The Story – Grameen Danone Foods Ltd
‘I am utterly convinced that our future depends on our ability to explore and invent new businesses and new types of enterprise… [this is] a great opportunity to make progress in that direction and take another huge step towards fulfilling our mission: to bring health through food to as many people as possible.’
Franck Riboud, CEO of Groupe Danone
Background
The origins of the idea that became Grameen Danone Foods are quickly becoming legend. Groupe DANONE CEO Franck Riboud invites Yunus for lunch whilst he is Paris in October 2005. They get on like the proverbial house on fire and decide to do something together to help the poor of Bangladesh. They shake hands and in less than two years the new joint venture social business to help end child malnutrition is being opened to worldwide publicity in Bogra by footballing superstar and Muslim icon Zinedine Zidane.
It is difficult to overstate the difficulty of the business and social challenges which these two men set their operational people. To produce a yoghurt to improve kids’ health in a country with few fridges and daily power cuts (in those areas lucky enough to have electricity); which will recruit and train local unskilled people; be sold door to door by women to supplement their incomes; to use its demand to improve the lot of rural milk producers; AND will aim to be a model of environmental friendliness and reuse!
The social problem is huge enough: 30% of all Bangladeshis and 56% of Bangladeshi children under the age of five suffer from moderate to severe malnutrition. In general the country has some of the highest child and maternal malnutrition rates, according to UNICEF.
Danone Communities
Groupe DANONE is a global leader in fresh dairy products and a joint leader in the bottled water, biscuits and cereal products market. Its brands include Danone, Volvic, and Evian. The company has over 200 facilities located across more than 120 countries, and employs over 90,000 staff.
To oversee the development of its portfolio of collaborations with social entrepreneurs around the world – of which the Grameen joint venture is the first – Danone Communities has been established in Paris. This team of four, led by Emmanuel Marchant, has access to a social investment fund of some 100 million Euros. There are two other trading social businesses in Senegal and Cambodia and Emmanuel is actively seeking social enterprise partners around the globe.
The realities
The solar powered 7,500 sq ft factory was opened in 2006 and is sited on 800m2 of land in Banani Betgari, an area close to Bogra, some 220 km northwest of the capital, Dhaka. Production commenced in February 2007.
The yoghurt is branded Shokti Doi which literally means “yoghurt to give strength”. In Bangladesh yoghurt is not consumed as a dessert but more as a snack. A single cup of Shokti Doi provides a child with 30% of its daily required intake of Vitamin A, iron, zinc and iodine.
Sales and production volumes continue to rise year on year and the factory is at 70% of its yearly maximum production capacity of 3,000 tons. Local education campaigns in the villages and a national series of TV ads featuring Yunus have helped develop consumer understanding and boost sales.
At the time of writing (October 2010), the business employs 40 Bangladeshis, operates a network of some 500 women door-to-door vendors who achieve 20% of total sales. The majority of selling happens through local shops and street side kiosks where the yoghurt pots are sold alongside crisps, cans of Coke, cigarettes and sweets.
Danone Communities has invested some 1 million Euros in the plant, start up costs and operating losses in this social business and on current projections, it is expected that Grameen Danone Foods will be at break even in 2011.
A plot of land for the second site near Dhaka has been identified and the intention is to build a factory there by the end of 2011. Longer term the board remains determined to see the whole of Bangladesh served by Grameen Danone Foods.
Challenges
Name a business problem and GDF has had to deal with it. The first recipe was not popular with the children and had to be sweetened. The huge spike in milk prices triggered by the global food crisis of 2008 pushed per cup price up too far and sales collapsed.
Finding Bangladeshis with the required levels of managerial and technical skills and expertise remains a major headache for a Danone leadership which badly wants to localize the company and step away so the social business can achieve cultural independence from Paris. The de facto CEO of the business is a French Danone marketing director seconded from its business in Greece.
Three years in, Yunus – who, with Riboud, sits on the board of the business – remains characteristically upbeat: “Although in its brief history Grameen Danone has had more than its share of ups and downs, the experience has left me more convinced than ever of my belief in the potentially transformative power of social business, not just in Bangladesh but around the world”.
Grameen Danone Foods Limited Part 1