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
SECTOR COMPANY COUNTRY
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
LifeSpring Hospitals 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
SECTOR COMPANY COUNTRY
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
SECTOR COMPANY COUNTRY
HEALTHCARE Aravind Eye Care India
LifeSpring Hospitals 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
What was the problem or
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
What can we learn from
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.
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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
What was the problem or
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
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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
What was the problem or
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
What can we learn from
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
What was the problem or
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%
What can we learn from
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
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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%
What can we learn from
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
What was the problem or
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
What can we learn from
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 BoP Model? Supplier direct purchase
What is the product? Household furniture
What was the problem oropportunity?
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 BoP Model? Supplier BoP-owned cooperative
What is the product? Retail clothing and home decor
What was the problem or
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
What can we learn from
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.
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CONSUMER: FINCOMUN (MEXICO)
What is the BoP Model? Consumer new or customized product
What is the product? Microcredit loans
What was the problem or
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
What can we learn from
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
What was the problem or
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
What can we learn from
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
What was the problem or
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
What was the problem or
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
What was the problem or
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
What can we learn from
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 BoP Model? Supplier direct purchase
What is the product? Soybean, wheat, rice, pulses, and other agricultural commodities
What was the problem or
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
What can we learn from
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)
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SUPPLIER: JAIPUR RUGS (INDIA)
What is the BoP Model? Supplier direct purchase
What is the product? Traditional artisan rugs
What was the problem oropportunity?
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)
What can we learn from
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
Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.
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
What was the problem or
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
What can we learn from
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
What was the problem or
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
What can we learn from
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)
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SUPPLIER: MUNDO VERDE (BRAZIL)
What is the BoP Model? Supplier direct purchase
What is the product? Health and wellness products, including food
What was the problem oropportunity?
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
What can we learn from
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 BoP Model? Supplier direct purchase
What is the product? Skin care, cosmetics, perfume, and hair care products
What was the problem or
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
What can we learn from
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)
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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
What was the problem or
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
What can we learn from
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 BoP Model? Supplier direct purchase
What is the product? Milk and dairy products
What was the problem or
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
What can we learn from
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)
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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
What was the problem oropportunity?
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
What can we learn from
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 BoP Model? Supplier direct purchase
What is the product? Wide variety of household processed foods
What was the problem or
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
What can we learn from
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 BoP Model? Consumer new or customized product
What is the product? Fee-based mobile service providing Indian farmers information about
commodity price, crop, and weather data via SMS
What was the problem or
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)
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What is the BoP Model? Consumer new or customized product Distributor increasing points of sale
What is the product?
Telecommunications services
What was the problem or
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
What was the problem oropportunity?
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
What can we learn from
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)
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What is the BoP Model? Supplier direct purchase
What is the product? Coffee
What was the problem oropportunity?
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
What can we learn from
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
What is the product?
Solar lanterns with rechargeable batteries that provide light for up to10 hours at a time
What was the problem or
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
What can we learn from
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)
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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)
What was the problem or
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
What can we learn from
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 BoP Model? Consumer small unit size product
What is the product? Solar photovoltaic, wind, and hydroelectric power systems, as well asaccessories such as lighting systems, refrigerators, and fans
What was the problem or
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
What can we learn from
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
Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.
CONSUMER: UNILEVER ANNAPURNA (INDIA)
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What is the BoP Model? Consumer small unit size product
What is the product? Annapurna, Hindustan Unilevers brand of iodized salt
What was the problem oropportunity?
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
What can we learn from
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
Source: The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, C.K. Prahalad, October 2009.
CONSUMER: UNILEVER LIFEBUOY(INDIA)
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What is the BoP Model? Consumer basic product or service
What is the product? Lifebuoy hand soap
What was the problem or
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
What can we learn from
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
What was the problem or
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
What can we learn from
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 BoP Model? Supplier BoP-owned cooperative
What is the product? Fruits and vegetables
What was the problem oropportunity?
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
What can we learn from
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
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