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Doing business with low-income communities – which academics and practitioners have christened ‘the base of the pyramid’ (BoP) – now includes a focus on creating sustainable markets with the potential to realise future profit – simply ‘milking’ a market for the next quarter’s profits is seen as short-sighted. 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 to be involved in these markets. And they care about the practical detail of doing it effectively, and ethically. This new view accords that doing business in a healthier economy benefits firms by lowering transaction costs and the long-term cost of capital.

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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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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

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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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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

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Thisbookisdedicatedtothememoryofthelate

CKPrahalad,whopavedthewaytorethinkingrelationships

betweencorporationsandlowincomecommunities.

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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

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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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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

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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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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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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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• 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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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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• 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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13

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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(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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