In 2005, when Muhammad Yunus met Franck Riboud, the CEO of Groupe Danone, the world’s largest yogurt maker, Yunus had an idea in mind – creating what he called a ‘social business’ in Bangladesh. And he had a clear idea of what it would do – it would create local jobs and benefits, and it would address malnutrition among Bangladeshi children

In Bangladesh, over 54% of preschool children—some 9.5 million youngsters—are malnourished and deficient in micronutrients, especially vitamin A, iron, iodine and zinc. Shokti Doi yogurt is fortified so it provides 30% of their daily requirement for iron, zinc, vitamin A and iodine and independent tests by the Global Alliance for Improved Nutrition (GAIN) showed improvements in IQ and growth indicators among children who consumed one yogurt a day for a year.

This marvellous YouTube video gives a great overview of the project’s beginnings in 2006.

The Grameen-Danone 50:50 joint venture partnership, Grameen Danone Foods Ltd., drew on the skills of both parties. Danone brought its skills in design, production, quality and nutrition. Grameen brought its highly developed network of branches throughout Bangladesh and its expertise in distributing products and services to rural communities. The social business model means that neither partner gets any profit once they have recouped their original costs; instead, earnings go into the project.

The yoghurt, which is enriched with crucial nutrients, is sold at a price of 6 BDT (= 0.06 EUR) which even the poorest can afford, while the venture was designed so benefits exist along the whole value chain, Yunus explains. “The milk for the yoghurt is purchased from micro-farmers. The production is designed in such a way as to give as many people as possible a job. Sales ladies distribute the yoghurt door-to-door and receive a 10% commission. Unsold yoghurts are taken back. In total, Grameen Danone Foods is responsible for the creation of about 1,600 jobs within a 30km radius around the plant.”

Initially, the plant bought its milk from a dairy co-operative 80 km from Bogra. But part of the project goal was to create micro-farms around Bogra which would supply milk to the plant. The Grameen Bank, which had been established by Yunus in 1976 to use microcredit to empower the poorest of the poor to boost their incomes and raise living standards, loaned money to farmers to buy cows and to the Grameen ladies to start up their micro-businesses selling yogurt.

Environmental aspects were considered in the plant design, with solar energy used for heating the water to clean the installation and preheat water for the main boilers, and packaging was made fully biodegradable.The plant has a biodigester which produces energy for nearby homes, and its own water purification plant.

For Danone, developing a yogurt factory that relied on small amounts of milk from many farmers required thinking everything from scratch – but as things turned out, that brought unexpected benefits. In a fascinating article in 2010, Time Magazine described it this way:

“In Bangladesh the company set out to put enough vitamin A, iron, zinc and iodine into a 60 g or 80 g cup of yogurt to meet 30% of a child’s daily needs. That proportion was beyond anything Danone had ever attempted. It took a year and dozens of tries to figure out how to do it without the nutrients reacting to one another and souring the yogurt.

Part of the answer lay in a new, less reactive iron that Danone had learned about from an NGO — – not the sort of partner a global corporation tends to come across in its normal line of business. Now Danone is using that iron in products for the developed world, where the company sells fortified yogurt targeting things like bone strength in older women (the Densia brand) and better digestion (Activia).

The Bogra operation has also proved a template for how Danone might push deeper into the developing world. The company already makes about 40% of its sales in emerging markets, but almost all of that is to the richest 5% to 10% of consumers in those areas. One lesson Danone picked up in Bangladesh: how to help farmers keep the milk they bring to market fresh by using enzymes, since refrigeration isn’t always possible. Someday that could help Danone expand in Africa.

Danone is also figuring out how to produce yogurt less expensively. To make Shakti Doi affordable, the company built a far simpler, lower-cost, 600-sq-m factory, even using one less tank thanks to an innovation in the fermentation process. The plant can’t make complicated recipes, and it relies on cheap labor (at local wages). But it has given Danone new insights about economies of scale. “The day we engineered that factory, a mental barrier was broken,” says Danone co-COO Emmanuel Faber. What the factory lacks in size, it makes up for in ease of use; workers simply don’t have to be as skilled.”

As of 2020, Grameen Danone was impacting 300,000 children and had created sustainable revenues for 500 farmers and for 200 “Grameen ladies” and 117 van pullers in distributing the products. Yunus hopes to replicate the success at Bogra over and over again, until there are plants all over the country.

In 2007, Danone launched a mutual fund called “Danone Communities” to invest in social businesses that address three specific Sustainable Development Goals – ending hunger (No. 2), ending poverty (no. 1), and clean water and sanitation (no. 6). Starting with the creation of Grameen Danone, Danone Communities has invested in social businesses from Senegal to Mexico, supporting 12 social businesses in 18 countries with more than 10 million beneficiaries.

Sources:

Danone Communities: Grameen Danone, Fighting Against Malnutrition In Bangladesh. Danone, 03.02.2020

A Social Business Success Story: Grameen Danone in Bangladesh. Essec Business School, Jun. 26, 2012

Danone’s Cheap Trick. Time, Aug. 23, 2010

Danone to Open Second Yogurt Plant in Bangladesh. Agence France-Presse, Apr. 29, 2008.

Mohammad Yunus history of Grameen Danone Foods. GAIN, YouTube

Grameen Danone: A Social Business. YouTube, May 29, 2010.