recently announced its plans to reduce and scale back its
operations¹ in Sub-Saharan Africa citing that the middle class in
the region is not growing according to expectations. In a follow-up
to the news Quartz Africa² stated that Nestlé might have forgotten
to mention that its business focus did not pay enough attention to
the potential that lies at the bottom of the pyramid (BOP).
While there has been a lot of talk around Africa rising in
recent years³ - the vast majority of consumers are low-income
households who as with any other consumer group have aspirations,
beliefs and needs. C.K. Prahalad wrote about the need for
companies and organizations to stop thinking of the poor as victims
but as entrepreneurs and value-conscious consumers⁴. To
sufficiently uncover the potential that lies at the BOP, there
needs to be adequate resource allocation for research and
innovation which is often costly and time consuming but can result
in positive benefits. This was the case with the famous Danimal
project by Danone in South Africa⁵ that took two years to deploy.
It highlighted the opportunities that are available at the BOP when
a deep level of understanding and strategic approach in product
development is undertaken. The company's focus resulted in the
successful rollout of the Danimal product that included some of the
following principles of product innovation for the BOP:
Consideration of current infrastructure and accessibility: In
the Danimal case - most of the suppliers and consumers had issues
around electricity supply. Product innovation had to take into
consideration the product's shelf life outside the cold room.
Product development must also include added value and
functionality not just form: For Danimal that meant including added
nutritional value in the form of Vitamin A and Iron as well that
the children in these communities often lacked.
Hybrid Solutions and collaboration:Deciding what to do for
specific markets requires a mind-shift that can often be made
easier by collaborating with experts in the field. Danone SA worked
with the South African Medical Research council to maximize
research on the benefits of probiotic cultures.
Unique distribution models: The traditional distribution method
through retailers and supermarkets was not sufficient to reach
consumers. Danone SA introduced the micro-distributer called the
Danimamas who were recruited, trained and provided with initial
assets to distribute the product.
While the above appears like a lot of effort for the
introduction of one product in one country, the efforts paid off.
From the first introduction in February 2005 sales more than
doubled by the end of the year. There are most likely other reasons
Nestlé has decided to scale back in Africa but for other
organizations/companies looking to invest in Sub-Saharan Africa,
let this not be a deterrent: the potential for profitable business
is still there.
¹Nestlé Scales back In Africa: http://www.reuters.com/article/2015/06/17/us-nestle-africa-idUSKBN0OW2K320150617
²What Nestlé may have forgotten to mention: http://qz.com/430745/what-nestle-forgot-to-mention-when-giving-its-reasons-for-scaling-down-in-africa/
³Africa Rising: http://www.economist.com/node/21541015
⁴C.K. Prahalad: The Fortune at the Bottom of the Pyramid
⁵Danimal in South Africa: Management Innovation at the Bottom of
the Pyramid - Richard Ivey School of Business