Yoghurt maker’s recipe for funding social businesses

Tuesday, July 8, 2008

When it launched a nutrient-rich yoghurt for poor consumers in Bangladesh, Groupe Danone (NYSE:DA) , the French food company, hit an unexpected obstacle. It had trained a large sales and distribution team of women, but only a handful were still working after a week.

The problem, Danone found after talking to a local charity, was that people there did not like women conducting door-to-door sales.

With its partner Grameen, the microfinance institution, Danone decided to talk to community representatives. “We’ve learned something about managing sales forces of door-to-door saleswomen that are very poor,” says Emmanuel Marchant, chief executive of Danone Communities. “It’s about understanding the cultural context in which we operate.”

Danone is not alone in its discovery. Many companies have to learn fast when they embark on projects that attempt to address poverty or disease through commerce. But while some companies have found innovative operational ways of entering these poor markets, financing social businesses remains hard.

In this respect, Danone has lessons to offer. It has devised a financing model in which 90 per cent of investors’ money will be ploughed into low-risk investments, weighted towards socially responsible investments. The other 10 per cent will go directly to the yoghurt project.

The model is a Sicav (soci?t? d’investissement ? capital variable), an open-ended collective investment fund common in France.

Anyone, from Danone staff to shareholders and institutional investors, can invest in the Danone Communities fund, which launched in December 2007 and is managed and marketed by Cr?dit Agricole. So far the fund has raised about ?60m : ?20m from Danone, ?24m from Credit Agricole, and the rest from other institutions and Groupe Danone’s employees.

“We wanted to have a very wide-open public financial tool that is easy to understand for retail banks and for the consumer in France,” Mr Marchant says.

In recent years, many groups have warmed to the idea of serving the world’s poorest people while turning a profit. But the heavy investment in time and money and the unstable operating conditions concerned mean most of these activities remain far from profitable.

Continue reading “Yoghurt maker’s recipe for funding social businesses

Source: Financial Times (link opens in a new window)