Monday, April 18, 2011

Grameen Danone and the Rise of the Social Business Enterprise

Last week you'll recall I linked to Stephanie Strom's New York Times article profiling a new PepsiCo venture that sponsors the local cultivation of corn in a small Mexican community, decreasing the environmental impact of crop transportation, and creating an economic boon for the impoverished nearby community. Strom's piece included a fleeting reference to an earlier enterprise spearheaded by French food conglomerate Groupe Danone. That aside caught my interest, and I decided to dig up some further details on the Danone program, an innovative prototype that, as it turns out, warranted the further attention.

As you probably know, Groupe Danone is a heavyweight multinational food-products corporation, specializing in dairy, baby food, bottled water, and a variety of other products, comprising a multitude of brands you'll recognize - Volvic, Evian, Activia and others. Here in the United States, many of the Groupe's products retail under a more familiar name: Dannon.

In late-2005, the corporate heads of Danone sat down with Professor Muhammad Yunus, the founder of Grameen Bank, a Bangladeshi community development organization specializing in microfinance. Yunus, who shortly went on to win the 2006 Nobel Prize in Economics, had pioneered a group-based credit model designed to give small, collateral-free loans to the poor, stimulating the growth of new businesses in the Third World. As a result of that meeting, Danone joined Yunus and his "Bank of the Poor" in launching Grameen Danone, an innovative "social business enterprise" which functions as a non-loss, non-dividend community-based business designed to invest in a cause-related product, then reinvest all profits back into further growth of the core organization.

In this case, Grameen Danone's cause was child nutrition in Bangladesh, and the product was a vitamin-fortified full cream yogurt, dubbed Shakti Doi, tailored to provide kids with much-needed nutrients. The tale of the yogurt's development is a fascinating one, as too is the story of Grameen Danone's trial-and-error financial evolution.

The novel facet, though, is this: investors collect no dividends from their profits; rather those funds are reinvested to promote the growth of the core business. In addition to addressing child nutrition, the Grameen Danone brand relies on locally-developed ingredients, resulting in increased job opportunities, business development for its various subsidiaries, and environmental protection.

The Grameen Danone model is one that's been copied since its inception, deservedly so. It provides a vivid example of the potential reach and innovation possible for corporations willing to partner with a local cause and champion a profit-neutral business with the potential to open, as well as elevate, new markets.

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