NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Allen Hammond, Bill Kramer, and Rob Katz

The recent debate over Fair & Lovely Whitening Cream, both in Aneel Karnani’s working paper and in Andrew Leonard’s column in Salon, brings up many interesting points. In response to Karnani, who argues that Fair & Lovely “entrenches disempowerment,” we suggest that a well-regulated free market may be the best indicator of what works and what doesn’t work, for the BOP as well as for other economic strata.

Hindustan Lever and its Fair & Lovely product did not create skin-color bias in India. Indeed, HLL simply responded in a rational manner to the demand for a product that effectively lightens skin. We do not have sufficient information to pass judgment on the way HLL has marketed this product, nor is it our remit. Of course, we condemn discrimination in all its forms, for what that is worth. However, as a Salon commenter notes, when a BOP customer chooses to buy skin cream, it is an aspirational purchase that she would not have had the wherewithal to make in the past. The consumer is making a rational choice, based on the circumstances.

Fair & Lovely would not be a commercial success if it did not work as advertised. Clearly, HLL understands the BOP market better than its competitors and has created a product that is very much in demand. At the same time, when HLL engaged in discriminatory advertising for Fair & Lovely, there was public pressure on them to cease the ad campaign, and backlash against the company in general. The market, in other words, was working.

Understanding market structure and the demand implicit in that structure is key to success for companies–and to meeting the needs of consumers. And while a skin cream may not seem to be a basic unmet need, that is really for consumers to decide. In any event, the same approach is key to dealing with market-based solutions to undeniably basic unmet needs, such as for clean drinking water and for access to health care or financial services.

That’s why, next month, WRI and IFC will publish a detailed empirical guide to the size and structure of BOP markets worldwide, along with an analysis of the business strategies that seem to be gaining traction on the ground, sector by sector. The report, to be called The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, is intended to help both businesses and the development community to engage with the BOP in a more strategic fashion. It will provide, hopefully, a more detailed basis for a discussion of the pros and cons of market-based approaches to poverty alleviation.