Recently, the IDB hosted its first international conference on Business at the Base of the Pyramid, the First BASE Forum. It was very exciting to see that most of the companies, NGOs and other actors in attendance truly understand what the BOP is all about. During the session on the small and medium enterprise “ecosystem,” one of the speakers said that being an SME dedicated to the BOP is not just about replicating the same business models, it requires brand new business models and ideas, in addition to dealing with traditional barriers, i.e. lack of capital, talent, etc. Launching a BOP business, in short, is harder than other businesses, but if you are able to crack the code the reward is much greater at the end of the day. Nizan Guanaes, a leading Brazilian communications executive, reminded the audience that companies no longer have a choice as to whether or not they want to serve the BOP, it is a reality if they wish to continue to be profitable and ahead of the game. Guanaes summarized it beautifully by saying that the real Brazil is not the Brazil of upscale Sao Paulo, but the Brazil of “Donha Maria,” who rides the bus and is tired of only getting her basic needs met—she wants so much more! She demands different products, different brands, she has varied needs and wants, and if companies do not adapt and change their products, distribution platforms and marketing, they will miss out on a US$500 billion market opportunity. .jpg)
It is clear that some large companies, such as Guanaes’ Grupo abc “get it,” but it was also clear that some do not. Some of the messages I heard seemed completely off. For example, a large multinational retailer focused its presentation on Corporate Social Responsibility (CSR), such as one-off projects to protect the Amazon, or to provide education/training for one community close to their retail chain. All of this is very worthy and the world most definitely requires philanthropic work as well, however, philanthropy is neither sustainable nor scalable, and most important, the topic at hand was how to adapt your company’s business to serve low-income markets. It was disheartening to listen to an executive referring to “Donha Maria” not as a consumer and a citizen, but as an aid beneficiary. A few years ago, this same company tried exporting its exact same way of doing business to other regions of the world without thinking about what local consumers wanted or needed, and it ran into trouble. For example, in North America, consumers buy bulk quantities of basic goods. In developing countries, such as Brazil, disposable income on a weekly basis is lower, consumers have less available space for storage, and finally, they are used to shopping more often. Only after failure was this company able to change and then find success in Brazil. As a retail chain, if you do not adapt your way of doing business to serve 70% of the Brazilian population, how, I wonder, will you reach economies of scale and be profitable?
The other example of a company that didn’t quite get it was a producer of consumer goods. The executive did discuss how the company had adapted several of its products to serve low-income markets in Brazil, but some of his examples made me wonder whether this company truly understands the BOP. The CEO explained how several of their products initially failed in low-income segments, and only when they conducted market research were they able to fix the problems. My question then is, why wasn’t “Donha Maria” included in the initial market research to begin with? That way, her needs and wants would have been addressed in the initial product development. The company only adapted after they saw they weren’t getting a large enough share of this US$500 billion pie. Moreover, what about the thousands of services and products that Donha Maria needs, but can’t be “adapted” from existing products as these needs are not found in affluent markets? A visionary company that gets it will see that not as a challenge, but as an opportunity and as a necessity for future growth and profitability.
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My humble recommendation is that if companies want to penetrate Latin American markets and reach large numbers of consumers effectively, they should follow Nizan Guanaes’ wisdom and get to know Donha Maria… she is your number 1 consumer (and yes, most likely she is a woman), and she is right around the corner, desperate for access to a new and better life! However, beware, as she will refuse to buy your product or service if you don’t get it. Just like you, she has very specific needs and desires, and wants the best at the most affordable price. If you get this, welcome to 360 million new consumers in Latin America and endless possibilities for innovation and scale. If you don’t, do not be surprised if you start losing market share rapidly to your competitor.
