Danone’s Cheap Trick

Friday, August 13, 2010

Groupe Danone is the world’s largest yogurtmaker and one of the biggest companies in France, with some $21 billion in sales annually. Yet a tiny factory in Bangladesh from which Danone never expects to earn any money is giving the company a profitable lesson in manufacturing for the developing world – and even some tips for business in the West.

The factory, which sits in the northern city of Bogra and makes a nutrient-rich kids’ yogurt called Shakti Doi (“energy” in Bengali), got its start in 2005, when Danone CEO Franck Riboud met Muhammad Yunus, the Bangladeshi microfinance pioneer and founder of Grameen Bank. Yunus has a habit of finding ways to use corporate infrastructure to reach ultra-poor consumers, as his worldwide following can tell you.

The result is Grameen Danone and a factory that produces one-hundredth of what a typical Danone plant does, churning out a low-cost yogurt fortified with four vitamins and minerals generally lacking in the diets of the area’s poorer children. Danone expects the enterprise – one of its “social businesses” – to eventually run at breakeven or better, but any profit will be reinvested in similar projects.

What Danone didn’t expect is that selling yogurt to the bottom of the pyramid would teach so much, in realms from product development to factory design. “Two years ago, I was pushing to have people from the Western world interested in what we’re doing,” says Philippe Pages, Danone’s director of nutrition for emerging markets. “Now I’m bombarded with requests.”

Source: TIME (link opens in a new window)