking on a second yogurt plant. Ultimately, our dream of a network of up to fifty such plants around Bangladesh remains achievable, although it will take longer to realize than we’d expected."
January 2009 Update - Grameen Danone enters Dhaka Marketplace
To view a 5 minute video of Professor Yunus on Social Business - click here.
To view a 3 minute video of Professor Yunus speaking on Grameen Danone - click here.
To view a 2.5 minute video on Grameen Danone - click here.
To see the entire Grameen Danone Photo Album.