Micro-distribution, a major lever for social businesses

Summary

Micro-distribution is a great opportunity for social businesses, since it both helps underprivileged populations along the path to employment and empowerment, and provides healthy food to a greater number of people. But it also has many challenges to face to reach a larger scale and become truly profitable and replicable. So there is plenty of room for innovation and creativity!

24Sept.
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Micro-distribution, a major240912

Many of the projects supported by danone.communities and the Ecosystem Fund develop a micro-distribution approach. What exactly does this bring to social businesses, and how does it nourish business innovation in both the developed and developing markets?

Micro-distribution, as its name suggests, is a small-scale distribution approach that favours direct-to-consumer delivery, or at least reduces the intermediaries between the producer and the consumer. Thierry Delepoulle is head of the Growth Two team at Danone, and was the topic leader at the workshop dedicated to micro-distribution at the GCM.
To him, micro-distribution is

an innovative concept that generally targets the bottom of the pyramid,

an innovative concept that generally targets the bottom of the pyramid, meaning that it both targets consumers that are at the bottom of the pyramid, and an underprivileged sales force that the project helps back to work. To put it simply, and there are of course variants, most micro-distribution projects employ people who struggle to find a job to ensure direct-to-consumer delivery of products that are designed for very low-income populations. There is thus a very strong social dimension to this approach. The Ecosystem Fund’s latest newsletter is actually entitled:

Micro-distribution. Providing access to healthy products and supporting social inclusion.

At Danone, both danone.communities and the Ecosystem Fund support such projects: in Bangladesh, Indonesia or Mexico, they empower women, the ones who suffer most from poverty and unemployment; in Algeria, they target young people between 18 and 30 years old who have no qualifications and no experience; in Italy, they give job opportunities to the over-50s, who are worst affected by the downturn; in Egypt, they provide a livelihood to poor rural populations. This diversity that made us, here at down to Earth, wonder: what exactly is the role of micro-distribution in social business projects? How can it inspire more “classic” businesses? What are its main challenges and goals for the future?

 

Developing the company’s ecosystem with a positive social impact

First of all, it is important to say that micro-distribution fits into Danone’s mission: bring health through food to as many people as possible… while developing its economic environment. As Franck Riboud says in the Ecosystem newsletter, “it is a common sense observation that no living organism can grow and develop in a deprived environment or a desert. It is in a company’s best interest to take good care of its economic and social environment, in a word its ‘ecosystem’.” In the light of this idea, the goals of micro-distribution are numerous, as shown by this infographic about the Semilla project in Mexico: ensure better access to healthy food for deprived populations, develop the economic dynamics in the community and in poor areas, provide access to jobs and thus to social security and legal benefits, build the salespersons’ self-esteem, etc. Can we then say that micro-distribution is crucial to the social business? Thierry Delepoulle is more nuanced: “it is not crucial, but it is definitely promising. Micro-distribution is probably one of the major levers that social businesses can use, in terms of impact on health, nutrition, employment, etc. It is one of the most important fields of exploration.” This micro-distribution also allows Danone to target entirely new fringes of the population that it cannot usually reach, as the Ecosystem newsletter explains:

Danone improves its penetration in lower-income populations: that can only be done through the employment of a sales force from these same social classes, with real ambitions for professional empowerment.

There is a genuine business interest for a multinational company like Danone that aims to widen its customer base and foster micro-distribution. Moreover, this approach is also an innovation laboratory for more “classic” businesses and in the developed world, like in Italy with the De Medici project or in France, a few years ago, when the ProxiCity project had salespeople deliver Danone products directly to boulangeries on bikes.

 

The challenges of scaling up

In spite of all these advantages, both for Danone and the local populations, micro-distribution is not a “magic recipe” and still has challenges to face – the major one being to succeed in scaling up the projects, in order to make as much of an impact as possible. The workshop dedicated to the subject at the GCM highlighted these issues (you can find them in more detail in the minutes of the workshop, here). As Thierry Delepoulle explains, the main challenge lies with the fact that none of the projects supported by Ecosystem or danone.communities is fully profitable yet, and breaking even is not enough: the projects have to actually make money in order to scale up. Then, there are a string of challenges linked to the people themselves: how to recruit and train them, how to lead and motivate them, while managing more and more people? In short, as the Ecosystem newsletter puts it: « micro-distribution projects constantly face a dual challenge: optimizing the economic business model to reach profitability, that pledge of sustainability and large-scale development possibilities, while ensuring the achievement of the social objectives (training, rehabilitation, job access, etc.) defined for targeted populations that require specific management.” Thierry Delepoulle acknowledges that, inside the company, there is still a process of building know-how going on on these issues, because the projects are all young and in their inital phase.

We have few projects that have been developed large-scale and that are replicable.

Moreover, all these projects were created in different countries, with different contexts that the business had to adapt to: not all populations have the same employment and/or nutritional needs. Understanding and meeting them requires tailor-made observation and action, which makes replicability all the more difficult. But these challenges also leave, hopefully, a lot of room for creativity, co-creation and the sharing of best experiences.That is exactly what the Experts workshops at the GCM are designed for, and there are growing efforts inside the company to bring together the ideas of all the project managers. “All these projects are like internal start-ups, which function with a different mindset, in which you do not necessarily standardize your practices, while that is exactly what has to be done in order to scale up”, Thierry Delepoulle stresses. But start-ups also have a mobility and reactivity that can be nothing but beneficial to a multinational company. Micro-distribution at Danone is in fact at a start of a journey that we can expect to be long and fruitful, nourishing new businesses in the developing world and inspiring more classic activities in richer countries. It is bound to increase “creativity and innovations for the business of tomorrow”, as the Ecosystem newsletter predicts. Tomorrow should be exciting, then.