Tag Archives: BOP

Obama Larger

While the article links Kenyan beer to Senator Obama (the son of a Kenyan) now running as presidential candidate of the US, it is of more interest for information on selling alcoholic beverages to consumers at the bottom of the pyramid

In Kenya, _Obama beer_ is suddenly popular.jpg

from: San Francisco Chronicle
(click image for full story online)

 

Consumers nicknaming Senator beer, brewed by East African Breweries Limited, Obama is a local thing and unlikely to have made any significant difference to sales. The brewers do not use it in their marketing, but say there has been some increase in sales in Obama’s father’s homeland, especially after Obama’s 2006 visit.

Of interest, though, is the origin of Senator beer and its place in the alcoholic beverage market of Kenya. What makes it different is that it is sold at 40 cents a glass compared to normal beers costing $1 to $3 a bottle. In a country where more than half the population earn less than a dollar a day its the only beer that is affordable to many.

It’s low price is achieved through saving the packaging costs by dispensing in bulk (1 000l a day in a bar) and by the fact that there is no excise tax on Senator beer.

The tax excise exemption is an attempt to address the dangers of illegal brews that are focussed on the poor consumer.

According to the article

A 2003 brewery study found that 55 percent of alcohol consumed in Kenya is homemade. Known as changaa or busaa, these spirits contain up to 40 percent alcohol and are often mixed with battery acid or formaldehyde to increase potency. At 25 cents a glass, these popular alternatives to more expensive beer are also known as “kill me quick.”

In 2000, 150 Kenyans died and hundreds were hospitalized from drinking a toxic brew in a slum near Nairobi, sparking calls for the government to crack down on the thousands of bootleg distilleries. Another 50 died in 2005, the latest statistics available. Many more have been blinded from these drinks.

A similar situation exists in South Africa and I suspect many Southern and East African countries.

In South Africa there seems to be less distillation but “fall over quickly” is popular! and adulteration is widespread. Before democracy in South Africa this was addressed by strict policing and possibly needs to be reevaluated now. With much of the homebrew being traditional beer based in South Africa, my personal suggestion would be to promote a homebrew quality ranking system and educate the user on alcohol usage.

In Kenya the brewers took the initiative

The brewery did away with bottles and packaging for Senator beer, using 13 gallon kegs. Each day, the company ships 8,500 kegs throughout the nation, and plans to expand output since it can’t keep up with demand.

Popularity is growing due to a heavy marketing campaign in the slums, where underground bars still sell homemade spirits.

The following points are probably important to sales at the Bottom of the Pyramid:

  • replacing normal consumer packaging can significantly reduce cost
  • there is normally a price where consumers will switch from the cheapest product for other benefits
  • taxes can effect consumer consumption patterns

Purchasing patterns on unpredictable incomes

Some of the uniqueness of supplying consumers at the Bottom of the Pyramid is illustrated by this view of what drives product purchase by the very poor from the Perspective 2.0 Blog.

When income is irregular and unpredictable, both in amount and frequency, such as it is for the majority at the bottom of the pyramid, buying behavior is not quite the same as for mainstream consumers. At least four patterns emerge based on a combination of need and money available.

Paid for in advance – Usually a service which can be used or consumed over time can be purchased in advance when funds are available and then made to last as long as possible. The best known example of course is prepaid airtime.

Bought in bulk – Usually food staples or something you cannot live without would be purchased in this manner, either when there is a sudden influx of cash or a payment at the end of manual labour or if managing on a fixed amount each month such as remittances from abroad. This ensures that there is something to eat even if money runs out before the next payment might be due. If its a sudden influx of cash for someone not on a pension or remittance then these are the funds that often go towards a consumer durable purchase or big ticket item of some kind.

Sachets or single portions – A form of on demand purchase. Interestingly, I came across this working paper by Anand Kumar Jaiswal at IIM, saying that sales results in rural India seemed to imply that only shampoos and razor blades were more successful in sachet form, whereas things like milkpowder, jam etc sold more in the larger size. The author cautions against assuming all sachets will sell. I believe it could be based on the usage pattern of the product in question or its nature – what if you packaged a perishable item in single servings that didn’t need refrigeration until opened?

On demand or daily purchase – mostly perishables like bread, eggs, fresh vegetables purchased for the day’s needs. Partly cultural but also influenced by availability of cash in hand. Cigarettes sold loose or two slices of bread and an egg are some examples we’ve seen. Indian vegetable vendors are also willing to sell you a small portion of a larger vegetable either by weight or by price. You can buy 50p worth of cabbage for a single meal. Minimizes wastage whether you’re cooking for one or have no fridge. This is also the most common pattern if you earn small amounts daily, like the vegetable vendor, shelling out what you have for what you need and then if there’s some change, debating what do with it.

I feel there might be three issues counterbalancing each other in this namely cash in the pocket, the potential of future income and the perceived risk of a purchase. What products work, surely depends on the balance of the three factors above and is not a universal either across countries or consumer groups in a country.

The sachet or single portion sale definitely works for food, I have seen bulk broken pasta in plastic bags in Senegal.

What about

lower specification products– addressing the same consumer need? In South Africa the bottlers of coke launched a diluted cordial in a small well decorated plastic sachet and seem to have established at least some market as the product has been available for many years.

sharing of bulk packs – in South Africa’s townships it is well known for neighbours to by large packs together and share directly without splitting and repacking. A product and package design could bedeveloped to make this process easier/ more efficient.

Biofuels & the Bottom of the Pyramid

Having recently spent lot of time scouring the INTERNET I have been struck by the focus that there is now on two issues that impact on development in Africa – Biofuels and BOP enterprise models.

Biofuels

As Europe and the USA see the effect expanding refining is having on their agriculture and understand the overall efficiencies there seems to be a move towards looking at sourcing inputs from countries with more tropical climates where higher agricultural production efficiencies are possible. This in turn means that land, hopefully not that currently used for feeding ourselves, is cultivated – possibly clearing forests (palm oil), risking the spread of alien species (jatropha) or using other resources (eg sugar irrigation) on behalf of those countries who can’t achieve efficiencies make production economically sustainable.

BOP

Bottom of the Pyramid (BOP) is an approach/model based on a view advanced by CJ Prahad that the 4 billion people who live on less than a dollar a day, are ignored by multinationals, although in sum they represent a large market. He, therefore, promoted the opportunity offered by this market, improving the supply to the poor and spinning off other opportunities through the supply chain.

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Others have challenged this approach questioning whether the market is large enough to interest multinationals and proposing instead that efforts at alleviating poverty should be based on establishing business in or partnerships with enterprises at he bottom of the pyramid.

Both of these of course impact on food processing, in particular when considering it as a development tool for Africa. I will therefore blog on them as much as personal learning (BOP) and staying abreast excercises at www.agribusiness.wordpress.com and maybe http://digivu2nd.blogspot.com/

I would be very interested to get your ideas, concerns and feedback on these issues.