session 2.4 holcim case study - stefanie koch

Holcim‘s low-cost housing projects – targeting customers at the Bottom of the Pyramid

Stefanie Koch, CSR/SD Coordination

Business and Poverty Leadership ProgrammeCambridge, November 14, 2006

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LCH Cambridge 08.04.23/KOSHolcim Group Support

Content

About Holcim

Low-cost housing

Challenges, open questions...

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About us

Holcim is one of the world's leading suppliers of cement and aggregates as well as downstream activities such as ready-mix concrete, asphalt and construction-related services.

From its origins in Switzerland it has grown into a global player with majority and minority interests in over 70 countries on all continents.

Today Holcim employs some 70‘000 people.

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Holcim – global by tradition

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1912 1920 1930 1940 1950 1960 1970 1980 1990 2005

SerbiaCroatiaChinaNew CaledoniaTanzaniaSri LankaBulgariaRomaniaHondurasPolandKosovoMadagascarMauritiusGuineaIranMalaysiaMacedoniaThailandEl SalvadorDom. RepublicIndonesiaNicaraguaGuatemalaFrench GuyanaAzerbaijanAustriaIvory CoastNigeriaNamibiaLa RéunionFijiHaitiCaribbean IslandsPanamaBangladeshYemenUnited KingdomNorwayUAESwitzerland

FranceBelgium

NetherlandsEgyptLebanon

GermanySouth Africa

CanadaBrazilUSA

MexicoCosta RicaItalyColombia

New ZealandPhilippinesEcuadorChileAustraliaCyprus

VenezuelaSpainIndiaHungaryCzech RepublicGreeceSlovak RepublicMoroccoPeruArgentinaSingaporeRussiaVietnam

Eu

rop

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Afr

ica

Mid

dle

Eas

t

Asi

a P

acif

ic

No

rth

Am

eric

a

Lat

in A

mer

ica

Numberof countries

Countries with operations of consolidated companies and those with minority interest

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Quarrying and raw material preparation

Clinkerproduction

Cement grinding and distribution

135 cement plants

398 aggregate plants

989 ready-mix concrete plants

101 Asphalt plants

CementClinker

56%

Other construction materials and services33%

Aggregates Concrete 11%

Sales 2005

Focus on core competencies

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Balance between growth and mature markets

Emerging markets

Mature markets

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Balance between growth and mature markets

Emerging markets

Mature markets

Employees

29'557

59'901

1990 2005

Net Sales in million CHF

5'247

18'468

1990 2005

252% 103%

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Sustainable development is a key element of our vision and mission

Sustainable development is a core element of the vision and mission of Holcim

Our mission is to be the world’s most respected and attractive company in our industry – creating value for all our stakeholders.

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Creation of Value

Mindsets

Strategy

Goal

Base

Product FocusGeographicDiversification

Local ManagementGlobal Standards

People

BetterCostManagement

Permanent MarketingInnovation

Human ResourcesExcellence

CorporateSocialResponsibility

SustainableEnvironmental Performance

Triple bottom line integrated in our strategy

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Content

About Holcim

Low-cost housing


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... a few examples of “classic” CSR projects

School center Felix Gloor

Holcim Vietnam – clean water, bright future

Ortopolis, Holcim Brazil

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Money spent for OH&S, donations and charity, CSR projects and coordination

Group companies have allocated USD 43 millions to CSR* of whichUSD 21 millions** go to OH&S.

* Data from Aggregates Industries not included** Data missing from four Group companies, including Aggregates Industries*** Most Group companies reported estimates

Total CSR spending 2005: USD 43 million

30%

4%

5%

6%6%

49%

OH&S***Donations and charityCSR coordinationCSR projects in the focus area educationCSR projects in the focus area community developmentCSR projects in the focus area infrastructure

Total CSR spending 2004: USD 29 million

39%

25%

7%

15%

6%

8%

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New business models

$$$

Maximizing social and economical value

Economic benefits For-profit commercial venues

Not-for-profit corporate philanthropy

Low

HighCan help in the short run, but is not self sustaining

Does not sufficiently serve the community

Sustainable livelihoods business

Social benefits

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Low cost housing – a new business opportunity Shelter and housing are a basic need.

As one of the world's leading supplier of cement, aggregates, concrete and construction-related services there is an opportunity to think about the poor as prospective customers.

Current projects

Holcim Apasco's MiCasa and Provivah projects and the prefabricated housing system Prefa PC of Holcim Costa Rica are good practice examples exploring new business opportunities while serving the needs of the poor.

Tsunami response: Reconstruction projects in Thailand, Sri Lanka and Indonesia

A partnership project between Holcim Lanka and Ceylinco Grameen aims at offering a solution to the housing needs of Sri Lanka‘s poor by combining micro credit with a low-cost housing concept

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Commercial component

Evaluation of the market potential, actors, partners, available resources and subsidies

Technical component

Development of a model house with high quality at the best possible price

Identification of the appropriate building material (cement, binders, others,…)

Capacity building & livelihood creation

Training and technical support

Support to local government and community planning

Access to building

materials

Distribution channels

Access to financial services

Provision of housing micro credits in partnership with a suitable organization (e.g. MFI foundations, donors)

Possible components of a project

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Low-cost housing models according to target group

Provivah, Mexico

House-for-Life, Sri Lanka

Mi Casa, Mexico

Holcim-GTZ, Aceh, Indonesia

LCH, Java, Indonesia

Prefa, Costa Rica

Mahagedera, Sri Lanka

Holcim-Gov., Ecuador

Aff

orda

ble

ho

usin

g

galing Mason, Philippines

Focus of the model on:

Commercial solution

Technical solution

Financial solution

Access to material

Skill/Capacity Development

Social tier 1Annual income p.c.:> $20,000Population in billions:0.75 – 1.00Purchasing power in billions: $ 15,000 – 20,000

Social tier 2 & 3Annual income p.c.:> $1,500 - 20,000Population in billions:1.50 – 1.75Purchasing power in billions: $ 15,000 – 18,000

<$2

>$2

Bas

is lo

w-

cost

hou

sin

g

Social tier 1Annual income p.c.:< $1,500 Population in billions:4.00Purchasing power in billions: $ 6,000

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Mi Casa - Holcim Apasco, Mexico

Overview Projecthistory and main outcomes, geographical focus and target group

Project History Project started in 1995, bringing together wholesalers, local

government and credit institutions Launch of Mi Casa “reloaded” in 2005

Main outcomes Construction or improvement of about 400,000 houses in

Mexico supported over the last six years.

Geographical focus and target group All over Mexico People with a daily income of more that USD 3 per day

1. To help people self-build to an acceptable standard

2. To improve the availability of affordable construction material

3. To become the leader in the bag market

4. To maintain a close relationship with distributors and clients

Budget: $ 4,029,000.00 / 364,286 USD (Exchange rate 11.06) Revenue: $83, 598,644.00 / 7,558,648 USD (Exchange rate 11.06)

ProjectObjectives

Budget and expected revenue 2005

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CASAKIT - Holcim Ecuador

OverviewProjecthistory and main outcomes, geographical focus

Project History Pilot project implemented to explore materials, workforce

from January 2002 to June 2002. Final development of project on company land in July 2002. Creation of “Fundacion Procasa”. Two models of housing were developed and built as part of

this project. CasaKit 01 (40 m2) y CasaKit 02 (46 m2). Today only one model is produced (CasaKit 02).

Main outcomes 686 units of CasaKit 01 were built between April 2003 to

August 2003. 266 units of CasaKit 02 were produced until January 2005. 206 units of CasaKit 02 are currently being produced,

handover planned for February 2006.

Geographical focus and target group Urbanization “Mucho Lote” in Guayaquil, property of the

municipality of Guayaquil. People below USD 3 per day.

1. To provide a housing solution for the project „Mucho Lote“ in the municipality of Guayaquil.

2. To achieve a cost-benefit balance with impacts on social problems.

3. To develop an industrial housing solution involving low-cost concrete and other components.

4. To strengthen Holcim Ecuador’s social image.

ProjectObjectives

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CASAKIT - Holcim Ecuador

Overview

Main learnings

Learning It is possible to develop high quality products for people who otherwise don’t have access to

decent housing. The houses can be produced at the real costs of a council house (low cost housing). A simple way to respond to Government requirements is the creation of a foundation. An

example: PROCASA. It is essential to control the costs in this kind of housing. The product (house) needs to be adaptable to environmental requirements.

Today 1.2 million USD are budgeted annually for PROCASA Holcim is perceived to be delivering a service to the community

Budget and expected benefits

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House-for-Life project - Holcim Lanka

Overview Projecthistory and main outcomes, geographical focus and target group

Project History November 2004, Evaluation of partnership opportunity and

preliminary project definition Mid-December 2004, Signing of Memorandum of Understanding Dec./Jan., Tsunami delays initiation of the project Spring/Summer2005, Construction of first 7 houses in the context

of the project Nov./Dec. 2005, First evaluation of the project

Main outcomes First houses built Partnership with Ceylinco Grameen established, evaluated Next steps defined

Geographical focus and target group Communities in the South of Colombo Peope with in income of USD 3 per day and more

1. To offer a housing solution to Sri Lanka‘s poor

2. To establish a partnership with Ceylinco Grameen

3. To provide products and services to a so far unserved target group

Fund with Ceylinco Grameen established of $50,000 Reinvested interest of $2,000 100% collection rate

ProjectObjectives

Budget and expected benefits

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House-for-Life project - Holcim Lanka

Overview

Main learnings

Learning Construction is delayed due to insufficient management of the construction by the house

owner. This is increasing housing costs. Initial training to manage the construction plan will help.

Shop Houses not only assist in poverty alleviation but create an opportunity to educate the lower strata of society on being independent.

Frequent project reporting would have helped to monitor the project more efficiently. It is difficult for Holcim Lanka to gain funds through development agencies, however alternates

like ‘securitised housing’ partnership are promising.

Adding incremental funds to ‘House for Life’ project will not create a significant impact to housing situation in Sri Lanka. We need breakthrough solutions.

Partnership with a networked, efficient and connected Micro Finance Institution will remain critical to manage the retailing of the business.

Catering to diverse land sizes & design needs through engineering & construction expertise is essential.

Sufficient resources to introduce technical advisory and project management to prevent the escalation of costs due to delays & inefficient use of raw materials must be considered by Holcim.

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Prefa - Holcim Costa Rica / Productos de Concreto

OverviewProjecthistory and main outcomes, geographical focus and target group

Project History 1965: Launch of new housing system, consisting of columns and

panels 1985: Introduction of pre-stressed columns and new joints

between the panels Casapac: Development of a solution that can be packed and sent

on a truck, including all material and components. 2000: New, and lighter Prefa system 2005: Elevated houses and two story prefab houses

Main outcomes Offering of an industrial product of high quality plus additional

services. Industrialization of the construction process. Achievement of an important relation with government. Coverage of the whole country. Program targets persons with more than USD 5 per day.

1. Provide a high-value, engineered solution through innovation, based on cement.

2. Develop the company brand equity and the prefabricated product image in general.

3. Increase the competitiveness in the construction sector providing environmentally friendly products, reducing waste and speeding up construction.

4. Facilitate the access of low-income families to low-cost housing.

5. Foster employment generation.

Estimated sales for 2005: 36,000 concrete tons (4,500 houses) Expected sales for 2006: 40,000 concrete tons (5,000 houses), $5 MM revenue

ProjectObjectives

Budget and expected revenue

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Prefa - Holcim Costa Rica / Productos de Concreto

Overview

Main learnings

Learning The housing deficit created a new market where the shortest construction time, the lowest

costs, the lowest level of skills required and, the lowest level of waste, were the key success factors.

Proactive communication helped to handle initial negative perceptions regarding the appearance of the material, that was so far primarily used in farms.

Extensive research and development was needed to improve the quality of the product in order to meet the customers’ expectations.

The new Seismic Code recommendations in design and construction phases needed to be implemented.

Durability and flexibility of the solution are the most important advantages of the system in comparison with other options available on the market.

Engagement in a process to get a clear understanding of customers’ needs and wants have changed the product dramatically and ensured the success of the project.

A permanent R&D program was crucial for product development. Long-term goals must be set and the organization must provide an internal structure able to

support the strategy.

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Galing Mason, country-wide training program for masons, Holcim Philippines

Partners TEDSA (government agency) Design/approval of curriculum, program implementation Assessment and certification of skills

Construction industry Assist in curriculum development and establishment of

criteria for awards Program implementation

Project recipients Selection of project sites/provision of resources

1. To enhance knowledge and skills, and to promote the image of masons

2. To promote concrete technology and appropriate use of concrete products

3. To engage in partnerships with the government, the construction industry and NGOs to promote and transfer masonry skills and to contribute to improving infrastructure

Project Objectives

Holcim ‘galing Mason Training: Basic and advanced masonry skills training.The 7-day training program is open to uncertified masons, offering skills training, competition, assessment, and skills certification. Masons received tools and subsidy while they participate in the construction of houses, schools, and other community facilities.

Holcim ‘galing Mason Olympics: local regional to world masonry competitions. A showcase of local masons’ skills through various levels of competition.

Holcim ‘galing Mason Award: Annual search for outstanding mason. Participants are nominated and awarded based on their skills and level of dignity they have acquired and shared with family, community, and society in their everyday life as a mason.

Capacity building and livelihood creation

Type of training activities

Accompanying CSR activities

Contributions to community development through construction of houses, schools or other community facilities as integral part of the training program.

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Housing Program “Ciudad Bolívar”, Holcim Colombia

Overview

History and main results

Project histroy En desarollo de su política de responsibilidad social y

teniendo como marco para el meejoramiento de la calidad de vida de la población que habita en las zonas de influencia de las actividades de la empresa, Holcim subscribío un convenio de cooperación interinstitutional con la Caja de la Vivienda Popular en el mes de julio del año 2005, con una duración inicial de 12 meses.

Main results Desarollo de un conjunto de acciones de carácter técnico,

social, administrativo y financiero para lograr que und conjuncto de 100 familias puedan llevar a cabo procesos de mejoramiento de sus viviendas o de construcción de unidades habitationales en sitio proprio.

Geographic focus and target group El proyecto enfoque sobre tres Unidades de Planeación

Zonal – UPZ – de Localidad de Ciudad Bolívar en la cual se encuentra la planta de producción de agregados “Manos”.

1. Housing improvements for 78 houses

2. Construction of 22 new houses (in collaboration with Idipron – public entity aiming at working with vulneable population)

3. Training of masons, inhabitants and beneficiary families with regard to issues such as housing, urban norms, and architecture

Project Objectives

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Opportunities Exploring new markets with the opportunity

to tap a yet unserved market segment and the possibility of increasing the share in the low-cost housing segment

Building of reputation Pioneer role in low-cost housing in

combination with microfinance Increasing customer base

Summary low-cost housing models Holcim Group

The housing deficit that is existing in all LATAM countries offers an opportunity to become leader in the low-cost housing market sector while living up to social responsibilities and tapping a yet unaddressed market segment with a high potential

Project Rationale

Perceived challenges / opportunities

Although there is a big market potential in relation to the population with less than USD 2 per day, most programs focus on people with USD 5 per day because it is more practicable and financing is less of a problem. This approach, however, requires accompanying measures to improve the situation of the population at the bottom of the pyramid

Market Component

Holcim Costa Rica and Holcim Apasco run their Prefa and Mi Casa program without any partners, while Holcim Indonesia partners with GTZ, Holcim Lanka with the National Building Research Organization and Ceylinco Grameen. For ProVivah Holcim Aspaco partners with the ProVivah Fund.

Subsidies are available to low-income families in Costa Rica and Mexico. In Mexico, however, government programs are not sufficient to tackle the existing housing deficit.

No subsidies are available in Indonesia and Sri Lanka-

Market potential

Partners

Available subsidies

Challenges Expansion of basic housing solutions Land issues in rural areas Financing services offered to clients Collaboration with providers of subsidies Local technical skills Program monitoring Up scaling of programs

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The distribution of the final product has a wide range from direct sales by the program unit in the company for the urban areas and distributors in rural areas in Costa Rica and distribution by specialized Mi Casa distributors in Mexico to distribution via the program partners like in Sri Lanka.

The more successful program have a special unit that is also involved in distribution of the final products.

Access to building material

The different initiatives offer either: a pre-fabricated housing solution or incremental Do-It-Yourself (DIY)-building in the traditional way with technical advice

provided via the program.

TechnicalComponent

Type of solution offered

Building material used

Distribution of solution

The different programs use a wide variety of building material including: cement, aggregates, wood, steel, fiber-cement panels, aluminium, copper-PVC, tiles, pre-cast sewage, compressed earth blocks, concrete frames and others

Most materials are sourced locally, in the case of Indonesia from local SMEs

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Promotional and technical brochures and booklets (Costa Rica) Extensive technical advise on self-building (Mexico) Conduction of mostly extensive training programs for different audiences, including end-

users (Costa Rica) Running of an extensive training program for masons (Philippines)


The programs of Holcim Lanka and Holcim Indonesia offer financial services (micro credits) as a key element of their solution.

Holcim Costa Rica offers credit services only to contractors, information about financial services offered by other organizations is provided to the end-customer.

Mi Casa offers credit options via distributors and is evaluating other options in collaboration with an MFI.

Financial services

Availability of credit services

Credit partners

Mode of collaboration

Holcim Lanka partners with Ceylinco Grameen, a well-known and successful MFI.

In the case of Sri Lanka, close partnership with Ceylinco Grameen, regulated by a MoU. Credit options in other countries offered through collaboration with distributors.

Type of training activities

Accompanying CSR activities

Self-construction training to end-users, training programs on site Provision of blue-prints of community facilities to be constructed Support for income-generating activities

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Main learning/findings

Overview

Technical solution The low-cost housing market requires a solution that offers the shortest construction time, the lowest price, lowest

cost, lowest level of construction skills required and the lowest level of waste and at the same time a high quality. It is essential to offer solutions that allow incremental building. Prefabricated building parts seem to be efficient for many low-cost housing programs. Durability, flexibility and adaptability to local circumstances are other crucial success factors.

Internal organisation and stakeholder involvement The company internal structure must be able to the support the strategy and implementation of a low-cost housing

program. A special unit needs to be established to ensure the implementation of the low-cost housing program. Financing, which is the main entry barrier for clients in this market segment, needs to be an integral element of any

low-cost housing program. Low-cost housing programs will vary from country to country and must be based on a thorough understanding of

the clients cultural and social values. Stakeholders’ (in particular house builders’) involvement in the design of the low-cost housing solution ensures the

meeting of needs. Partnerships with NGOs and community organizations, in order to build trust, and with professional organizations,

in order to facilitate program implementation, are crucial.


Training self-builder and clients in construction skills is essential in order to keep the prices for the final product down and the quality high.

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Content

About Holcim

Low-cost housing


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Discussion

Questions?

What do you think how companies can scale-up projects in order to reach a considerable impact?

How to combine the market-driven with the community-driven approach?

People at the very bottom of the pyramid can‘t benefit from low-cost housing solutions. What can be done to move them up higher in the pyramid?

How do you suggest to measure the success of BOP-projects?

session 2.4 holcim case study - stefanie koch

Documents

kos holcim global

holcim group support

mission of holcim

kos countries

kos content

kos balance

lch cambridge latin

kos triple