Wealth and health at the Base of the Pyramid: Modelling trade-offs and complementarities for fast moving dairy product case

This paper models the localized Base of the Pyramid (BoP) supply and demand chain of a fast moving dairy product within its (social and business) environment for identifying the effects of various pricing strategies on wealth and health of the poor population of Bangladesh. The joint venture of the Grameen Bank and Danone (GD) in Bangladesh is a showcase of integrative BoP projects. It produces fortified yoghurt in a micro-plant and distributes it through micro-entrepreneurs, following a strictly localized approach. The objective of this BoP project is twofold; (1) integrating as many people as possible into productive processes and paying decent prices, wages, and commissions (wealth) and (2) regularly serving as many people as possible with fortified yoghurt (health). By means of dynamic simulation, we analyse how volatility in raw material prices affects the economic viability of the business model and hence both objectives. The GD case provides the motivation as well as empirical data for the presented research and has been used for model validation. Additionally, we use further literature sources. Our results show the outstanding importance of sales effectiveness for buffering against negative consumer reaction to sudden price increases. Sales effectiveness aggregates various performance factors regarding product distribution and perceived product quality and value. In this respect, awareness raising campaigns by governmental and civil society organizations as well as changes regarding distribution mode and selection of distributors may enhance sales effectiveness.