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New Markets, New Mindsets
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NewMarkets,NewMindsets
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New Markets, New Mindsets
Creating wealth with South Africa’s low-income communities through
partnership and innovation
Tashmia Ismail and Nicola Kleyn with Gwen Ansell
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New Markets, New Mindsets
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First published by Stonebridge – an imprint of Jacana Media (Pty) Ltd – in 2012
10 Orange StreetSunnysideAuckland Park 2092South Africa+2711 628 3200www.jacana.co.za
© Tashmia Ismail, Nicola Kleyn and Gwen Ansell, 2012
All rights reserved
ISBN 978-1-920292-03-4
Cover design by Russell Clarke and Shawn PaikinGraphic concepts by Judy SeidmanPicture research by Antony Kaminju and Collin Cornew;
original photographs pages 60, 63, 97, 98 by Antony Kaminju All other photographs Tashmia Ismail and by kind permission
of the companies and individuals concerned
Set in RomanSerif 11/16ptJob no 001745
See a complete list of Jacana titles at www.jacana.co.zaVisit the GIBS website at www.gibs.co.za
Every effort has been made to ensure the accuracy of details, names, facts, places and events contained in this book. In the event of any inaccuracy, the authors and publisher welcome feedback. Some names have been changed or removed for privacy.
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Also available as an e-bookd-PDF ISBN 978-1-920292-07-2ePUB ISBN 978-1-920292-08-9 mobi ISBN 978-1-920292-09-6
Aboutthewriters
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About the writers
Dr Tashmia Ismail is a fellow at UNU Maastricht Economic and
Social Research Institute on Innovation and Technology, and a senior
lecturer at the University of Pretoria’s Gordon Institute of Business
Science (GIBS) where she teaches innovation and BoP strategy.
Ismail heads the GIBS BoP Hub, which offers a collaborative
multi-stakeholder platform for firms interested in developing and
executing BoP strategies. She is interested in how innovative and
sustainable business models can be shaped for firms in developing
markets. Currently, her research is directed at understanding internal
innovation management and the external networks firms must
engage with to ensure success in low income contexts.
Dr Nicola Kleyn is a senior lecturer at the Gordon Institute of Business
Science where she lectures and researches in the fields of marketing,
branding and reputation management. She is both passionate and
curious about how organisations can best manage the dynamic
tensions that arise when individuals and companies seek to create
win-win-win solutions that concurrently enable people, profit and
planet. She was instrumental in initiating a stream of BoP-focused
research and teaching at GIBS and plays an active role in the BoP
Hub at GIBS.
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NewMarkets,NewMindsets
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Gwen Ansell is a veteran writer, editor and writing trainer. She has
written several textbooks, including IntroductiontoJournalism, which
is a set text for the national curriculum and trains scholars, journalists
and other communicators in writing skills. As a researcher, Ansell is
the author of the South African cultural history SowetoBlues, and
has done extensive value-chain and innovation research on the South
African music industry.
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Aboutthewriters
vii
Thisbookisdedicatedtothememoryofthelate
CKPrahalad,whopavedthewaytorethinkingrelationships
betweencorporationsandlowincomecommunities.
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NewMarkets,NewMindsets
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Acknowledgements
The authors of this book have had the good fortune of working with some
exceptional people whose ideas and encouragement have been invaluable. We
would like to thank:
• Professors Nick Binedell and Stef Coetzee for their leadership and passion
for BoP markets.
• GIBS colleagues Prof Helena Barnard, Kerry Chipp and Michael Goldman
for their early insights and support from the inception of the book.
• All the companies we work with for sharing their learning so generously
and in many cases providing detailed feedback on drafts.
• The Kellogg Foundation and the Gordon Institute of Business Science for
institutional support.
• Our project co-ordinator, Collin Cornew, for communication, fact-
checking, sourcing images and other invaluable production support.
• Rebecca Harrison and David Osborn (former GIBS MBA students) for
their excellent research efforts which made valuable contributions to the
content and ideas expressed in this book.
• Thabo Gumbi and Brett Wilks (also former GIBS MBAs) for providing
perceptive feedback on FAQs.
• Two academic reviewers for their instructive feedback.
• Photographer Anthony Kaminju for his images.
• Graphic artist Judy Seidman for conceptualising the the graphics and
illustrations.
• Bridget Impey, Russell Clarke and the editing, layout and marketing teams
at our publishers, Jacana Media.
• Everyone else at GIBS and the BoP Hub who has played a role in
transforming this book from an idea to a product.
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Contents
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Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xi
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Authors’ introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Chapter 1 Context, contests, role-players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Chapter 2 Identifying opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Chapter 3 Fine-tuning the business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
Chapter 4 From idea to action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Chapter 5 Business unusual as usual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Chapter 6 Taking stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Appendix: List of individuals interviewed for the research . . . . . . . . . . . 236
Further reading: a dozen key sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
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Preface
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Preface
The context
The BoP Learning Laboratory in South Africa (BoP LL SA) was
established in 1996 and was made possible through a WK Kellogg
Foundation grant. For a large part of its existence the BoP LL SA was
administered from the Afrikaanse Handels Instituut (AHI) in Pretoria.
Members of the BoP LL SA included the Gordon Institute of Business
Science (GIBS) in Johannesburg, the University of Stellenbosch
Business School (USB), and the Unit for Entrepreneurship at the
University of the Free State.
The BoP LL SA had multiple objectives which included the promotion
of sustainable development at the base of the income pyramid
through private sector initiatives. It aimed to develop and test a
broader conception of the BoP Protocol for South Africa and the
southern African region, through a consortium of business partners
working alongside poor communities and to foster self-sustained
development at the community level. Importantly, the BoP LL SA
promoted linkages between large- and medium-sized corporations
and small entrepreneurs in different sectors in South and southern
Africa. Finally the BoP LL SA built research, training and other
capacities at GIBS, USB and other organisations in order to promote
the BoP in South and southern Africa.
Through the work of the BoP LL SA the BoP approach has been
promoted significantly through conferences, workshops, lunch-
hour meetings, research workshops, compilation of fact sheets on
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companies operating at the BoP, a book containing case studies
of firms involved in the BoP in South Africa, MBA theses on BoP
topics, MBA electives on the BoP, training workshops, the building
of a broad base of partners in the BoP field in South Africa, the
development of new entrepreneurs through entrepreneurial training,
immersion visits of companies to townships, bridges between
business schools and township communities and permanent BoP
structures at USB and GIBS.
We are highly indebted to the WK Kellogg Foundation for the grants
extended to us to complete this work. The following participants
in the BoP LL SA need to be thanked for their contributions during
the grant period: Prof Wolfgang Thomas (USB), Dr Nicola Kleyn,
Dr Helena Barnard and Dr Tashmia Ismail (all from GIBS), Dr Johan
van Zyl from the Entrepreneurship Unit at the UFS and Mr Nicolas
Pascarel of Reciprocity in Cape Town. Last but not least we are also
particularly grateful for the role that Prof Stuart Hart (chairman of
the Global BoP Network) and Dr Michael Gordon from the University
of Michigan played in engaging with South Africans on the BoP and
in setting up the BoP LL SA. This has served as great inspiration for
us to initiate and continue with the work in this field in South Africa.
We are also particularly grateful towards the AHI that has housed
the BoP LL SA over the grant period and that has allowed Prof
Stef Coetzee to lead and coordinate the activities of the learning
laboratory.
This book by GIBS, one of the partners of the BoP LL SA, is in a
sense the culmination of the work of the BoP LL SA. We trust that
the case studies covered in the book will illustrate the extent to
which companies in South Africa are engaged at the base of the
pyramid and the unique learning experience provided by the South
African context.
Prof Stef Coetzee
FormerdirectoroftheBoPLLSAandformerCEOoftheAHI
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Authors’introduction
1
Authors’ introduction
There has been a flowering of conversation and research about
doing business with low-income communities – which scholars have
christened ‘the base of the pyramid’ (BoP) – in the past two decades.
Initially academics sought to demonstrate how such underserved
markets in the developing world were neglected, and what potential
they offered. As multinational companies began to explore the new
space, there was more to be considered: about what succeeded, what
failed, and what lessons had been learned.
And, increasingly, scholars, researchers and businesspeople in
developing countries themselves have become an important voice in
this conversation. Much valuable experience has been documented
from Asia – especially India – and some from Latin America. But
although similar work is going on here, far less has been heard from
our continent and our country: South Africa.
This was the broader motive that led us, in 2009, to embark on
the research which forms the backbone of this book. But we had a
more focused interest too: exploring options for bridging the gaps
between different perspectives on BoP business – by broadening our
focus from consumers and demand perspectives to include those
that operate on the supply side in BoP markets.
BoP consumers need to sustain themselves with limited resources
and more often than not, inadequate education and access.
While technology, especially the ‘mobile revolution’ now affords
better access to information and services, this has also increased
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NewMarkets,NewMindsets
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expectations of both goods and services. Low-income consumers
demand products that will meet real, sometimes unique, needs at
an affordable price. And there is fear – strongly articulated by some
stakeholders – that firms entering the BoP space are nothing more
than unethical raptors seeking to profit by exploiting the poor. All
this creates a unique set of challenges for firms more accustomed to
serving more affluent customers.
Challenges for firms on the supply side include how to make profits,
ensure future competitiveness, and keep shareholders happy too.
But our conventional business models embody an implicit tension
between the firm as a profit-seeking entity and the firm as a
development actor. That’s a tension that was apparent within many
of the firms we interviewed for this book.
However, new views are emerging. For many firms, supply-side
motivation is starting to include creating sustainable markets with
the potential to realise future profit. In this view, simply ‘milking’ a
market for the next quarter’s profits is seen as short-sighted. Doing
business in a healthier economy will lower transaction costs and the
cost of capital longer-term. Consumers in the future market will have
more disposable income to spend; small entrepreneurs in low-income
communities can grow into meaningful partners and job-creators in
their own right. Sustaining and growing a robust, thriving future
market where the firm can operate is becoming a jumping-off point
for innovation.
This book focuses on insights from the supply side area of BoP
studies. A series of conversations served as the starting point to
develop case studies of South African organisations to showcase
this type of innovative business model development: where a firm, in
the course of doing sound business with the BoP, serves at the same
time as a development actor.
Finding exciting stories of development and growth was a project
that began in 2008. During the course of our work at the University
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Authors’introduction
3
of Pretoria’s Gordon Institute of Business Science, we interact with
a large range of companies and other supply-side actors, both local
and international. This offers a unique opportunity to gain insight
into the mindsets of companies and challenges which many face
in the shifting, post-2008 developing market landscape. Under the
auspices of initial funding from the Kellog Foundation through the
South African BoP hub, a team of researchers indentified potential
contributers and contacted companies and individuals working in
this space. We gathered information from secondary sources and
conducted semi-structured interviews with BoP supply-side actors
to learn more about why and how they had chosen to serve the BoP
market. Over the next 18 months the research team transcribed,
followed up and identified additional expert voices who could add
their insights to the book.
The more people we talked to, the clearer it became that many
businesses in South Africa understand very well the challenges of
the post-2008 world: stagnant growth in developed economies;
escalating GDP growth rates in the largely untapped markets of
the developing world. The BoP market here, as elsewhere, is largely
underserved and underserviced, offering opportunity for the ‘next
billion’ (as one seminal BoP book termed it) consumers. Currently
the first economy operates alongside the world’s four billion poor
in a parallel reality which monopolises over 80% of global GDP. We
do not believe it is sustainable to have a developing market strategy
which ignores this economic reality.
What is becoming increasingly apparent to us is that the status quo
is shifting, and the rules of both commercial and social engagement
with middle- and lower-end markets in developing economies are
transforming. There is keen interest from both local and global
businesses and institutions in getting involved in these markets.
And they care about the practical detail of doing it effectively, and
ethically.
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Regardless of global trends or government pressures, accessing these
markets is challenging. Often, customers who survive on minimal
incomes seek and will value different market offerings from those
traditional customers have purchased. They have unique needs and
identities requiring innovative, non-traditional business models and
approaches.
In our research, we talked to executives and experts who have
practical experience of just that kind of innovation: creating new
products and customer experiences; shaking up hidebound company
cultures and joining hands with new kinds of partners. The insights
they so generously shared with us for this book make inspiring as
well as useful reading. We hope they will inspire you, the reader, to
look at your own business practice with a fresh eye too.
Tashmia Ismail Nicola Kleyn March2012
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Context,concepts,role-players
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ChAPTer 1
Context, concepts, role-players
‘Tomakeaproductcheapiseasy…
butitmustbeaffordableandrelevant.’
– Maria Pretorius
In this chapter, we’ll look at the ideas that underlie business and
economic thinking about the base of the pyramid (BoP) and why
doing business with underserved communities is becoming so
important. We’ll look at how the concept has been defined – overseas
and in South Africa – and at some of the business experts who’ve
contributed to growing the theory. Like in all the chapters in this
book, we’ll begin by visiting a company that has taken steps to work
with this market in South Africa, in this case, Danone.
French-based yoghurt and foods multinational Danone is more than
90 years old. It has 160 plants in over 120 countries, and more than
800 000 employees worldwide. Danone has been in South Africa since
1998, initially as a joint venture with Clover Foods. In 2010, Danone
acquired the Clover stake of the joint venture and Danone Southern
Africa was born. Internationally, Danone has a longstanding interest
in nutrition. Through the non-profit Danone Institute International,
the company established in 1997 the Danone International Prize for
Nutrition: a €120 000 award presented every two years to individuals or
teams that have advanced the science of human nutrition.
When Danone decided to begin exploring low-income markets in South
Africa, they needed answers to five key questions:
Case study: Danone – finding a champion within
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• What kind of product will meet a genuine need in this market and
be appropriate for our capacity and expertise?
• how do we identify potential outlets and create effective
distribution?
• how can we price the product right and monitor business
performance appropriately?
• how can we best reach out to consumers and inform them about
the product?
• Are there any ways the product can become a vehicle for
contributing to community growth?
The Danimal yoghurt
‘Danone is very philanthropic,’ said Maria Pretorius (at the time of
our interview heading up the Danimal project at Danone Southern
Africa but now Business Development Manager at PepsiCo), ‘our goal
was to provide affordable nutrition to as many people as possible…
We wanted to reach consumers that our products do not reach…
We said: we need to have a product that is affordable but relevant.
Because to make it cheap is easy, anybody can do that – you don’t
make quality, you don’t make a difference – and we didn’t want
to put the Danone brand behind that. It had to be a good product,
affordable, relevant – and it had to be available.’
Pretorius was talking about Danimal, a low-priced, vitamin-fortified
yoghurt with a very long refrigerated shelf-life, and an extended
indoor shelf-life even without refrigeration: a product produced
after extensive research specifically for the township market, where
many spaza shops have limited fridge space. The story of Danimal’s
development tells us a lot about how international enterprises can
reach out to do business with South Africa’s underserved and
underserviced communities – and how the relationship can be
mutually beneficial.
‘We spent around a year,’ explained Pretorius, ‘developing a formula
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and doing lots of research: is it going
to be for adults or children, what
is its price, and so on. We finally
developed a yoghurt which had a
more affordable recipe, but enriched
with Vitamin A, iron and zinc
because our research discovered
those are the main deficiencies of
the target market.’
But there were other influences
on selecting and developing Danimal. Danone Southern Africa
partnered with the Danone Group worldwide, at that time engaged
in an international nutrition mapping project. It also partnered
with researchers at the University of Cape Town in South Africa,
‘and we tested it with children to see if they liked [the taste]’. In
the end, the specifications of the product ‘depend on the culture of
the country – but also on factory capabilities… we had capacity on
those [yoghurt] machines, and that is our expertise,’ said Pretorius.
Danone developed only one product in its budget cost-range; they
considered others, such as a UHT yoghurt, maas (soured milk) and
juice, but required more research on optimal size and packaging
formats. Besides, Pretorius noted, ‘the more products you have, the
more complexity you have… our factories do not cater for small
volumes: the machines are huge, and producing little bits of this and
that isn’t going to work.’
Danone shaved costs by using a lower-cost base for the product
and then fortifying it, and by using creative distribution methods
that avoided high-margin supermarket chains. ‘The people in the
township know that if they are selling that product they are not going
to be competing with [a supermarket] next door.’ She recalled that
when the project began there were far fewer township retail outlets
than today. ‘So we selected Soweto, Ga-Rankuwa, Alexandra – all
the main townships around us – we used GPS sensoring [sic] and
Affordableandnutritious:thelong-lifeDanimalyoghurt
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NewMarkets,NewMindsets
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then we chased routes. Every little kiosk and spaza was GPS-ed, and
we also created a second set of GPSs for communication about the
product: schools, public places and so on.’
Initially, Danimal was priced at R1: a single unit of currency was by
far the most manageable for tiny vendors who might not have change
for a customer (although rising costs eventually pushed the price up
to R1.30 – rather less convenient for vendors because of the need to
hold small-coin change).
The company used buzz teams to tell communities about the
product: T-shirts, brochures, small entertainments such as puppet
shows with free product samples for the audience. As well as using
‘normal’ (truck) distribution, the company also reached out to less
formal marketers: initially dubbed the ‘Dani mamas’ (there were
eventually around 70 of these agents, about half of them women).
Through newspaper advertising, Danone identified these aspiring
traders, seeking people who had a bank account, a fixed address, a
potential trading area (identified through the GPS mapping) that did
not overlap with others, and a well-motivated rationale for wanting
to do this business.
The vendors were put through a mini MBA for micro entrepreneurs
which was created by Danone. So the distributors were given
extensive business training with prizes awarded to high performers.
‘The business is not for everybody,’ said Pretorius. She recounted
how volunteers committed to community social work often came
forward, but were often ‘not good business people because they
wanted to do good [first], and it created a lot of stress’. However, ‘a
lot of people come to like the trade. They learn, and because they are
doing such a good job, people ask them to put up soap and things,
chicken… and they start doing a really nice, healthy distribution
business.’
Danone did not judge the Danimal SA project by the same
performance indicators as other products. Although the product
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Context,concepts,role-players
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broke even, Pretorius’s main criteria, as well as sales, included ‘the
number of entrepreneurs recruited and trained’ and other social
indicators. Vendors don’t have to pay cash up front for stock ‘so there
is a lot of trust in this whole exercise… but the [amount of] bad debt
is very small,’ she said; she worried more about the risk of robbery
that cash-carrying vendors ran.
Danimamas:selectedforbusinesssenseandinitiative
Pretorius confessed she ‘loves this product. It is my passion… It’s
a win-win situation: a very good project for the people [and] a lot
of township kids will grow up with the product… and will become
consumers out of the township.’ And it couldn’t have gone as far as
it did, she felt, without ‘the freedom’ given by the company overall to
develop a completely new product to meet the needs of low-income
South African consumers. ‘For me, the most phenomenal thing is
to have a specific, unique product for this market, completely made
from scratch.’
Pretorius’s story illustrates many of the strategies and tactics that
can be effective for businesses reaching out to communities with
limited spending power:
• Danone did not view this market as a target for cheap,
substandard goods.
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NewMarkets,NewMindsets
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• Instead, they invested considerable research into developing a
product that met real needs (nutritionally fortified and with a
longer out-of-fridge shelf life) while matching the company’s
expertise and production capacity.
• They considered scalability when deciding which product to
launch.
• The company used outreach entertainments and community
members to inform others about the product, and to sell it.
• They mentored and evaluated the vendors and rewarded growth.
• They used non-conventional distribution methods to reach hard-
to-access areas and reduce costs.
• They kept the ‘front end’ of the business simple and backed this
up with more complex research and production capacity.
• They used nuanced accounting and evaluation procedures that
did not only consider direct, immediate profit.
• Many companies fail because they allocate their inexpensive
and junior staff to lead projects with high complexity, such as
BoP projects. Ideal practice would be to allocate best human
resources (capable, experienced, proactive).
Our interview was conducted in 2009, when the fortified yoghurt was
on the cusp of scaling and fulfilling its high-volume/low-margin potential
as a BoP product. Maria Pretorius left Danone in 2010. After her
departure, the project disappeared from the Danone portfolio, leaving a
gap in the affordable fortified children’s yoghurt market.
When Gibs researchers visited the township of Diepsloot outside
Johannesburg in June 2011, they saw how some spaza shops had
branded themselves with a specific stock line, to create a distinctive
identity. One had called itself the ‘Danoon’ spaza, taking its name from
a shelf crammed with Danone yoghurts. This store was well known in
the area; its yoghurts were often bought as emergency infant food by
Postscript
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Context,concepts,role-players
11
mothers who could not afford formula that week. The yoghurt, however,
was not the vitamin-fortified Danimal but the standard retail Danone
brand. It was not refrigerated, and some stock had passed its marked
expiry date. The pilot seems to have unintentionally left misconceptions
about yoghurt storage requirements, shelf-life and nutritional value.
The trajectory Danimal took illustrates many key principles of building
a brand successfully in a low-income market. Despite early hurdles,
the product learning curve was climbed, and a business model had
evolved. But the process had one major flaw: it remained a corporate
champion-based project. The independence so useful to Pretorius
when she was exploring possibilities turned out to be a double-edged
sword; her undoubted knowledge, passion and belief in the product
had not been embedded in the mainstream of the organisation. With
Pretorius’s departure, the impetus to continue and expand Danimal
was lost. Danimal production at a small scale utilised unused factory
capacity. Scaling up from the pilot would have required a commitment
to switch capacity from another product – the kind of decision only
possible with the backing of an influential senior champion.
Chris Linder, who has owned a Pick n Pay franchise for eight years in the
township of Soshanguve, says baby care has been the fastest growing
segment in his store, outstripping growth in every other product line he
carries. AMPS [All Media and Products Survey] data and conversations
with other large fast moving consumer goods (FMCG) companies with
baby-care ranges all corroborate his experience. Other companies
have identified the potential of products similar to Danimal and plan to
launch these into the BoP space. had Danimal survived the departure
of its committed champion, its entrenched and trusted status in the
market would have given it a major advantage over new entrants.
So the story of Danimal raises as many questions as it answers.
• What is this ‘base of the pyramid’ that Danone reached out to?
Why are businesses and economists talking about it so much?
• how do we define it in South Africa?
• Is the effort worthwhile for South African companies too, or is it
something only huge multinationals can do?
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NewMarkets,NewMindsets
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• Can the tactics Danone used be universally effective; what more
might different types of companies need to do?
And the way the Daminal story ended raises big questions about
continuity in project management, about changing company values to
embrace BoP initiatives, and about the ethics of pilots in this space.
These are the questions the rest of this book sets out to answer,
drawing on conversations with executives from more than 20 SA-
based companies – local and multinational – who have taken the first
steps. But first, in this chapter, let’s look at the concept of BoP. Where
did it come from and how did it develop?
Understanding the base of the pyramid: history and the birth of an idea
Selling to low-income markets is not a new enterprise, and nor is
developing small businesses in low-income communities, in South
Africa or in the rest of the world. Since the late Seventeenth Century, for
example, Quaker communities in England and Ireland have encouraged
small businesses and self-help as part of their charitable efforts.
In South Africa’s segregated townships under apartheid, companies
seeking to sell products often combined this with entertainment
outreach and buzz-group activities. Singer Sibongile Khumalo
remembers how her father, the late Professor Khabi Mngoma, formerly
a rather rebellious and socially conscious music teacher, found work
with Reckitt & Colman in just such a capacity: ‘Around the early
1960s he started working for Reckitt & Colman as [some kind of] sales
representative. He had to work within schools and part of his brief was
to start a health project that was linked to music. It was for selling Dettol
and Disprin and Senokot and all those things, making the community
aware of the products. But he was able to develop an innovative way
to make the work interesting and effective and genuinely educational,
using choir teaching, because that was his expertise.’
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Context,concepts,role-players
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Of course, for a very long time all over the world, unscrupulous traders
have also concocted cheap goods targeted at the poor: adulterating
wine with water, tea with sawdust and flour with plaster to do so.
Current thinking about BoP trading focuses neither on charity nor
on simply dumping shoddy goods. Mngoma’s innovative educational
efforts provide a very relevant precursor.
‘As with the tip of an iceberg, the opportunity remains invisible
to the corporate world.’ – CK Prahalad & Stuart Hart
The modern interest in doing business with the world’s very large,
low-income markets was crystallised by business academics the late
CK Prahalad and Stuart Hart in a paper called ‘The Fortune at the
Bottom of the Pyramid’, published in 2000 in the HarvardBusiness
Review. The paper observed that 4 billion people are still outside
the global market system: something that both poses a challenge for
and offers huge opportunities to companies. (The precise figure of
4 billion can be debated, and many researchers prefer to define the
BoP by its characteristics, rather than a headcount. But it has also led
to the concept being dubbed B24B: Business to the 4 billion.)
At a time when many companies – particularly the biggest – see their
established markets and strategies maturing (in other words, neither
growing significantly nor delivering much that is new) the initial
thrust of the theory was that exploring this new market could offer
trillions of dollars’ worth of new markets. Ignoring these potential
new markets could also have serious consequences: economist
Joseph Stiglitz warned in 2002, ‘Globalisation today is not working
for many’ and invoked the spectre of violent unrest on a world scale.
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NewMarkets,NewMindsets
14
(Indeed, in America, interest in BoP ideas intensified after the tragedy
of 9/11.) In addition, BoP ideas were initially attractive, particularly
to the American business community, because they emphasised new
routes to sustainability and profit, in contrast to corporate social
responsibility (CSR) theories calling for businesses merely to spend
more on benevolence.
Both Prahalad and Hart went on to write extensively on the area (see
the Further Reading section) and developed the theory in slightly
different directions. Prahalad’s particular focus was large companies
entering the Indian market. He argued that the biggest companies
had the resources to take risks to penetrate this new market – but
that smaller companies were more agile and flexible, and more likely
to discard ineffective old ways of operating.
Out of this line of thinking have come concepts of disruptive
innovation and frugal engineering: the revolutionary reshaping of
company practices and products to meet the needs of these new
markets – and, in the process, create businesses that are sleeker and
products that are more environmentally friendly. This also relates
to a growing interest in the idea of triple bottom line accounting:
evaluating social/ethical and environmental performance alongside
profit. Many commentators are also suggesting that a key underlying
context factor is the way access, rather than property or ownership,
is becoming the tool all economic actors need to structure their lives
– and the way the digital space can potentially make this easier for
the poor as well as the rich. We’ll consider all these ideas in more
detail as they arise in subsequent chapters.
Hart developed the first set of protocols for BoP, known as BoP1: a
guide to business practice in the new context. These protocols helped
launch and guide many business initiatives, but as Hart and his BoP
Protocol co-author Erik Simanis wrote in 2008, ‘in the rush to capture
the “fortune” at the base of the pyramid, something may have been
lost – the perspectives of the poor themselves’. Hart has therefore
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