The debate between C.K. Prahalad and Aneel Karnani regarding the BOP proposition continues. As we reported earlier this week, Professor Karnani has published a new case study critical of Hindustan Lever Limited's Fair & Lovely Whitening Cream, a product identified by Prahalad and NextBillion.net's Allen Hammond as "formulated for [BOP] needs" in a 2004 Foreign Policy article.

Karnani’s criticism of the BOP proposition first surfaced in August, when he posted another working paper, The Mirage at the Bottom of the Pyramid, and blogged about it on this site. In response, C.K. Prahalad drafted a 5-page rebuttal to Karnani, which was also posted on NextBillion.net. The controversy has received attention in Andrew Leonard's How the World Works column on Salon.com; many readers have weighed in at Salon with their thoughts as well.

As the debate took shape online, I received an e-mail directly from Professor Karnani, who asked me to share his words with the NextBillion.net community:

A criticism of the BOP proposition is that targeting the poor as consumers could lead to their making bad consumption choices not in their own self-interest. Thus the firms could end up exploiting the poor. The BOP proponents dismiss such arguments as arrogant and patronizing and assert that the poor are value-conscious consumers.

My recent paper focuses on this debate by examining the case of Fair & Lovely, a skin whitening cream marketed by Unilever. I chose this case study because Hammond and Prahalad, two leading proponents of the BOP proposition, mentioned this example in one of their early articles. Also, Unilever is frequently mentioned in the literature as a socially responsible company that markets to the BOP. Fair & Lovely is indeed doing well; it is a profitable and fast growing brand. It is, however, not doing good, and I demonstrate its negative implications for public welfare. I conclude with thoughts on how to reconcile this divergence between private profits and public welfare.

By Allen Hammond, Bill Kramer, and Rob Katz

The recent debate over Fair & Lovely Whitening Cream, both in Aneel Karnani's working paper and in Andrew Leonard's column in Salon, brings up many interesting points. In response to Karnani, who argues that Fair & Lovely "entrenches disempowerment," we suggest that a well-regulated free market may be the best indicator of what works and what doesn't work, for the BOP as well as for other economic strata.

Hindustan Lever and its Fair & Lovely product did not create skin-color bias in India. Indeed, HLL simply responded in a rational manner to the demand for a product that effectively lightens skin. We do not have sufficient information to pass judgment on the way HLL has marketed this product, nor is it our remit. Of course, we condemn discrimination in all its forms, for what that is worth. However, as a Salon commenter notes, when a BOP customer chooses to buy skin cream, it is an aspirational purchase that she would not have had the wherewithal to make in the past. The consumer is making a rational choice, based on the circumstances.

Fair & Lovely would not be a commercial success if it did not work as advertised. Clearly, HLL understands the BOP market better than its competitors and has created a product that is very much in demand. At the same time, when HLL engaged in discriminatory advertising for Fair & Lovely, there was public pressure on them to cease the ad campaign, and backlash against the company in general. The market, in other words, was working.

Understanding market structure and the demand implicit in that structure is key to success for companies--and to meeting the needs of consumers. And while a skin cream may not seem to be a basic unmet need, that is really for consumers to decide. In any event, the same approach is key to dealing with market-based solutions to undeniably basic unmet needs, such as for clean drinking water and for access to health care or financial services.

That's why, next month, WRI and IFC will publish a detailed empirical guide to the size and structure of BOP markets worldwide, along with an analysis of the business strategies that seem to be gaining traction on the ground, sector by sector. The report, to be called The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, is intended to help both businesses and the development community to engage with the BOP in a more strategic fashion. It will provide, hopefully, a more detailed basis for a discussion of the pros and cons of market-based approaches to poverty alleviation.