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Thursday, June 11, 2009

Updates on a Social Business: Grameen Danone

By Jaime Pozuelo Monfort

The French dairy company Danone and the Grameen Group signed a joint venture in 2006 whereby a social business was created with an initial capital of $1 million. The business would manufacture and distribute fortified dairy products in Bangladesh without incurring losses and maximizing the benefits of the clients served. What are these benefits? According to Danone's Chairman and Chief Executive Officer Franck Riboud the benefit is "To bring health through food to the largest number of people in Bangladesh" (Financial Express, 2006).

The initial factory was set up in Bogra, 230 kilometers north of Dhaka, the capital of Bangladesh. The business plan targets the construction of 50 plants over the course of a 10 year period. Riboud confirmed on 29 April 2008 that Danone and Grameen would seek to build a second factory in 2009. The new facility would generate 3,000 tons of dairy products every year (France-Press, 2008).

I decided to travel to Bogra during my one week visit to Bangladesh. The Grameen Danone social business is a pioneer of what could become a default approach to doing business with the extreme poor in a new capitalist paradigm. At 3pm on Wednesday 4 March 2008 I was picked up from the Grameen Tower in Dhaka and headed off towards Bogra, a five hour car ride on Bangladesh's crowded roads. I spent the night in room 305 at the Naz Garden Hotel and met with the Grameen Danone managers the next morning.

Khandoker Mohammad Abu Sohel is the Sales & Distribution Manager at Grameen Danone Foods Ltd. I met Sohel at 9:30am on Thursday 5 March 2009. Sohel and his team - including Brice Lewillie and Remi Carpentier - showed how the way the social business is structured helps the extreme poor: from the ladies that deliver the 50 or 100 cups of yogurt in four hour shifts every day to the local farmer and his seven cows that provide the milk to keep the factory operating. I remain convinced the pilot I saw will become mainstream and help the bottom billion get on the ladder of prosperity, once and for all. What is the next step if the first pilot is successful?

In 2007 Danone proposed a mutual fund that would raise $135 million and pay an interest rate of 3% to 4% annually. The investment fund, named danone.communities, allows to finance the expansion of Danone's social business in Bangladesh as well as to start new social businesses that fight malnutrition and poverty mainly in emerging countries.

Asad Kamran Ghalib and Farhad Hossain of the University of Manchester review the case of Grameen-Danone Foods Limited. The authors review the benefits a social enterprise brings.

For the Manchester scholars the Danone-Grameen joint venture brought about a merger of the values of Grameen Bank and Danone Foods. The authors point out that "Social entrepreneurs do not call for the abolition of capitalism altogether; they do not suggest an entirely different business model to run markets; they do not advocate that philanthropy alone can run the world's social markets" (Ghalib et al, 2008). Capitalism is however understood as a tool to serve the poor, a tool to serve the bottom billion. The authors conclude that "This paper has seen how communities within the proximity of the Bogra facility, a fraction of the bottom billion, have benefited in a number of ways: health, nutrition, employment and greener environment, all with the possibilties of expanding the operations further afield" (Ghalib et al, 2008).

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