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Critical analysis of Grameen Danone Food LTD case as a model of sustainable
private-NGO joint venture
Thesis · April 2018
DOI: 10.13140/RG.2.2.32675.09761
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Critical analysis of Grameen Danone Food LTD
case as a model of sustainable joint venture,
for the attention of Danone executive board
April 2018
Student ID number: 10233566
Word Count: 2200
Abstract
The present report will analyze strengths and weaknesses of the collaboration
established by Group Danone and Grameen Bank in Bangladesh. At first, an
overview of the partnership’s key features will be provided, as well as a theoretical framework to better understand the nature of a Social Business Enterprise.
We will then discuss the resources employed and the motivations of the two
parties to enter the collaboration, relying on relevant theory presented as a
background. A detailed description of how the partnership addresses the three
pillars of sustainability represents the core of the report. Finally, suggestions to
improve the collaboration and its efficiency will be provided. Additional information about different themes of the report can be found in the Appendixes.
Contents
1 Introduction
1.1 Social Sustainability . . . . . . . . . . . . . . . . . . . . . . . . .
3
3
2 Grameen-Danone collaboration:
2.1 Organizations involved . . . . .
2.2 Grameen Danone Food LTD . .
2.3 GDFL as a Social Business . .
2.4 Aim of the partnership . . . . .
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4
4
5
8
key features and
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goals
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3 One partnership, many interests: Why GDFL?
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3.1 Theoretical background . . . . . . . . . . . . . . . . . . . . . . .
9
3.2 MNE-Nonprofit collaboration: impact the Bottom of the Pyramid 9
3.3 Motivations of the parties . . . . . . . . . . . . . . . . . . . . . . 11
4 How does GDFL enhances sustainability?
4.1 How GDFL enhances Social Sustainability . . . .
4.2 Social goals through economic achievements: how
sustainable? . . . . . . . . . . . . . . . . . . . . .
4.3 An eye for the environment . . . . . . . . . . . .
4.4 GDFL and UN SDGs . . . . . . . . . . . . . . .
. . . . . . . . .
can GDFL be
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .
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14
17
17
5 Conclusions and suggestions
18
5.1 Environmental Sustainability . . . . . . . . . . . . . . . . . . . . 18
5.2 Economic Sustainability . . . . . . . . . . . . . . . . . . . . . . . 18
5.3 Social Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . 21
Bibliography
22
A Corporate Social Responsibility
26
B Grameen Bank history and features
28
C Malnutrition in Bangladesh
32
D Why Bogra?
36
1
E B2B and B2N partnerships comparison
F Analysis of Bangladesh dairy industry, market
segments
F.1 Available market and expenditure on food . . . .
F.2 The Dairy Market . . . . . . . . . . . . . . . . .
F.3 Customer segments . . . . . . . . . . . . . . . . .
38
and customer
. . . . . . . . .
. . . . . . . . .
. . . . . . . . .
40
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G GDFL historical criticalities and solutions
43
H Scientific supplement
45
2
Chapter 1
Introduction
1.1
Social Sustainability
1.1.1 The debate around sustainability issues usually refers to the concept of
sustainable development in terms of environmental challenges (Vallance et al.,
2011). However, both early formulations of sustainable development, such as the
Burtland Report (WCED, 1987), and more recent ones, such as the UN SDGs
(United Nations, 2015), have a clear social aspect at their core. Social sustainability, appealing to principles such as safety, equity, diversity, democracy and
welfare (McKenzie, 2004), is one of the three main pillars enabling sustainable
development to be achieved (Littig and Griessler, 2005). The Corporate Social
Responsibility (see Appendix A) of companies operating in poor and developing
countries requires them to consider and address the satisfaction of basic needs of
their population as a fundamental indicator of social sustainability (Littig and
Griessler, 2005). Key themes of social sustainability according to the United
Nations are shown in Appedix A as well.
1.1.2 The present report will analyze how Danone and Grameen Bank founded
a joint venture aimed at improving Social Sustainability in Bangladesh. The report will address inter-organizational structure, motivations and business model
of the joint venture, as well as critiques and suggestion to provide the Danone
management board with tools and benchmarks to evaluate whether the partnership was successful and whether it could be used as a trial for future sustainable
collaborations.
3
Chapter 2
Grameen-Danone
collaboration: key features
and goals
2.1
Organizations involved
• Danone and Danone Communities
With almost 25 billion euro in revenue reached in 2017, Group Danone is a
global market leader for food and dairy products (Danone, 2018). Simultaneously the partnership with Grameen Bank, Danone created the Danone
Communities Found as a way to repeatedly invest is social projects (Sardana, 2013). On its end, Group Danone now controls its part of the venture through Danone Asia PTE and Danone Communities Fund (ibid).
• Grameen Bank
Established in 1983 by the Bangladeshi economist Muhammad Yunus, the
Grameen Bank is a microcredit institution, managed by the Government
of Bangladesh since 2013 (Yunus et al., 2010; Quadir, 2013). The Grameen
Bank, defined by its founder “the bank of the poor”, currently lends money
to almost 9 million people, 96.5% of which are women and 68% of which
crossed the poverty line (Grameen Bank, 2017). The repayment rate of
the loans is over 99% and the bank has always been profitable aside from
three years (ibid; Yunus et al., 2010). For further information on Grameen
Bank history and features, see Appendix B.
2.2
Grameen Danone Food LTD
2.2.1 Grameen Danone Food LTD (GDFL) is a Social Enterprise (SE) founded
by Danone and Grameen Bank as a 50-50 joint venture (Yunus et al., 2010).
4
Operating in Bangladesh, it is considered the first SE established with the aim
of fighting malnutrition and creating employment opportunities in rural communities (Yasmin, 2016). The company’s explicit mission is to “reduce poverty
by a unique proximity business model working with daily healthy nutrition to
the poor” (ibid).
2.3
GDFL as a Social Business
Figure 2.1: Comparison among Social Business and regular business over two
variables: profit maximization and social impact (Source: Yunus, 2010)
2.3.1 A Social Enterprise is a company which aim is to benefit people and communities while being financially sustainable (Osberg and Martin, 2015). Hence,
they are radically different from standard companies, aimed at maximizing profits, but also from NGOs and philanthropic foundations (Yunus, 2010; Zahra et
al., 2009; Ghalib and Hossain, 2008). In Social Enterprises, both economic and
social goals are at the core of the business model, so that the social impact
does not rely on donations and charity but rather on an economical sustainability typical of the private sector (Yunus, 2010; Thompson and Doherty, 2006;
Dorado, 2006).
2.3.2 Hence, in this form of business profitability is a necessary step to achieve
economic sustainability and in turn focus on the social goals (Maurel, 2009).
However, Yunus (2010) defines GDFL as a Social Business Enterprise (SBE),
which is a form of Social Enterprise where no dividends are paid after the initial
investment is returned to the investors. Any profit arising from the operations
is reinvested in the company itself. There are 6 key features that Yunus (2006)
identifies in SBEs, as showed in Table 1.
5
Table 1: Key features of SBEs (adapted from Yunus, 2006; Ghalib and Hossain,
2008)
1
“An SBE is designed and operated as a business enterprise to pass on
all the benefits to the customers. It reverses the profit maximisation
principle by adhering to the benefit maximisation principle. In an SBE,
benefits of the business are passed on to the target group, rather than
being translated into profit for the investors.”
2
“SBEs are non-loss-non-dividend companies. The bottom line for them is
to operate without incurring losses, while serving the people - particularly
disadvantaged people - and the planet, in the best possible manner.”
3
SBEs will operate in the same market and compete with standard companies, as well as other SBEs. The competition among SBEs pushes them
towards improving efficiency and thus their sustainability.
4
SBEs should achieve profitability but they cannot pay dividends to investors, other than the repayment of the initial investment. “SBEs should
generate surplus for expansion, improvement of quality, increasing efficiency, introducing new technology, innovative marketing to reach the
deeper layers of low-income people, particularly women, children and
disadvantaged communities, and for undertaking research and experimentation, to improve and diversify products and services.”
5
“Investors will invest in an SBE for a return much broader than their
immediate gain in dollars and cents. They invest in an SBE because they
feel an urge to make a difference, and share their lives with other people.
They invest because they feel that they can contribute their creativity,
innovativeness and entrepreneurial abilities to solve intricate social and
economic problems around them. By doing that, they can improve the
living conditions of all living beings, including their own. They do not
see an SBE as a vehicle for making private gains.”
6
Investors can withdraw their investment at any point, provided they sell
their shares to existing or new shareholders.
6
Figure 2.2: Relationship between Social Enterprises and other businesses according to Ghalib et al. (2009)
2.3.3 Humberg and Kleeman (2014) identify three key strengths of SBEs: 1)
they do not rely on fundraising and aids, 2) just as for-profit companies, they can
scale up and replicate successful initiatives, and 3) they can explore business
opportunities in markets ignored by standard businesses. The latter point is
maximized in a MNE-Nonprofit partnership, as it will be discussed in Chapter
3. Humberg (2011) describes four broad ways in which SBEs can be sustainable
(table 2), and GDFL adopts all four approaches in its business model (see
Chapter 4 ):
Table 2: 4 SBE approaches to sustainability (Humberg, 2011)
Conversion
Introduction
Innovation
Collaboration
Convert poor communities from aid beneficiaries into active
participants
Introduce short-term development programs into commercially viable business solutions
Create opportunities for experimentation, innovation, replication and growth
Create avenues for cross-section collaboration for private and
public sectors for social development
7
2.4
Aim of the partnership
2.4.1 Malnutrition is “the bane of developing economies” (Sardana, 2013).
Bangladesh is one of the most underdeveloped countries in the world (Tsuboi,
2008), and according to the UNDP (2007), 48% of the children under the age of
5 were underweight. Bangladesh is still one of the worst performing countries
worldwide in terms of anemia, children’s stunting and wasting (see Appendix
C). At its establishment, GDFL adopted 4 objectives (Sardana, 2013):
1. To bring health through nutrition at very affordable price for all Bangladeshi
children;
2. To 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;
3. To preserve non-renewable resources as much as possible;
4. To be profitable to ensure economic sustainability.
2.4.2 Hence, GDFL impacts all three pillars of sustainable development as
described in Lonzano (2008): economic, environmental and social aspects are
present in its mission. Figure 2.3 provides a visual representation of the population segments at the core of GDFL mission:
Figure 2.3: Bangladeshi population divided by daily income: GDFL adresses
the poorest segments (Source: Maurel, 2009)
8
Chapter 3
One partnership, many
interests: Why GDFL?
3.1
Theoretical background
3.1.1 Collaboration between firms represents an important tool to improve
the social sustainability of the parties involved, thus “stimulating the transition
towards a more sustainable society” (Niesten et al., 2016). Common reasons for
companies to enter alliances are the acquisition of knowledge and skills (Kogut,
1988; Doz et al., 1989; Hamel, 1991; Khanna et al., 1994), possibly through
Open Innovation (Frankenberger et al., 2014), and improvement of strategic
position (Kogut, 1988). However, an interesting point of view in evaluating the
partnerships aimed at improving sustainability is the acquisition of legitimacy
and social support for the firms involved (Baum and Oliver; 1991). In turn,
recent researches have shown that acquired legitimacy and social support can
be capitalized as value for customers (Luo and Bhattacharya, 2006; Bronn and
VIdaver-Cohen, 2009), becoming profitable assets of a company. Out of the
many ways in which firms collaborate (Niesten et al., 2016; Kale and Singh,
2009), the present report refers to sustainable collaboration in the form of 50-50
joint venture, a preferred form of collaboration to avoid opportunistic behavior
from one of the parties (Jolink and Niesten, 2016), a risk to be considered in
MNE-Nonprofit partnerships.
3.2
MNE-Nonprofit collaboration: impact the Bottom of the Pyramid
3.2.1 Partnerships with NGOs and Nonprofit Organizations are extremely
useful for MNEs to enter new markets (Dahan et al., 2010). The so-called
Bottom of the Pyramid (BOP), which is the largest but poorest group of world
population living with less than $2.50 per day (Prahalad, 2004), represents an
9
important opportunity for businesses to expand their markets while improving
living conditions of people (Garrette and Karnani, 2010). By working with
poor producers, MNEs can benefit from market growth opportunities as well as
develop new capabilities for innovation to face challenges (McKague and Oliver,
2012). The improved economic conditions of poor communities as well as the
marketing of cheap products in the same areas can open new markets in which
companies can enter and grow (Thompson and MacMillan, 2010). Different
market-based approach for value creation towards poverty reduction are showed
in Figure 3.1:
Figure 3.1: Different market-based approaches to poverty alleviation (Source:
McKague and Oliver, 2012)
3.2.2 Again, all four factors considered in Figure 3.1 are present in the GDFL
collaboration: in the supply chain, the poor are producers and often entrepreneurs
financed by Grameen Bank (Rodrigues and Baker, 2012), they are employees of
the company and finally consumers of the product.
3.2.3 MNEs-Nonprofit collaborations (or B2N, as opposed to B2B), represent
a challenge in terms of Absorptive Capacity (ACAP), defined as the “firm’s
ability to learn from its external environment and leverage new knowledge to
improve performance”, due to the structural difference between the organizations
10
involved (Murphy et al., 2013; Cohen and Levintal, 1990). See Appendix E for
a further comparison between B2N and B2B collaborations in terms of ACAP.
3.2.4 B2N collaboration allows companies and Nonprofit to deliver economic
and social value through the implementation of a collaborative business model
(Dahan et al., 2010). Before establishing GDFL, nor Danone nor Grameen Bank
were able to fight poverty and malnutrition in an economically sustainable way
by themselves: the collaboration made it possible, as represented in Figure 3.2
(Case 3):
Figure 3.2: Models of collaboration between MNEs and NGOs, the same applies
to Nonprofit organizations aimed at enhancing sustainability (Source: Dahan
et al., 2010)
3.3
Motivations of the parties
3.3.1 The most appropriate theoretical framework to analyze Grameen Danone
collaboration is the resource-based view, arguing that “firms use collaborative
governance forms to access knowledge, resources and technologies of other firms”
(Niesten et al., 2016). Table 3 analyzes the resources employed and the expected payoffs (motivations) of the two firms:
11
Table 3: Resources and motivations of the partners (Bronn and Vidaver-Cohen, 2008; Yunus et al.,
2010; Dahan et al., 2010; Dacin et al., 2007; Burke and Longsdon, 1996)
Resources
Grameen Bank
Group Danone
Capital: 50% of the total investment;
Institutional support: the Grameen Bank is
controlled by Bangladeshi government;
Brand recognition: the Grameen family of enterprises are extremely popular in
Bangladesh;
Social support: Yunus and the Grameen
Bank are extremely well perceived among poor
populations and communities;
Network of producers / clients of the bank;
Capital: 50% of the total investment;
Managerial capabilities of a MNE;
Geographic and demographic knowledge of
the area;
Visibility through communication channels.
Motivations
Moral Motives
Engaging in sustainability is morally right to
do
- Eradicating poverty and malnutrition from
rural communities in Bangladesh, thus accelerating the development process of the country;
- GDFL establishes a precedent for a possible
successful B2N partnership, enhancing future
opportunities of gathering investments from
the private sector;
- Should GDFL become profitable on the long
run, the profits can be transferred to other
companies of the Grameen family;
- Grameen employees have the opportunity to
learn business practices from a global leader
in the private industry, allowing them to
improve the efficiency of Grameen companies
(knowledge acquisition).
Grameen Bank is a Nonprofit organization:
even though the last three points are partly instrumental (profit, knowledge acquisition and
skills), they are morally driven in the “big picture”.
12
Brand value with customers;
Global sourcing;
Established supply chain for imported ingredients (see Chapter 4);
Technical knowledge in dairy production;
Business knowledge in dairy market;
Marketing tools and expertise;
Visibility through communication channels.
Institutional Motives
Engaging in sustainability releases institutional
pressure - Social legitimacy arising from the
association between Danone and Grameen
brands;
- Improved goodwill among stakeholders;
- Increased legitimacy of the dairy industry:
yogurt improves health conditions.
Instrumental Motives
Engaging in sustainability can have a direct impact on profitability
- Opportunity to open a new market for their
products in Bangladesh;
- Improved image of Danone dairy products as
healthy and useful;
- Improved image of Group Danone as a
company that actively engages in Corporate
Social Responsibility.
Moral Motives
Engaging in sustainability is morally right to
do
- Danone employs capitals for a good
cause: fighting poverty and malnutrition in
Bangladesh.
Chapter 4
How does GDFL enhances
sustainability?
4.1
How GDFL enhances Social Sustainability
4.1.1 The first and main objective of GDFL is a pure social goal: to fight
poverty and malnutrition in Bangladesh (Sultan, 2006). The strict relationship
between these two conditions is showed by Ghalib and Hossain (2008) in Figure
4.1.
Figure 4.1: The vicious circle of poverty and malnutrition (Source: Ghalib and
Hossain, 2008)
13
4.1.2 On the malnutrition side, GDFL produces a fortified yogurt called Shokti+
enriched with vitamins, iron, protein, iodine, zinc and calcium (Sardana, 2013).
This yogurt is promoted in rural communities and sold at cheap price: 6Tk per
60g cup, equivalent to 0.07$ (Rodrigues and Baker, 2012). GDFL also generates
economic value all along its supply chain and employees, as discussed in section
4.2. Figure 4.2 shows the relationship between a company and the stakeholders in terms of sustainability: we discussed in Chapter 3 the payoffs for GDFL
owners; we will now address how its business model enhances the condition of
its suppliers, employees and communities involved.
Figure 4.2: The relationships between a company and its stakeholder stretch
the impact that such a company can have in both economic and social terms
(Source: Hutchins and Sutherland, 2008)
4.2
Social goals through economic achievements:
how can GDFL be sustainable?
4.2.1 A study undertaken by researchers at the Johns Hopkins University and
GAIN - Global Alliance for Improved Nutrition (Sazawal et al., 2013; Appendix
H) demonstrated the positive impact on health among children who eat Shokti+
several times a week: GDFL is actively fighting malnutrition in rural communities. However, as explained in Section 2.3, the nature of a SBE implies that it
needs to be financially sustainable to keep its operations going: this is the firm’s
internal economic sustainability, that allows it to achieve its mission (Yunus,
2010). In fact, GDFL also affects the economic condition of its suppliers and
employees, through a process that we can consider improved external economic
sustainability, which is a part of the social profit arising from the SBE business
model (ibid). How does that happen? We will now analyze in detail the business model of GDFL. A further analysis of Bangladeshi dairy industry, market
14
features and customers segments can be found in Appendix F.
Table 4: GDFL business model at a glance.
Mission Statement
• Alleviation of malnutrition and poverty reduction though a business approach: the employment of a proximity business model, operation on a
non-loss basis, repayment of the capital invested.
(Yasmin, 2016)
Vision
• To create up to 50 factories, that provide fresh and healthy dairy items to
Bangladeshis by 2020.
(Yasmin, 2016)
Financial Objectives
• Be a non-loss operation company; with no shareholder losing money in
their participation;
• Be able to generate enough surpluses to pay back the invested capital to
the parties as early as possible and reinvest the remaining profits in the
company.
(Yasmin, 2016)
Social Objectives
• “Allow low-income, nutritionally deprived populations (especially children)
to have access (regarding affordability and availability) to daily healthy
nutrition to improve their nutritional condition”;
• “Poverty reduction is to improve the economic conditions of local suppliers
(farmers) and helping them to improve their practices (upstream), involving the local population via a low-cost / labor-intensive manufacturing
model (production), and contributing to the creation of jobs though the
distribution model (downstream)”.
(Yasmin, 2016)
Key Product
• Shokti+ fortified yogurt, produced through Danone expertise and based
on local raw milk;
15
• Job opportunities: The yogurt production in Bogra farm, GDFL headquarter, employees more than 100 local workers. Danone experience in
the dairy production industry allowed GDFL to build a production site
with advanced and easy-to-use machines: almost all the workers are either
unskilled or semi-skilled.
(Yasmin, 2016; Rod and bak, 2012; Sardana, 2013)
Supply Chain
• Proximity based model: supply, production, retail and consumption of
Shokti Doi are as close as possible;
• Job opportunities: The milk is supplied by local small producers organized
in cooperatives, often clients of the Grameen Bank. The milk is collected
twice per day in chilling points all over the Bogra and Begtari regions.
Milk is supplied to GDFL by around 400 farmers;
• GDFL supply chain is socially sustainable according to the definition of
Hutchins and Sutherland (2005): it is aimed at distributing economic value
among a high number of small, poor suppliers.
(Rodrigues and Baker, 2012; Hutchins and Sutherland, 2005; Danone, 2016)
Distribution channels
• Job opportunities: the yogurt is distributed in rural communities by sales
ladies, who were in many cases beggars before working for GDFL. They
sell the product door-to-door and keep a commission of 1Tk every yogurt
sold. They are asked to meet the goal of 100 yogurts per day; GDFL takes
back the unsold packages. There were 260 “Grameen Ladies” employed in
2016;
• However, the 80% of the profits of GDFL comes from city sales, where the
yogurt is sold at double the price by shops and supermarkets;
• According to Group Danone (2016), 300,000 children were reached and
helped by GDFL yogurt so far.
(Rodrigues and Baker, 2012; Yanis; Sardana; Danone, 2017)
Marketing
• GDFL employs television commercials and ads to reach the city customers,
and organizes events in villages where the importance of nutrition is explained.
(Rodrigues and Baker, 2012)
16
Sales
• Rural sales: they represent the smallest share of sales volume, but they
are the reason why GDFL was founded in the first place;
• Regional sales: yogurts are sold in around 4.000 retail stores all around
the Bogra area;
• Urban sales: sales in the cities of Dhaka, Sylhet, and Chittagong represent
the 80% of GDFL revenue.
(Rodrigues and Baker, 2012)
4.3
An eye for the environment
4.3.1 Even though environmental sustainability is not at the core of GDFL
mission, the company has among its objectives to avoid harming the environment. The GDFL plant is powered by solar panels and adopts a strict protocol
for efficient use of water (Ghalib and Hossain, 2008). Moreover, the packaging
is 100% biodegradable and it melts in the ground after few days of disposal,
becoming a fertilizer (ibid).
4.4
GDFL and UN SDGs
4.4.1 In conclusion, we propose in Table 5 a useful comparison between
GDFL actions and the UN SDGs from Yasmin (2016):
Table 5: GDFL actions towards UN Sustainable Development Goals
Goal
GDFL actions
Zero hunger
Ensuring nutrition in the malnourished children in poor
areas of Bangladesh the main goal of GDFL.
Economic growth
GDFL creates job opportunities both directly and all
along its supply chain (see Table 4).
End poverty
Through the 1,600 jobs created, GDFL helps rural populations to move out of poverty.
Gender equality
Being a "Grameen Lady" is often the only option for
women in poor rural villages to be employed.
Innovation
The Bogra plant is a state-of-the-art production facility
with high technologies and low environmental impact.
17
Chapter 5
Conclusions and suggestions
5.0.1 In the twelve years since its foundation, GDFL had to face and address
a set of problems, as summarized in Appendix G. However, the collaboration
still presents some criticalities. In the present chapter, we will present the key
points where the partnership can be improved, based on the three aspects of
sustainability.
5.1
Environmental Sustainability
5.1.1 GDFL approach to environmental sustainability is already impressive
(see Section 4.3), considering that it is not a central aspect of its mission. Our
only suggestion is to limit the number of chilling points for milk collection,
which are spread around the region (Yasmin, 2016), and to power them though
solar panels. The refrigerators, working 24/7, should be up to date to be energy
efficient and to limit the warming effect on the outside.
5.2
Economic Sustainability
5.2.1 As discussed in Chapter 2, it is necessary for GDFL to be economically
sustainable to carry out its social mission. Moreover, the fact itself of improving the consumption of its products in rural areas works in both directions:
social and economic. Table 6 identifies the key problems and offers suggestions for GDFL economic sustainability, such as including new partners in the
collaboration, differentiate its products and delivery channels.
18
Table 6: Problems and suggestions to improve Economic Sustainability (Rodrigues et al., 2012; Bapat, 2011a/b; Sardana, 2013;
McKague and Oliver, 2012; Sazawal et al., 2013; Sandstrom, 2001).
Problems
Actions undertaken
Further suggestions
Small area covered
The rural communities reached by the Shokti+ are just
in the Bogra region, in a 50km radius from the production facility. GDFL planned to open new production
sites and to have as many as 50 of them by 2020. However, as of today, the Bogra plant is still the only one
opened.
GDFL claims that the Bogra plant alone contributed
to the creation of 1,600 direct and indirect jobs and allowed them to reach 300,000 children with the Shokti
Doi. It is clear how the expansion of the project is
a key step to scale up with an enormous potential.
Clearly, the financial instability did not allow GDFL
to expand as much as it was planned. We suggest that,
in addition to a slight change in their business model
(see following points), GDFL seeks a capital increase
by including a third party in the collaboration. This
could be an institutional agency such as the World
Bank or the UN Capital Development Fund to provide a financial investment. On the other hand, a further logistic support in terms of supply chain can be
provided by CARE, an NGO that works directly with
milk producers in Bangladesh to improve their conditions and that already collaborated with GDFL. They
could formally enter the partnership and deploy their
resources in the sector to help the expansion.
The product is not attractive enough
To make it edible without refrigeration and with added
nutrients, the yogurt taste and consistency do not
meet consumers taste, especially after a few days out
of the production facility when it becomes more liquid.
GDFL increased the sweetness of the product and developed 4 different fruit flavors.
While the choice of yogurt has many positive aspects
in terms of supply and nutritional aspects, the lack of
refrigeration capacity in local villages seems to set a
high entry barrier. Danone already develops different
lines of fortified products in the same region, such as
rice biscuits in India. GDFL could add a second solid
and long-life product appealing to small crop or rice
farmers as suppliers. This product could be easier to
sell in rural communities, improving both economic
and social sustainability.
Continues on page 20
19
Table 6: Continues from page 19
Problems
Low profitability
Actions undertaken
Further suggestions
GDFL developed different lines of the Shokti+ with new flavors
and marketed them at a higher price in cities and shops, where
the 80% of the the total revenue comes from.
The addition of nutrients and the necessity of producing a yogurt
that doesn’t need refrigeration make its taste and consistence
less than optimal, especially for urban consumers. GDFL could
launch a separate line of yogurt thought specifically for urban
markets, to keep refrigerated and not- or less fortified, to better
meet the taste of consumers. It could be sold at a higher price to
target a different customer segment that would be attracted by
the strength of Danone brand, a different packaging and different
flavors. The profit would be spread on the same supply chain of
small poor farmers, and the increased profit would improve the
company financial performance.
As Sardana (2013) notes, yogurt is perceived as a dessert by
urban citizens, very popular at festivals, parks and other celebrations. Just as GDFL turned beggars into Grameen Ladies in
villages, they could start employing poor people in the cities to
sell Shokti+ with push-carts, very popular in the subcontinent
for ice-creams, in front of schools, festivals, parks etc., providing
employment in cities as well.
20
5.3
Social Sustainability
5.3.1 GDFL is already an example on how to solve social problems with a
business approach. Its limits largely depend on limited financial resources, and
the suggestions provided in Table 6 (page 19) are ultimately aimed at improving the social impact accordingly. There are however two aspects of GDFL
actions that are less dependent on its economical or organizational structure,
and that can be improved as proposed in Table 7.
Table 7: Problems and suggestions to improve Social Sustainability (Sazawal et
al., 2013; Callaghan-Gillespie, 2017)
Problem
Suggestion
A study from Johns Hopkins University and GAIN (See Appendix H)
showed that the fortified yogurt produced by GDFL positively affect the
growth and the blood values of children aged 5-15, but it does not increase their iron levels more than
it would the consumption of regular
milk or yogurts. The iron level, as
well as values improved, were still too
low even in yogurt consumers, and
even if the study considered the irrealistic consumption of 5 yogurts per
week.
How to fight children malnutrition
more efficiently?
Medical research shows that adding
micronutrients to a diet is not enough
to improve their blood levels significantly. This passage relies on the
absorption level, that is increased
if different nutrients from different
sources are taken together. Hence,
the suggestion present in Table 6
to develop new products will also increase the impact of the yogurt itself
if fats, proteins or other vitamins are
added.
Studies (Callaghan-Gillespie, 2017)
have shown that a proper nutrition
in pregnant women will decrease the
chance that their children will be underweight in their first years of life.
GDFL should add pregnant women
to their target segment and educate
them during the informative events
they already hold in villages. This
could also improve the revenues from
rural villages.
21
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25
Appendix A
Corporate Social
Responsibility
Figure A.1: Pyramid representation of Corporate Social Responsibility (Source:
Carrol, 1991)
The most succesful definition of Corporate Social Responsibility was given
by Archie Carrol (1979):
The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.
Carrol (1991) then theorized the four domains of CSR and their relationship
in the form of pyramid levels, as shown in figure A.1.
The pyramid should not be read in a hierarchical way from the top down: as
in the construction of a pyramid, the fundamental levels (economic and legal)
26
Figure A.2: Key themes of Social Sustainability (Source: Hutchins and Sutherland, 2008)
have the priority and allow further levels to be constructed (Schwartz and Carrol,
2003). The philanthropic domain is considered less important than the other
three by the author himself (ibid). It is in fact not natural nor expected from
a company to spend money without any return, even though it can be argued
that every philanthropic action carries at least some sort of return for the public
image of the company (Burke and Logsdon, 1996). Hence, the importance of
innovators such as Muhammad Yunus that can build a paradigm - the Social
Business Enterprise - where instead of philantropy companies can engage ethical
business at no costs and no profits, with a purely positive payoff in terms of
image, knowledge acquired and new markets creation.
In terms of ethical domain, Figure A.2 shows the key themes of Social Sustainability that companies must keep into consideration while doing business.
27
Appendix B
Grameen Bank history and
features
The Grameen Bank was founded in 1983 by Muhammad Yunus, who eventually
won the Nobel Prize in 2006. "Grameen" means "village": the bank was established to give loans to people who normally had no access to them by private
banks. The Grameen Group has now more than 30 enterprises and the bank itself operates in Bangladesh and abroad: 30 branches were opened in the United
States in the last years, where 100% of customers are women (Grameen Bank,
2017). In the next few pages, we will provide figures showing the key numbers
and results of Grameen Bank action. For the purpose of the present paper, it is
important to notice that almost the 50% of Grameen loans are directed towards
Agriculture and Livestocks segments: the bank is the key promoter of rural
entrepreneurship in the country, a factor that can be taken into consideration
in planning the future moves of GDFL (see Chapter 5).
28
Figure B.1: Key numbers of Grameen Bank - 1 (Source: Grameen Bank, 2017)
29
Figure B.2: Key numbers of Grameen Bank - 2 (Source: Grameen Bank, 2017)
30
Figure B.3: Breakdown of Grameen Bank loans by sector (Source: Grameen
Bank, 2017)
Figure B.4: Breakdown of GB loans for education by degree (Source: Grameen
Bank, 2017)
31
Appendix C
Malnutrition in Bangladesh
The situation of malnutrition in Bangladesh is nothing less then alarming. To
give a clearer impression of the extent to which such a condition is affecting
Bangladeshi public health, we will provide in the next pages some figures and
ranking showing the percentage of children population affected by wasting and
stunting, as well as women affected by anemia, a disease related to poor nutrition. By "wasting", the report refers to a low weight related to height (a
common synonym can be "underweight"). By "stunting", the report refers to
a low height related to age (a common synonym can be "underdevelopment").
The data are sourced by and collected from the Global Nutrition Report 2016
released by the International Food Policy Research Institute (2016). The source
will be cited as IFPRI (2016).
32
Figure C.1: Countries ranked from lowest to highest, stunting prevalence.
Bangladesh appears 107 out of 132 (Source: IFPRI, 2016).
33
Figure C.2: Countries ranked from lowest to highest, wasting prevalence.
Bangladesh appears 117 out of 130 (Source: IFPRI, 2016).
34
Figure C.3: Detail of countries ranked lowest to highest, prevalence of anemia in
women of reproductive age. Bangladesh appears 158 out of 185 (Source: IFPRI,
2016).
Figure C.4: Budget allocations to nutrition-specific and nutrition-sensitive interventions. Bangladesh allocation equals the 3,31% (Source: IFPRI, 2016).
35
Appendix D
Why Bogra?
1
Figure D.1: Bogra region in north Bangladesh
Bogra was chosen as site for production and as area of distribution for a
number of strategic reasons:
• It is within 250 kilometers of Dhaka, Bangladesh’s economic and political
hub. Around 250,000 people live in the district of Bogra (solid red in map
below) and about 35 million live in the Rajshahi Division, of which Bogra
is a part;
1 This
Appendix is entirely taken from Rodrigues and Baker (2012)
36
• The division is strategically located in Bangladesh’s northwest region and
well connected with the rest of the country by rail and road transport.
The Indian state of West Bengal is on Rajshahi’s western border and the
Rangpur, Khulna, and Dhaka divisions are the north, south, and eastern
borders respectively. The Jamuna (Brahmaputra) River defines Rajshahi’s
eastern border and the Padma (Ganges) River creates the southern border;
• In the dry season, the banks of these river systems are ideal for dairy cow
grazing. As a result, much of Bangladesh’s dairy industry is based in the
Division;
• Bogra is known as having some of Bangladesh’s best yogurt and other
milk-based sweets;
• The region also has high rates of malnutrition, providing GDF an opportunity to measure the impact of its yogurt on health.
Figure D.2: Geography of GDFL supply chain
37
Appendix E
B2B and B2N partnerships
comparison
Referring to Cohen and Levinthal (2000), Murphy et al. (2012) describe Absorptive Capacity as "a firm’s ability to learn from its external environment and
leverage new knowledge to improve performance." In their words:
Linking individual and organizational levels, the concept emphasizes
the cumulative and pathdependent nature of learning, and highlights
the processes, policies, and procedures that enable learning in an
organization. In Cohen and Levinthal’s original model, ACAP incorporates three distinct, although related, facets: the firm’s ability
to recognize the value of new information, its ability to assimilate it
into its own knowledge base, and the ability to apply it to commercial ends.
The ACAP is defined by different components: prior knowledge, assimilation
of new external knowledge, power relations, etc. Table E.1 in the next page
represents the authors (Murphy et al., 2012) attempt to define the major difference between "Business to Business" and "Business to NGO" collaborations
in terms of Absorptive Capacity. B2N partnerships have a lowest postential of
ACAP mainly due to a different organizational structures and different aims
regarding the partnership itself. This can be the case of GDFL, even though
Grameen Bank is not an NGO: the nature of SBE and the motivations pushing
them to join the partnership (See Chapter 3) make the GDFL collaboration
comparable to a B2N case scenario. In this respect, the different nature of the
organizations involved, while enhancing the complementarity of the resources
employed, can reduce the efficiency of GDFL governance.
38
Figure 1: Comparison and contrasting of B2B and B2N alliances relative to ACAP (Source: Murphy et al., 2012). The citations
in the table are not reported in the bibliography of the present report.
39
Appendix F
Analysis of Bangladesh dairy
industry, market and
customer segments
F.1
Available market and expenditure on food
Bangladesh population exceeds 150 million people, and over a half of them live
in more than 8,000 villages and rural settlements (Rodrigues and Baker, 2012).
Food is the largest expenditure in households, accounting for the 36% of the
expenditures for wealthiest families and 65% of the expenditures o among the
poorest ones (ibid).
F.2
The Dairy Market
Bangladesh production of dairy products is well over 2 billion liters per year
(Rodrigues and Baker, 2012). There are three main channels for dairy products
acquisition as showed by Rodrigues and Baker (ibid):
• "Self-production – up to 30 percent of milk-consuming households in villages and 69 percent of families living in chars (riverbank areas) produced
their own milk;
• Informal market – buying from neighbors, door-to-door salespeople, and
street vendors accounted for an additional 50 to 60 percent of consumption
in villages, 29 percent in slums, 24 percent in char areas, and about 49
percent for middle class consumers;
• Fixed market sales – milk purchased from formal retail outlets represented
less than 20 percent of village sales, over 70 percent of slum sales, and over
40
30 percent for upper and middle class consumers. With more supermarkets in cities around the country, middle and upper class consumers are
increasingly purchasing milk through established retail outlets."
Moreover, Smallholder milk producers supply all the domestic milk for the
informal traditional market and three quarters of the formal processed market
(Haque, 2009). Table F.1 provides a flow chart representation of milk price
from rural producers to rural and urban consumers:
Figure F.1: Milk price flow chart - based on 2007 data (Source: Haque, 2009)
41
F.3
Customer segments
Table 8, adapted from Yasmin (2016), describes the key features of GDFL
customer segments:
Table 7: GDFL customer segments (adapted from Yasmin, 2016)
Customers
Charateristics
Rural buyers
- Live in remote settlement
- Little purchasing power
- Lack nutritional awareness
Urban buyers
Lower class
-
Live in small cities
Little purchasing power
Little nutritional awareness
Product accessible through corner stores
Middle class
- Sufficient purchasing power
- General health awareness
- Product accessible through supermarkets
42
Appendix G
GDFL historical criticalities
and solutions
In the course of the twelve years since its foundation, GDFL had to face more
than one problem and to come up with solutions to face it. We will now summarize the major difficulties GDFL had to go through and the actions undertaken
as a response:
• Unrealistic business plan: a problem affecting the very beginning of
GDFL operations was a too optimistic pricing of the product. Shokti+
was initially marketed at 5Tk for customers in both rural and urban areas,
but the demand necessary to sustain such a price had been overestimated
by GDFL managers, that had to raise the price of cups to 6Tk in villages
and 12Tk in cities, and eventually to reduce portion of yogurt marketed in
villages from 80g to 60g (Sardana, 2013; Yasmin, 2016; Bapat, 2011a/b);
• 2008 crisis: the worst period of GDFL life was about 2 years after the
beginning of operations, where two events threatened the survival of the
enterprise. The financial crisis, with related increase in price of commodities, and a series of severe floodings that harmed farmers all around
Bangladesh made the price of raw milk to almost double from February
2017 to April 2017. GDFL had to inrease the price of a cup from 5Tk to
8Tk, and that resulted in losing 80% of rural market until they managed
to lower it to 6Tk for those consumers, and to increase the price to 12Tk
for urban consumers. GDFL launched a TV commercial in 2009 for urban
customers that was an immediate success, and the sale level recovered after the crisis, reaching 800,000 monthly cups sold (Rodrigues and Baker,
2012; Yunus, 2010; Yasmin, 2016);
• Product choice: as discussed in Chapter 5, the choice of yogurt as
product has some critical downwards. Even though GDFL managed to
make a formula that doesn’t need refrigeration, it still has to be consumed
43
no later than 72h from the production. Moreover, the taste didn’t meet
customers’ expectations initially, and the company had to make it sweeter
and to add different flavors eventually (Yanis, 2016; Bapat, 2011a/b);
• Cultural barriers: the traditional rural system in Bogra region does not
support women selling products door-to-door. GDFL organized almost
1,300 events in the first four years of activity to introduce the product
and its delivery system to villages, working on children engagement and
parents understanding of the importance of proper nutrition (Humberg,
2011; Sardana, 2013);
• Hygene: the original cup of Shokti+ was sold without spoon, and the
children used to eat it using their hands or bamboo sticks, raising hygene
problems. GDFL changed the design of cups to include plastic spoons in
them (Yasmin, 2016).
44
Appendix H
Scientific supplement
Without being too specific, in the following final pages we report some data
resulting by the Johns Hopkins and GAIN study on GDFL fortified yogurt in
Bangladesh (Sazawal et al., 2013). The study considered the different in children health based on three variables: no consumption of yogurts, consumption
of non fortified yogurts and consumption of fortified yogurts. The study shows a
positive effect on yogurt consumption of any type, with sometimes slight, sometimes significant variations in favor of fortified yogurt. Specifically, the fortified
yogurt group (FY) showed improved Hb (hemoglobin) as compared to non fortified yogurt group (NFY), as well as a lower decrease in iodine and protein
levels over time. Most importantly, the FY group showed a better height gain
velocity than the NFY group, even though there was not relevant difference in
terms of weight gain velocity and body mass. In the next pages, we will provide
tables showing the results of the study as well as the nutritional composition
of a 60g cup of GDFL yogurt Shokti+, the yogurt provided to the study participants. We must acknowledge that the FY and NFY groups were provided 5
cups of Shokti+ per week, a quantity that as Yanis (2016) noticed exaggerates
the actual amount available to children living in rural villages reached by GDFL
distribution.
As a final note, a recent comprehensive research by Balhara et al. (2017)
compares many different studies on the theme of children malnutrition as related
to mortality and humanitarian emergencies. We redirect to their paper for
further information on the topic.
45
Figure H.1: Composition of fortified yogurt provided to the study participants*
(Source: Sazawal et al., 2013)
Figure H.2: Paired comparison for blood parameters between baseline and end
study comparing fortified and non-fortified yoghurt groups (Source: Sazawal et
al., 2013)
46
Figure 1: Comparison for growth parameters between fortified and non-fortified yoghurt groups at end-study adjusted for baseline
measurements (Source: Sazawal et al., 2013)
47
Final note
The final word count of the present paper is 2,200 words excluding Appendixes, Bibliography, figures, tables and captions. The system will probably count all those anyway. Yet, I decided not to insert all the parts mentioned as images because LATEX way to handle figures is, say, less than optimal, and it would have affected the quality of the document as a whole.
48
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