Thomas Taylor Social Entrepreneurship Professor Melissa Pauslen 10/26/15

Danimal Case Hawarden and Barnard’s case, Danimal in South Africa: Management Innovation

at the Bottom of the Pyramid tells the story of the Dannon yogurt company’s endeavor into the bottom of the socioeconomic pyramid in South Africa. Dannon introduced ‘Danimal’ yogurt in 2005 with the specific intent of marketing a viable product to consumers with the least buying power and experience wielding economic influence. On a broader scope, the case details the changes that took place in the management of the South African dairy industry as a major Western corporation attempted to introduce a new brand into a developing market. Dannon sought to figure out how feasible marketing and selling products in developing economies was, with their primary qualitative goal being to create brand awareness in the bottom segment of the consumer base in South Africa. Dannon utilized a non-traditional distribution network and employed a social marketing program to grow awareness in a non-traditional market, with the knowledge that their methods would not be a sustainable means of creating profits. Dannon took on the challenge of penetrating what C.K. Prahalad calls the “Bottom of the Pyramid” with an entrepreneurial spirit, taking the many challenges of marketing and distributing nutritional bottled children’s yogurt in a land bereft of distribution or food storage infrastructure as opportunities, and innovating to create new solutions. The case illustrates the intricacies of doing profitable business, maintaining focus on delivering a viable (nutritious) product, and establishing maintainable brand familiarity in the evolving economy of South Africa. Going forward, the case discusses Dannon’s pursuit of a sustainable business model is superseded by their desire to establish their brand. In light of the case, this paper will discuss the successful development of the Danimal product itself, the question of sustainability in their current distribution and marketing model, the value derived from this product, the insight the case gives into doing business in developing countries, a discussion of doing business within the complex developing economies like that of South Africa, and a plan to measure success and mitigate Dannon’s management’s concerns going forward.

The Danimal yogurt product introduced by Dannon has a level of nutrition not often available to poor children in South Africa, a feature of food thought of as commonly accessible to consumers in a developed economy, to the extent that it is often an afterthought. However, in a developing market in which consumers lack access to proper nutrition for their growing children as a result of a lack of infrastructure (like refrigeration) that deters businesses, there exists a need to move products into an area, store them without refrigeration, and convince people to buy them. The Danimal product is not only nutritious, but it does not require refrigeration, has a shelf life of one month, and its packaging is attractive to children. The product is ideal for an introduction of the Dannon brand into a market currently bereft of the infrastructure that allows for other products to be successful, however it does not provide a viable model for profitability because the margins for the product are too low given the increased input required to increase shelf life, and the scope is limited to children. The informal distribution via ‘Danimamas’ or local micro-distributors in South Africa is a creative way to infiltrate a

market without any established distribution channels, and helps to empower locals to involve themselves in business. However, the part time workers who constitute Danimal’s distribution networks lack the effectiveness and reliability of formally trained distributers, whose services would be necessary to expand and access a breadth of consumers. This case gives valuable insight into dealing with limitations exclusive to developing economies, and resources often taken for granted by businesses in developed markets. The case also gives a comprehensive illustration of the process by which decisions are made from the top-down, as well as Dannon management’s concerns about the viability of their brand, and the pitfalls of innovating business solutions in low-income markets. This paper will provide a plan to change the M.O. of Dannon’s operations in South Africa and beyond, so that the emerging market project may continue.

Dannon’s financial capital resources present a distinct advantage for leveraging the untapped human capital of developing economies like South Africa. This paper recommends assisting the development of organic distribution infrastructure in South Africa by communicating with local business owners, and holders of capital to offer an opportunity to develop local distribution and transportation companies with Dannon taking a stake. Helping local consumers grow their own transportation businesses not only increases the general level of wealth in the consumer base, but this particular endeavor creates a resource that can be leveraged for expanding the scope of Dannon’s dairy goods in the future. Partnering with local business leaders, providing capital assistance and business training will be one major facet for sustaining growth of the Danimal brand, injecting capital into the consumer base, and paving the way for other operations down the road. By increasing the breadth of the accessible customer base in South Africa and other proximate markets, Dannon could overcome the lack of total income in the market and open many doors to sustainable growth. Measurables for this initiative will be similar to any expansive business maneuvers, starting with standard measures of the profitability of distribution companies, penetration of new adjacent markets as distribution channels improve, and proceeding to the sustainable employment of South Africans and increasing measures of national income.

The next step for Dannon to create a path for future growth involves the company leveraging the size of the ‘bottom of the pyramid’ by instituting a brand ambassador program in order to increase the scope of the grassroots advertising campaign already in place. Incentivizing locals to reach out to neighboring communities and advertise the Danimal product focusing on its role in children’s healthy growth and development. This organic initiative will lay the foundation for Dannon’s introduction of other products into the South African Market, which will focus on the food’s role in nutritional health in every stage of life. The chief measure of the impact of this initiative will be the amount of attempts to imitate the products, and public perception of the company. Imitators of Dannon’s products will indicate an inclusion into the collective consumer mindset, so that its presence is ingrained in their society and therefore presents other opportunities to engage in competition. Public perception will also be indicative of Dannon’s brand’s reception, as its mission is to establish itself as a household name. Means of advertising used most heavily in developed markets are ineffective or implausible. Television and Internet advertising will lack effectiveness given that access to such media is limited in low-income economies, and furthermore association with television media will associate

Dannon’s brand with the unreachable grandeur of western entertainment and ostracize low-income consumers.

The final operation Dannon should take to transition from Danimal’s temporary foothold in the South African market to sustainable profitability and expansion is a combined educational-business development initiative. This paper recommends Dannon partner with the Invelaphi Engineering Refrigeration Company and SARACCA to promote career-specific education for South Africans. Invelaphi has a history of contributing to the overall quality of business in South Africa, having partnered with an association of contractors called SARACCA, whose mission is to provide education and guidance to refrigeration and cooling businesses so that higher standards may be met across the board.1 As a dairy company whose profitable products are reliant upon the prevalence of refrigeration infrastructure, Dannon has a vested interest in increasing the prevalence of affordable refrigeration, and so partnership with Invelaphi and SARACCA to provide South Africans with education in refrigeration manufacturing and maintenance presents an opportunity to improve infrastructure that will not only improve the financial bottom line, but improve the level of education and income of a struggling low-income consumer base. Assisting South Africans with subsidized technical education will contribute to the market’s overall wealth, education, and simultaneously increase access to a vital portion of infrastructure for Dannon’s products. The impact of this initiative will be measured by the (hopefully positive) changes in employment for South Africans taking part in the education initiative, the prevalence of refrigerators in private homes and vendors, and Dannon products’ sales.

In a careful examination of the case of Danimal yogurt in South Africa one finds a model for introducing business in developing economies, dealing with the obstacles to distribution and marketing strewn throughout them and a discussion of the process of establishing a sustainable business. Dannon introduced Danimal in 2005 in order to gauge the practicality of marketing and distributing a product in a developing market like South Africa. In order to combat the lack of established distribution channels, refrigeration infrastructure, and consumer education, Dannon made partnerships with locals and a low-margin truck company, created a product that does not need to be refrigerated, and employed a grass-roots advertising model. The steps taken by Dannon to infiltrate a dairy market in which consumers lack knowledge, income, and resources that would normally lead them to purchase a nutritious bottled children’s product are innovative and driven by an entrepreneurial spirit. However, Dannon’s strategy for introducing business is not a sustainable business model, and as such management seeks to innovate solutions for the infrastructure problems that interfere with distribution and storage. This paper has detailed a plan for changes in the business model that will allow for sustainable broadening of the customer base, measuring impact, and persistent growth. Going forward, developing organic distribution infrastructure by assisting local owners of capital, and helping them to grow their own transportation businesses that can be leveraged for other endeavors in the future will be one major facet for sustaining growth of the Danimal brand, injecting capital into the consumer base, and paving the way for other operations down the road. By increasing the breadth of the customer base in South Africa and other proximate markets, Dannon could overcome the lack of total

                                                                                                               1  http://saracca.org/  

income in the market. The company should leverage the size of the ‘bottom of the pyramid’ by instituting a brand ambassador program to increase the scope of the grassroots advertising campaign already in place. Additionally, partnering with the Invelaphi Engineering refrigeration company to promote career-specific education for South Africans that will contribute to the market’s overall wealth, education, and simultaneously increase access to a vital portion of infrastructure for Dannon’s products.

Works Cited SARACCA. INVELAPHI ENGINEERING SHARES THEIR GROWING PAINS.South African Refrigeration & Air Conditioning Contractors' Association. N.p., 9 Oct. 2015. Web. 26 Oct. 2015. <http://saracca.org/>.