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Poverty and Danone

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South Africa had a big income inequality gap with its market being at the bottom of the pyramid with more than half of the population in the 4-5 tier range having less than $1500 in purchasing power parity in US dollars. Danone wanted to capture the market by introducing a low priced product to the low income people. With research by local Universities and the SA Medical Research Council, the benefits of of Danimal were promising. It was found that the probiotic cultures in yoghurt were beneficial for children and also that a product needed to be produced with existing equipment.

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They also wanted to address nutritional shortcomings in the typical diet of a child from a poor family — especially vitamin A, iron and zinc. There were several benefits in the production of the yoghurt. Danone was doing well for the society especially the children of poor backgrounds of SA by providing them with nutritional products. Their network of distribution consisted of Danimamas and Daniladies and Danimen, which provided jobs and skills for entrepreneurship for the uneducated, poor people.

The social benefit was that Danone SA taught people who previously had no jobs or any prospects the principles of business, supported them through the initial phases of their business and celebrated with them when they succeeded. The long term brand awareness and image would increase and help them expand to other developing countries. The population benefitted from the availability of a high-quality, nutritious, tasty and affordable product. Danone understood that if a hungry child was being fed, that child grew up with a greater loyalty to the brand.

The company also understood that experience with the brand was very powerful; to be able to smell and taste it was a valuable marketing tool. The performance advantage gained from the Danimal initiative was thus very hard to measure, but it clearly resulted in more brand recognition in the lower tiers of the market. Is Danone successful in addressing the needs of the bottom of the pyramid? What can they do better? Pretorious had the 4P’s in mind when product was developed. The price was initially set at R1. 00 in 2005.

This was beneficial since the transaction would require one coin interaction which made it simple and valuable for the targeted children’s market. To avoid additional margins added onto the final price, the price was printed on the lid. Danone themselves just broke even with no profits. To address nutritional shortcomings in the typical diet of a child from a poor family — especially vitamin A, iron and zinc — the company wanted to enrich the yoghurt with these nutrients. The yoghurt also needed an extended long shelf life due to lack of electricity and fridges.

Danone promoted their product, by associating the name “Danimal”. Danimal was combination of “Danone” and “animal”, which gave a sense of pride in Africa. A colorful energetic leopard as the logo appealed to children, while the nutritional facts appealed to the adults. They created a product for the bottom of the pyramid that was initially introduced into the Gauteng province but later expanded into two other provinces, Kwazulu-Natal and the Free State. I think that Danone did a great job by providing the needs of the bottom of the pyramid. They spent little money and used existing equipment with no marketing.

They made a product that was appealing to children and healthy in the long run too. Their pricing strategy was to market the poorer people with strict pricing with no additional margins added. They did not distribute them traditionally but by using the locals to sell them as “franchise” units. Danone needs to make a profit on this product. Maybe they can expand their product at a higher price to other tiers. Even better would be to make other dairy products that appeal to the specific market. Another idea would be to market them at schools or hospitals, where diet and nutrition are very important.

When Maria Pretorius leaves her current position in S. Africa, what are the implications for sustaining the Danimal yogurt project and product line? What do you recommend? The initial problem is that Pretorius had no other person that shared her values and mission. She seemed to be doing all the work. A training program should be put into place for the top management, with a clear goal set and expectations for the next 5 years. As the case stated, each business unit is provided a budget to use as they see fit. This will be a hurdle for the new replacement.

Joelle Berry should be hired to take over, since he really is the only person, besides Pretorius, that has knowledge on the product and Business model. More employees should be trained on the product and also all management should be on the same page in terms of future expectations and goals. Danone should start expanding the Danaimal product by introducing new flavors and maybe producing a product appealing to adults. Distribution should be expanded to include traditional grocery stores, or even start of in small local convenience stores. As mentioned earlier, Danone should get in contact with a local school district or hospital.

Cite this Poverty and Danone

Poverty and Danone. (2017, Jan 05). Retrieved from https://graduateway.com/poverty-and-danone/

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