Grameen Danone Foods

Grameen Danone Foods Ltd,

a Social Business in
Bangladesh

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“This is a unique opportunity to create a business totally dedicated to social objectives, a company
whose ambition is not to generate profits for its investors, but committed to serve the interests of
people without incurring losses.”
Professor Muhammad Yunus, President of the Grameen Group

“I am utterly convinced that our future depends on our ability to explore and invent new businesses
and new types of enterprise” … “a great opportunity to make progress in that direction and take
another huge step towards fulfilling our mission: to bring health through food to as many people as
possible.”
Franck Riboud, CEO of Groupe Danone

“Reducing poverty by means of a new business model that will provide the least well off with a
healthy diet, every day.
With this initiative, the need to maximize profits for the investors is replaced by social impact on local
community. Profits go to the local communities in terms of benefits brought to them.
Emmanuel Faber, Groupe Danone,
Executive Vice-President
A social business
joint venture

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The Grameen Group and Groupe DANONE joined
forces since march 2006 to create Grameen Danone
Foods Ltd, a social business based in Bangladesh.

Grameen Danone Foods Ltd’s mission is to reduce

poverty by a unique proximity business model that
will provide daily healthy nutrition to the poor of
Bangladesh.
Grameen Danone Foods Ltd is the first investment
supported by ‘danone.communities’, an investment
fund, created to support businesses that aim to be
sustainable, but make social and societal goals their
objective.
 Bangladesh, one
of the world’s
poorest countries

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Total population in Bangladesh is 160 million.
72,9% of population is rural.
32% is aged below 14.
Average family size is 4,9 (2005).
GDP / cap is 497$ a year (Indonesia : 2,246$)
60% of Bangladeshi households live on less than 2€/day.
(2007)
40% of Bangladeshi population is living under poverty
level (2009).
Density is extremely high : 1084 people / km2
Life expectation in Bangladesh is 66 years (vs 80 years
in France, for example).
Bangladesh is ranked 146th by the UNDP in terms of
human development (2009).
 Health Concerns
- Stunting (41% of young children)
- Diarrhea
- Polluted water (arsenic, bacteria)
Nutritional situation
Macro Nutrition Issues in Bangladesh

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- Overall energy deficiency, particularly among young
children (between 24% and 40% gap vs RDA)
- Protein deficiency
- 87% of protein source is vegetal (lentils One child out of two in Bangladesh is suffering
and beans), deficiency in essential amino- from malnutrition, especially in rural areas.
acids likely Lack in micronutrients can impair mental
development, alter the functioning of immune
system, compromise proper eye sight, etc.
Micro Nutrition Issues Malnurished children are more often sick and
less attending school.
- Iron (49% among young children) Malnutrition in Bangladesh is a vicious circle :
- Vitamin B2 it is not only a question of public health but
also of economic development.
- Calcium
- Vitamin C
- Vitamin A
- Iodine and zinc likely

Source: Grameen/local NGOs

Grameen Danone
Foods’ objectives

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


To bring health through nutrition at very
affordable price for all Bangladeshi children
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
 To preserve non-renewable resources as much
as possible
 To be profitable to ensure economic
sustainability
Shokti +, a fortified
yoghurt to meet
nutritional needs of
Bangladeshi children

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Shokti+doï literally means ‘ yogurt to give strength’
Shokti+ has been specifically developed by Danone’s
experts in R&D, with technical help of the NGO ‘Global
Alliance for Improved Nutrition’, to fulfil the nutritional
needs of children in Bangladesh and to contribute to their
healthy growth by bringing them the benefits of milk, live
cultures and other micronutrients they lack.
Shokti+ is a yogurt made with cow's milk, date molasses
and sugar. It is a natural source of calcium and protein,
which are essential for healthy growth and bones. It also
contains live fermenting cultures that help to reduce the
severity and duration of diarrhoea.
Shokti+ is also enriched with micronutrients. A single 60g
cup provides 30% of a child's daily requirements of vitamin
A, iron, zinc and iodine.
Price per cup of Shokti+ has been designed for the
poorest families to be able to afford it regularly. Price is 7
BDT for 60g, or 5 BDT for a pouch of 40g.
Shokti+ is produced by Grameen Danone Foods Ltd in a
small modern factory in Bogra, built with the Danone
know-how on quality and food safety.
A local supply business
model where milk is a key
challenge

T The main ingredient in Shokti + is milk. Since 90% of the

Bangladeshi milk market operates on an informal basis,
organizing milk supply is a big challenge for GDFL.
Until end 08, Grameen Danone mainly bought its milk from a milk
cooperative of micro-farms : the Grameen Livestock Foundation,
30km from the factory.
Since 2009, Grameen Danone has started to collect milk from
local micro-farms around the plant (370 farmers in Dec. 10).
Grameen Danone also bought from ICMSE, the integrated farm
of Dr Mostaq Ahmed, with more than 100 milking cows and that
provides technical assistance and training to 300 micro-farmers.
This ensures more than 75% of the milk consumption.
By extending partnerships with farmers, GDFL would decrease
spot purchase, enabling better milk quality insurance and fixing
the price. Through the previous creation of chilling centers, the
cooperation with existing chilling centers (ex. Grameen), and the
development of local farmers, the objective is to reduce spot
buying to 10% in the next 5 years.
A job creating and
environmentally
friendly mini factory

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The Grameen Danone Bogra factory’s yearly capacity was
initially of 1600 tons, and was equipped in Apr. 2010 to
double this capacity. In Sept. 10, the plant is used at 55%
of this new capacity.
Priority is to reach plant capacity through proximity sales in
a radius of 50km. This is in order to maximize penetration
and level of consumption among local communities. And
also to allow proximity transportation with rickshaw vans
and small motorised vehicles with natural gas (CNG).
Nevertheless in order to reach this capacity quicker,
decision was made to sell in Dhaka from november 08.
The Grameen Danone plant in Bogra has been designed
to rely on local labour rather than sophisticated machinery.
This avoids expensive maintenance problems, enables to
create 65 jobs and develops local competencies.
The factory has been designed in an environmentally
friendly way, to minimize use of non-renewable resources.
It is partially sourced with solar energy, it is collecting rain
water, it is provided with a biodigester that produces
natural gas.
 10000+
in 2011 Distribution model

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3863

2126 Dec 09
621 Distribution is based on two channels :

-Shops : Except in Dhaka, with some modern trades shops,

Aug 09 shops are small proximity stores, located in urban areas as
Jan 09 well as in rural villages.
Shops represent 80% of current Grameen Danone sales.

- Door-to-door sales in rural areas through a network of

sales ladies : These “Grameen Danone ladies” are micro-
entrepreneurs. They are supplied with yogurts, trained and
coached by Grameen Danone staff. They get one-day
sales credit, reimburse the cost of cups through their sales
and keep a margin on each sold cup.
980+ End of October 2010, number of ladies exceeds 600. By
selling 60 cups per day, their income is 78 tk in a day. For
in 2011 these ladies that are often among the poorest in their
community, this activity is a source of empowerment and
valuable additional income for their family.
650 Door-to-door sales through ladies are slightly more than
20% of Grameen Danone sales.

240 Dec 09
42

Aug 09
Jan 09
 Birth of the project

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Grameen Danone story developed extraordinarily fast !
October 2005 : Franck Riboud, Chairman and CEO of
Groupe DANONE and Muhammad Yunus, father of
Microcredit, met in Paris. Following their meeting, they
decided to explore the possibility of establishing a
partnership in Bangladesh.
An initial workshop was organized in Dhaka in November
2005, attended by a team from Danone and a team from
Grameen.
Just a few months later, in March 2006, Franck Riboud
and Muhammad Yunus announced in Dhaka the
creation of Grameen Danone Foods Ltd.
In mid-July 2006, Grameen Danone acquired a plot of
land in Bogra on which to build its first plant.
February 2007: The plant in Bogra produced its first
yogurts.
 First steps

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In its 1st phase from February to September 2007, after
having overcome some production issues, Grameen
Danone sales started to increase around the factory.
Distribution was mainly done through small shops in
Bogra town and rural sales ladies that sold door-to-door.
Promotion was done through visits to Grameen Bank
centers.
In September 2007, a full time Executive Director joined
the team. Number of sales ladies went from 29 to 270
(in march 08). Sales expanded quickly to reach 350 000
cups sold in a month.
Since beginning 2008, Grameen Bank helped sales in
some Bogra areas to prepare the market for Grameen
Danone’s teams.
The selling area remained exclusively in a radius of
30km around Bogra.

Key learnings at this stage were :

- Regarding product: Initial Shokti Doi recipe was not
sweet enough for Bangladeshi taste. Therefore decision
was made to upgrade the level of sweetness, but it still
remained lower than local yogurt product.
- Regarding sales ladies recruitment: involvement of the
community and family is key to recruit rural sales ladies

Step 1
Feb 07-
March 08
 Crisis and new start

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April 08, raw material costs rose sharply. Milk price
jumped by 100 percent. Grameen Danone board made
a tough decision to remain economically sustainable. It
increased the price by 60% raising the price of 80g cup
from 5tk to 8tk. Consumer demand immediately
collapsed. In the process sales ladies’ network
disintegrated completely. In June 08, Grameen Danone
Foods Ltd (GDFL) launched a new formula maintaining
30% RDA in micronutrients in a smaller 60g cup,
bringing down price to 6tk.
With mini-promotional events and school nutrition
programs in the villages, GDFL started to recover the
market. A small effective professional ladies’ network
(35 ladies working 17 days /month and selling 50 cups /
day) was built up.
After fixing the retail distribution model in Bogra town,
GDFL expanded its sales, through retail shops, to
Rajshahi and Pabna, 50km from Bogra.

Step 1
Feb 07-
March 08
Expansion

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Then GDFL went for accelerated expansion.
Parallel to the rural distribution GDFL board decided to
expand its market to use the excess capacity of the plant.
Increase in production was necessary to decrease the
per unit fixed cost. Dhaka price was set to get a margin
to offset the loss in rural market. : a 60gr cup of Shokti+
doi reinforced in proteins, is priced at 8 tk.

Company also launched new products like a valorized

mango Shokti+ (8tk for 60g and 12 tk for 80g).

First TV advertising campaign was launched in March

09. In October 09, a new TV campaign involving Pr.
Yunus enabled to reach the level of 100 tons per month
and above from november 09.

To support rural sales in 2009, 1270 proximity mini-

events took place in villages. School nutrition programs
were also organized in rural and urban schools reaching
80 000 pupils among B-C-D social economic classes.
 Towards
sustainability
GGrameen Danone will implement several key actions to further
grow and reach break-even in 2013 :
- Extend its sales network
From 8000 to more than 15000 stores
From 600 to 1500 ladies

- Fully exploit proven success marketing model

TV advertising with “Prof. Yunus“
TV advertising with Shakib Al Hasan
Mini events in rural areas (approx. 7000, x3 vs 2009)

- Innovate by launching Shokti+pocket : a 5tk pouch with same

nutrition, longer shelf life with no fridge needed.
Partially vegetal recipe ensures lower formula cost and
better profitability

- Focus on developing own chilling centers to secure the price

of milk to below 30 BDT/ liter

- Improve industrial efficiency by going to max. capacity by

doubling its maximum capacity from 1600 to 3200T per
year.

- Start the 2nd factory near Dhaka in 2013

Step 1
Feb 07-
March 08
 What about Grameen
Danone’s impact on
health ?

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The John Hopkins University, USA, is currently carrying an
efficacy study in order to measure the impact of Shokti+ on
the health of Bangladeshi children. The study will evaluate
the impact of the consumption of a fortified yogurt vs. a non
fortified yogurt and the impact of a fortified yogurt vs. no
yogurt consumption at all over a period of 6 months and
one year, based on following criteria : morbidity, growth,
cognitive development and status indicators.

This study is being financed by GAIN (Global Alliance For

Improved Nutrition), a global NGO. The study started in
September 2008. Results should be available by end of
2010.

In parallel, Grameen Danone is measuring the weekly

frequency of consumption of Shokti+ : 25% of kids aged 6-
12 in Bogra rural area among C-D-E social economic class
declare to eat at least one cup of Shokti+ per week
(Source: quantitative study on 860 individuals in total, incl.
300 in rural Bogra, ORG-QUEST, june 09).
Social and economic
impact

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Grameen Danone Foods Ltd tries to maximize its local social
impact and to make it sustainable by reaching economic
profitability.

What is the status in Dec 2010 ?

- At the beginning of the year, 1 kid out of 4 around Bogra within

SEC C & D declares to eat at least one shokti+ / week in the last
3 months. NGO GAIN (Global Alliance for Improved Nutrition)
and John Hopkins University are about to deliver results of a
clinical study on health impact of Shokti+ by the end of 2010.

- 821 ladies are getting an additional income of 50 to 100 tk / day

by selling Shokti+ products door-to-door : this is limited but
contributes to improve their living conditions. They benefit from
having a regular source of income, new social capital related to
their formal job, more freedom to move in public space, and an
improved self-esteem.

- 370 micro-farmers around the plant sell daily to Grameen

Danone, getting a regular fixed income, without having to go to
the market.

-Grameen Danone has directly created 190 jobs.

By 2015, GDFL expects to have created 400 jobs, to impact

living conditions of approximately 2250 farmers and 6500 sales
ladies, and to impact the heath of 1.5 million kids.
 Plans for the future

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Company will start a second factory near Dhaka in 2011
and is already looking for a land for a third factory.

2020 vision: Company looks forward to replicate the Bogra

model all over Bangladesh to be able to cover the needs of
all the kids of the country.

Company will welcome partners to invest in this social

business and take responsibility of various clusters of these
mini plants to extend healthy nutrition over the rest of the
country.