The document analyzes the business model of Grameen Danone Foods Limited, a social business collaboration between Grameen Bank and Groupe Danone. It discusses how Grameen Danone aims to address malnutrition among children in Bangladesh while reducing poverty. The business model employs local villagers in manufacturing and distributing a fortified yogurt product. Financial analysis shows the business is becoming more profitable and self-sustaining over time. The future outlook expects Grameen Danone to expand its operations and community impact through increased infrastructure and campaigns.

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THE SWEET TASTE OF GRAMEEN DANONE
MG437 SUMMATIVE ESSAY
EXAM NUMBER: 35998
WORD COUNT: 1,898

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THE SWEET TASTE OF GRAMEEN DANONE
The significance of an effective business model in an organization is indubitable. It
instills authenticity in institutional processes and provides a comprehensive overview
of the business by making activities visible. A high-quality business model will
always deliver value to the customers, entice the customers to pay for that value and
ensure self-sustainability or profit (Teece, 2010). Innovations within these business
models have resulted in the structuring of successful enterprises and generation of
massive wealth (Johnson, Christensen and Kagermann, 2008).
Through this essay I attempt to analyze one such creative business model that has
been applied to a low-income market at the base of the pyramid. Focusing on such a
market not only generates value for organizations but also offers the poor a chance to
access services that improve their livelihood resulting in reduction of global poverty
(Karamchandani, Kubzansky and Frandano, 2009).
This article is separated into three components. The first briefly explains the ideology
and objectives of a social business. In the second part I attempt to investigate the
design and implementation of the business model of Grameen Danone Foods Limited,
an enterprise that aims at eradicating malnourishment among children living at the
base of the pyramid in Bangladesh whilst reducing poverty within their community.
Lastly the essay looks at a futuristic perspective for Grameen Danone and why
Business Model Innovation at the base of the pyramid will continue to be a critical
area of research.
A SOCIAL BUSINESS
A social business is that which achieves the purpose of creating business models that
capture aspects dealing with basic human needs which may be forgotten by other

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economic institutions (Seelos and Mair, 2005). Yunus elucidates the concept,
significance and the functionality of a social business (Yunus M et al, 2010). He
states that the base of a social business model is entrepreneurship, a quality available
in abundance within poor people of the world. A social business aims to empower
these people by using this inherent quality so that they may elevate themselves out of
poverty. Its secondary aim is to recover the money invested in the business only to
reinvest it again for the betterment of the society.
I will now attempt the study the business model of a social business, Grameen
Danone using a combination of frameworks put forth by academics (Chesbrough
2010, Teece 2010). It includes the analysis of the collaboration, market segmentation,
customer value proposition, manufacturing, distribution, marketing, results and
revenues. This will provide a holistic view about how the organization started, the
way it operates and the direction it is heading towards.
Collaboration
Value
Proposition and
Market
Segmentation
Manufacturing
and Distribution
Marketing
Revenues

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The Collaboration
The Grameen group comprises of four sister companies of the Grameen Bank and has
a strong presence in Bangladesh. Groupe Danone is a multinational company with an
aim of providing health through food products. They realized that using their
competencies they could solve the vital social problem in Bangladesh where more
than 56% of the children under the age of five suffer from malnutrition (Unicef,
2008). This led to the establishment of Grameen Danone Foods Limited in October
2005 when M. Riboud the chairman of Groupe Danone pledged his allegiance to the
Grameen group via a handshake over lunch (Yunus and Weber, 2007).
Market Segmentation and Customer Value Proposition.
The Market Segmentation involves selecting the right consumers to serve, around
which further operations of the organizations revolve. Grameen Danone targets a
mass market of children living at the Base of the Pyramid in Bangladesh.
A Customer Value Proposition is a distinct offering that enhances a customer’s value
through attributes such as performance, customization, price, accessibility and
convenience (Osterwalder, 2009). Grameen Danone provides a sweet and nutrition
rich yogurt as their value proposition. Rich in vitamins, minerals, calcium, iron, zinc
and iodine it is a high performing product. Being easily accessible at every doorstep
and available at the cheapest prices, their product called ‘Shoktidoi’ or power yogurt
is a hit within the local communities (Grameen Creative Lab, 2011).

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Manufacturing and Distribution
The manufacturing process of Grameen Danone involves conversion of milk into
yogurt in small but well equipped plants located close to the villages that are served.
The villagers are involved in the process by hiring them to work in the plant as well as
purchasing milk from the residents that own cows (Yunus and Weber, 2007). The
design of the initial plant near Bogra is environment friendly. It contains energy
saving light bulbs, solar water heaters, rainwater harvesting facilities and an in house
biogas system (Yunus and Weber, 2007). The cost of the construction is $1 Million
and the capacity of production is approximately 100,000 biodegradable cups of yogurt
per day (Sultan, 2007).
There are two modes of distribution for Shoktidoi. The yogurt is either delivered to
shops in rural as well as urban locations or picked up by ‘Grameen Danone Ladies’
from collection points (Rangan and Lee, 2010). These ladies who deliver the yogurt to
the doorstep of customers are residents of the same village and clientele of the
Grameen Bank. They get a certain commission depending on the number of cups of
yogurt they sell per day.
This makes the manufacturing and distribution system of Grameen Danone unique as
it enables the incorporation of contradictory and contemporary views of both Prahalad
and Karnani in its business model (Asad Ghalib et al, 2009). Prahalad’s theory is to
treat the poor, as people with the ability to select and purchase a wide range of goods
that they think are beneficial (Prahalad, 2005). Grameen Danone provides one such
good as explained above. Karnani on the other hand labels this method as
romanticizing the poor (Karnani, 2008). He believes that poor cannot make
appropriate choices due to information asymmetry and illiteracy. The solution is to
provide the poor with steady jobs and a steady income by involving them in the

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production process. Grameen Danone has been successful in implementing his
opinions by improving working practices of villagers as well as providing a steady
income to both support their families and pay off their loans.
Marketing
After the establishment of the plant it was necessary to make people aware of the
problem of malnutrition and how consumption of Shoktidoi would be a step to solve
it. The marketing strategy used by Grameen Danone is campaigning on the ground as
well as through electronic medium (Grameen Danone Foods Limited, 2010). They
utilize nutrition programs in schools to gain a better access to the students. They
conducted 1,270 events in villages to spread brand awareness. An advertizing
campaign on television featuring Muhammad Yunus was also launched in 2009.
Results and Revenues
Even though Grameen Danone has managed to sell a large quantity of yogurt, which
is their source of revenue, they are still not profitable (Rangan and Lee, 2010). Using
data provided by Rangan and Lee I have calculated certain financial ratios displayed
in the table below for years 2007-2009. These calculations are based on well-known
productivity formulas (Wetman, 2003). Comparison of the figures for these years
helps to show that the organization is going from strength to strength every year and
is showing positive signs for the future.

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Year 2009 2008 2007
Gross Profit
Margins
55% 52.90% 51.10%
Diluted EPS 3.55 3.86 12.82
Debt to Equity 1.02 2.10 2.05
ROCE 9.6% 7.2% 6.5%
Current ratio .752 .996 .644
ROA 7.5% 5.9% 4.9%
1. The Gross Profit Margin of an organization indicates how well the revenue
generated by the company is utilized. GP Margin is indicative of the
proportion of sales, net of returns, that is represented by profit. An increase in
GP ratio means that irrespective of the company’s other expenses (those not
related to the core business), the fundamental profit after costs is increasing.
This is the case with Grameen Danone and can be indicative of better
operating efficiency, reduction in costs or more market clout.
2. The Diluted EPS indicates the earnings per share of the organization. This has
drastically gone down between 2007-2009. But since we know that the Gross
Profit Margins have gone up, the decrease in EPS shows that Grameen
Danone is reinvesting the money generated through profits for further
expansion.
3. The Debt to Equity ratio illustrates the capital structure policies of the firm or
how much debt the company uses in order to fund its operations. This ratio has

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decreased from 2.05 to 1.02 for Grameen Danone over three years, which
shows that more operations are financed using equity (generated via fresh
issues of shares or retained profits) rather than through money borrowed.
4. The ROCE is the return obtained on the capital invested by a company. This
ratio has gone up from 6.5% to 9.6% in three years, which is a very positive
sign.
5. The current ratio specifies the ratio of current assets to the current liabilities
and is a key indicator of short-term solvency/liquidity. It is of specific
importance to creditors of a business. This ratio has also risen between 2007-
2009 for Grameen Danone. There is a slight decrease between the years 2008-
2009 which is due to the increase in price of milk resulting in an increase in
the short-term debt.
6. ROA is the signal of the profitability achieved through assets employed in an
organization. It shows, in a way, the level of efficiency at which capital assets
of a firm are operating. The growth of this ratio is a sign that Grameen Danone
is making lucrative and intelligent investments in terms of its fixed assets.
Thus through observing basic financial ratios we can appreciate the fact that Grameen
Danone Foods Limited is heading towards self-sustainability and even profitability.
A FUTURISTIC PERSPECTIVE
In the near future Grameen Danone Foods Limited will expand its economic activities
via increase in infrastructure, manpower and campaigning (Grameen Danone Foods
Limited, 2010). The aim is to achieve profitability by setting up a new manufacturing
plant and generating revenues of approximately $7,470,000 by 2012, extending the

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network of ‘Grameen Ladies ‘ to 1500 and conducting around 7000 mini events in
villages across Bangladesh (Rangan and Lee, 2010).
Via the growing popularity of Grameen Danone, I believe that a major impact within
rural communities in Bangladesh will ensue. These will be in the form of capabilities
and relationships (London, 2009). Within the communities there will arise a common
goal of eradicating malnutrition and increase in knowledge about its benefits. The
relationships between the people in the villages will improve, as there will be a sense
of respect for one another. The efficient working of the ‘Grameen Danone Ladies’
will result in gender equity and social cohesion. Overall the future looks extremely
bright for Grameen Danone Foods Limited.
Through this essay I illustrated the concept of a social business and utilizing academic
frameworks of business model innovation attempted to highlight the foundation,
functionality and future of Grameen Danone Foods Limited. Study of such business
models at the BOP level is critical as it provides a service to the investors interested in
these markets and thus helps taking steps to alleviate global poverty (London, 2009).
For investors it is a method of deriving what the ‘best practice’ is and where it works.
There is hope that by observing Grameen Danone’s progress many fruitful
collaborations will be formed leading to the empowerment of millions more at the
Base of the Pyramid. This will definitely sweeten the taste of Grameen Danone Foods
Limited even more.

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Rangan, V and Lee, K. (2010). Grameen Danone Foods Limited., a Social Business.
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