Danone

This case study describes French multinational Danone’s initiatives to address the low-income
populations from emerging countries and how it transformed itself in the process into a social
business. In many ways, this case study shows the future of rural marketing.
In the late 1990s, Danone realized that there were limits to the European understanding of
‘social’, which merely meant that it should treat its employees well. Business had a larger objective
than to supply premium products to rich consumers in developed countries. Yunus (2007), in his
book, Creating a World Without Poverty, describes the thought process of Franck Riboud, the
chairman and CEO of Group Danone:

Danone Communities support nine social businesses

Source: Danone.communities.

We don’t want to sell our products only to the well-off people in those countries. We would like
to find ways to help feed the poor. It is part of our company’s historic commitment to being
socially innovative and progressive, which dates back 35 years to the work of my father, Antoine
Riboud.
It was this thinking that launched Grameen Danone Food Limited (GDFL), a joint venture
between Danone and Grameen Group in Bangladesh, which is based on the model of social
business. GDFL’s first product was shokti doi, a tasty yogurt to meet the nutritional needs of
children. The product was first distributed in rural areas by shokti ladies, who sold the product on
commission basis.
Grameen Danone was launched in July 2006 with its mission to reduce poverty through a
unique business model to supply daily healthy nutrition to the poor—a fortified yogurt at an
affordable price under the brand name Shokti+. It started additional activities linked to social
marketing, including educating consumers about their nutritional needs and health.
While other companies start projects or put their money in corporate social responsibility
(CSR), Danone illustrates the future of rural marketing in which companies strive to fulfil social
objectives and get transformed in the process. Starting from the early 2000s, the company has
launched social business and BoP projects with the explicit intention of strategic renewal.
Grameen Danone has adjusted the company’s entire value chain to its social mission and rural
business environment. The company involves local communities in all parts of its value chain: it
sources raw milk from small farmers, employs local residents in the factory and engages local
women as sales ladies for door-to-door sales. In the absence of a cold chain, Grameen Danone
emphasizes a quick turnaround of 48 hours from factory to consumer so that the product does
not deteriorate. The company has a no-loss operation, with all profits to be reinvested for further
expansion and improvement.
 The organizational learning process is not limited to ‘top down’ dissemination of the leaders’
intuitions, but also skills developed by field managers and employees spreading through the
organization. Crossan, Lane and White (1999) explain the business model through ‘the 4I’s’:
Intuition, Interpretation, Integration and Institutionalization. This has played a significant role in
the process of strategic renewal undertaken by the firm. The Danone case shows a number of
disruptive innovations:

New approach to HR: New incentive systems were created. For example, executive bonuses
were calculated on the basis managerial contribution of one-third economic, one-third managerial
and one-third societal. Danone managers were encouraged to become ‘intrapreneurs’ in that they
could act creatively and operate frugally. ‘Social innovation labs’ reunited the people in social
business projects annually, along with other stakeholders. A social network, both internal and
external, was built around ‘danone.communities’. This helped building new individual skills which
became collective and eventually organizational. The French concept of hyper efficiency was
replaced with a more patient and modest behaviour. The HR policy includes skills acquired
through working in BoP markets combined with long training that facilitates the paradigm shift.

Innovation: Radically new products were developed, such as nutrient-rich yogurt in Bangladesh
and the ‘pouch’ in Senegal, which is a carton composed of local grain and milk that can be stored
at room temperature. These are examples of an innovative and frugal methods adopted by the
company. Innovative financing was implemented, such as employee savings and the
danone.communities mutual fund, and investing guarantee schemes created by the French
Development Agency.

Supply chain: The supply chain was tweaked to source milk and cereal from local sources.
Distribution of products was done through a network of rickshaws and the ‘shokti ladies’ who sell
products door-to-door. Rather than increasing the sophistication of products, it built on new skills
in terms of improving last-mile delivery. It slowly developed the ability to develop disruptive
business models with low capital intensity.

Production: The concept of micro-factory was developed, which used renewable energies such
as ‘bio-digesters’. Danone factories in Bangladesh are about one-hundredth the size of its factories
in the Western world.

Market research: Unlearning their ways of thinking and acting, managers instead observed,
listened and discovered the needs, expectations, habits and constraints of customers to design
simpler and better offers for them. They knew very little about low-income consumers and learned
to co-create with them and work with local communities.
That first social enterprise became the founding project of the danone.communities fund,
Danone’s incubator for social businesses. Today, nine social businesses are supported by
danone.communities, together improving the daily life of over one million people around the
world, according to its website.
Companies in rural marketing may well remember the words of Antoine Riboud, who had in 1994,
said: “There will not be sustainable economic value creation if there is no personal development
and human value creation at the same time.”

Questions for discussion:

1. Why is it necessary for companies to transform their objectives? What is the nature of a
social enterprise? Is it the future of marketing?
2. Imagine you work for a farming equipment/machinery manufacturer (say, tractors and
similar machinery). Can this firm work as a social enterprise? If so, how?