Introduction
Since Bel Group’s early years, the family-owned cheese-manufacturing group has been driven by its core values to ‘Dare, Care and Commit’. More recently, Bel has increasingly emphasized achieving growth through the pursuit of shared value creation. As family-member and CEO Antoine Fievet puts it, ‘Growth must happen through the creation of wealth, not just for the company, but for society as a whole.’1
Bel’s commitment to these principles led to the creation of Bel Explorer (BE) in 2011 to serve as the Group’s idea incubator for inclusive and break-through business model approaches. This dedicated unit aims to increase global access to high-quality nutritional and affordable products by including lower income communities in its value chain.
In November 2011, BE attended the International Convention of Street Vendors organized in New Delhi.2 At the time, the Group was investigating India as a potential market, and the event sparked a deep interest in how best to engage the informal sector as an alternative distribution method. It also became apparent at this conference that strategies based on mutual interest and needs had the potential to create innovative forms of sustainable business.
One of Bel’s five key brands, The Laughing Cow, had a strong presence in Vietnam, accounting for over 90 per cent of the national cheese market. With an effective local subsidiary in place, BE decided to launch its first Sharing Cities (SC) project in Ho Chi Minh City (HCMC). The very first iteration involved a system of door-to-door saleswomen recruited to sell a new affordable nutrition product designed specifically for the market. Problematically, however, the model was loss-making.3 Sales were insufficient to cover fixed costs and to generate enough income for the vendors.4
BE quickly adapted the approach to build on the city’s already extensive networks of street vendors instead. According to the International Labour Organization, the informal sector employs 1.8 billion people globally (while the formal sector accounts for 1.2 billion), constituting an ‘incredible sales force’.5 Moreover, street vendors represent the main channel for food purchases for most consumers in the developing world.6 In HCMC, 80 per cent of the food consumed by low-income families comes from street vendors.7 BE therefore returned to HCMC in 2012 to test the sustainability of this untapped sales force of over 135,000 street vendors8 as an alternative distribution network for The Laughing Cow.
Pain Points in the Ecosystem
BE began by investigating the structures and patterns of the existing street vendor network and the needs of the vendors themselves. In accordance with BE’s policies, this crucial research stage was not treated separately from the active development of the inclusive business model. The business unit had to share the resource costs required to finance the initial ecosystem analysis. The business unit and BE then agreed together that the research had resulted in a worthwhile opportunity to pilot.
BE ran various research projects to develop a profile for the vendors that highlighted their daily working activity, typical products in their baskets, and their typical margins. BE chose to focus on the community of fruit and vegetable sellers (estimated to be twenty-five thousand individuals),9 since they acquired all their products from a limited number of large wholesale markets in the city. This diagnosis stage was conducted between March and April 2012 with over three hundred vendors across three fruit and vegetable markets. Significant research, observation, and interaction highlighted the crucial hurdles the business model would need to overcome to strike the right balance between maximum social impact and business viability.
The street vendors in HCMC represent a vulnerable segment of society with low education, and low and uncertain incomes, as well as a lack of access to many social services. Over 65 per cent are women, most of whom are aged between 35 and 50 and typically have children. According to this research, a key aspiration of this group is to pay for their children’s education. For 92 per cent of vendors interviewed, selling their entire stock takes over 12 hours per day, during which time they earn the equivalent of €3–10.
Despite their appealing numbers as a sales force, the street vendors in many instances lacked proper education, confidence in their sales ability, and effective sales techniques to acquire new customers. Nevertheless, BE’s research found that the majority of these vendors possessed a highly valuable and impressive business tool: their relationship with loyal customers.
The interviews revealed that travelling vendors typically sell 80 per cent of their basket to regular customers, with whom they have a trusted relationship. Moreover, on average, a street vendor has between 100 and 150 regular clients that he or she visits per week, and, when travelling by bicycle, makes roughly forty sales per day. The vendors spend the bulk of their time visiting their network of regular customers and developing friendships with them. Each consumer has his or her own preferred itinerant seller that he or she will support over many years. In fact, 65 per cent of consumers surveyed reported that they bought goods in order to support their seller. Seventy-six per cent of consumers said that they had been buying from the same street vendor for over five years.
The professional and personal development of the vendors was, from the outset, at the heart of the initiative. BE recognized that investing in the vendors’ own development would not only attract more vendors, but also would naturally improve business performance through the vendors’ improved skills and productivity.
Therefore, during the diagnosis phase, BE conducted focus groups with vendors to understand their main social concerns, as well as their thoughts on the initiative. BE also contacted local NGOs to further their understanding of the key social needs in the wider community. A host of social issues were identified, including access to education, healthcare, and finance. The latter was found to be an obstacle to engaging street vendors in the programme. Most vendors pay in cash and their daily revenues would barely generate enough margin to diversify their basket of products—let alone support the purchase of branded products that initially represent a costly and uncertain investment. Moreover, the usual fruits and vegetables offer better profit margins than conventional branded products. The vendors’ legitimate expectations regarding profit margins were therefore higher than what Bel could offer, especially since Bel did not wish to set up a preferential margin system for street vendors and risk undermining their traditional sales network.10
Vendor concerns were not only financial, but also psychological. Their apprehensions were rooted in a lack of confidence in their own selling ability, combined with their belief in how consumers perceive them. One street vendor, for example, said that he could not sell branded products because ‘nobody buys brand products from a street vendor’. Convincing the street vendors to sell a new product therefore presented a challenge.
Business Strategy
Almost paradoxically, it became clear that the social concerns of the vendors (income levels, healthcare, etc.) could contribute to finding a potential business model solution. BE developed an incentive system based primarily on providing social benefits tailored to the needs of the street vendors in return for high sales performance. Street vendors selling The Laughing Cow would gain access to business training, health insurance, and a bank account. When a street vendor first joins the programme, Bel offers him or her three free boxes of the Laughing Cow to try and sell. At the outset, free goods and immediate cash undoubtedly represent the most attractive incentive for the vendors. However, over time access to health insurance and skills training are as valued as free goods or cash bonuses. In fact, a survey of the best-performing sellers showed that the health insurance was viewed as the most valuable incentive.
In developing the right business model to overcome the identified obstacles and to optimize for the opportunities discovered in the diagnosis stage, BE used the following series of key design principles:
Fit the culture of the community. BE set up three hubs in existing wholesale fruit and vegetable markets so that vendors did not have to travel to a different location to stock Bel products. The operational team in HCMC selling to the vendors are Bel employees.11
Add to the vendors’ baskets, never replace. Bel sales should not represent more than 20 per cent of the vendor’s total income so that they do not become dependent on the availability and demand of Bel’s products. The main product sold is The Laughing Cow since it is affordable, popular, and its quality and nutritional benefits are preserved even when unrefrigerated.
Simplify the standard business sales process. Bel sells directly to the street vendors who sell directly to their clients. This allows for closer interaction with the sellers and consumers while also simplifying the value chain.
Promote the Bel Group brand. When the street vendors join the programme they receive a brand uniform and can therefore become the brand’s ambassadors throughout the city; these elements should be encouraged, rather than enforced.12
The social component is equally vital in the functioning of this initiative. Vendors had significant reservations about selling branded products, as well as concerns about receiving lower margins for The Laughing Cow. BE adopted a holistic approach, identifying the vendors’ key concerns, as well as carefully selecting the best partners to work with on key areas:
Training and skills-building: Partnering with the European Institute for Cooperation and Development (IECD), BE established Business Schools for Vendors in December 2012. This eighteen-hour module offers vocational training, covering topics such as food security, sales techniques, basic bookkeeping, and technical management. Once vendors complete the training, IECD organizes follow-up meetings with the vendors at their respective sales locations.
Access to insurance: BE has partnered with theinsurer Groupama to offer a micro-insurance product at $1/month to cover the potential ‘cost of hospitalization and children’s education in the event of disability’. Rather than charging the vendors, Bel and Groupama co-finance the entire premium for this insurance. The total costs amount to $12 per individual each year. In effect, the insurance incentive acts as an equivalent to cash bonuses, but with a clearer social benefit.
Access to financial services: Bel promotes the purchase of new material and equipment. It also encourages vendors to save through helping them open bank accounts.
Access to the formal sector: Bel supports the vendors with their administrative paperwork and integration into the formal sector by assisting them with taxation, social security access, and migrant registration.
Benefiting the whole ecosystem: Bel seeks to improve the vendors’ environment through advocacy and lobbying, and contributing to the public debate on street vendors.
These incentives allow BE to deliver widespread social impact while also helping to attract and recruit new sellers. The business training is a particularly powerful incentive since it improves the productivity of the sellers, resulting in increased growth of sales and revenue, for the vendors as well as for Bel.
It is important to note that these social incentives are generally not free, and the vendors gain access to different levels of social benefits relative to their levels of performance. It remains crucial to Bel and the vendors that SC is not perceived to be a philanthropic programme. Therefore only those who have performed the best and have been identified as suitable for prolonged training will be enrolled into the Business Schools for Vendors. Currently, half of the vendors in HCMC receive insurance, while 15 per cent receive the business training.
After designing the social incentives, BE established two sets of performance indicators, which measure business performance and social impact respectively. The major indicators are:
Business(thisishowthesalesteamsupervisorsareassessed):Total volume, sales, investment, and profit; evolution of the sales per street vendor; percentage of the street vendor business vs. traditional trade.
Social: Number of street vendors in the programme, percentage receiving a social incentive (detail on health part/business training/access to financial inclusion), and impact of the business training on the street vendors’ global activity. Since the business training aims to achieve holistic goals, the social performance indicators also measure impact on self-esteem, confidence, and aspirations.
During the pilot phase, Bel monitored the business performance and development of the community on a weekly basis in order to analyse results quickly and adjust operations if necessary. In order to facilitate this, in 2015 BE created and implemented a dedicated online Customer Relationship Manager at each kiosk. On a daily basis, the local sales executives register new street vendors and record their sales. The supervisor of each team uses the kiosk to analyse performance, and at the end of each month supervisors can automatically identify the list of street vendors who will receive incentives and what incentives will be offered. Finally, at a global level, Bel is able to monitor global performance indicators, to compare one market/model to another.
Performance
Despite some initial hesitance from the business unit managers, BE launched its first SC initiative in 2013 in HCMC. Although the initial objective was set at forty sellers within six months, only four months later the team celebrated the arrival of their 100th vendor. Furthermore, by December 2013, less than a year after the programme launched, there were nearly 250 vendors active in the SC network in HCMC—a number that has grown ever since.
BE and the local business successfully managed the SC programme to profitability within two years of its launch. By 2016 they had 2,261 street vendors representing 28 per cent of the volume of single-serve portions of The Laughing Cow made in General Trade. In terms of social impact, as of December 2016, 429 of vendors had graduated from micro-entrepreneur courses, 1,000 received health insurance, and 817 opened bank accounts. On average in HCMC, the vendors who had received business training improved their revenue by 30 per cent after twelve months. Today the programme offers the same level of profitability as other sales channels, along with greater social benefits for its wider ecosystem of distributors.
Prognosis
The promising results from the HCMC pilot resulted in the decision to scale up the pilot project and pass the leadership to the business unit managers in 2015. The pilot had reached the important target set by BE for all projects: that it should match—or be forecasted to match in five years—the level of profitability in Bel’s traditional route to market within that country.
Since the SC launch in HCMC, BE has successfully implemented this business model in Kinshasa (Democratic Republic of Congo), Antananarivo (Madagascar), Hanoi (Vietnam), and Istanbul (Turkey). The initiative has seen the steady growth of its informal sales network, with 2,100 street vendors in 2013 to 7,500 in 2018, and a targeted 80,000 by 2025.
The SC programme has proven that it is possible to simultaneously identify new business growth opportunities and develop a more inclusive economy in order to improve the welfare of the vulnerable in the ecosystem. Certain emerging countries, such as Vietnam and the countries of sub-Saharan Africa, where these informal networks already exist, will contribute significantly to Bel’s business development. By using alternative distribution channels of locally trusted street vendors, the programme is allowing Bel to become firmly established in areas with high population growth. The programme is integrated into Bel’s core business strategy for regional inclusion and customer growth. Notably, the Bel Foundation has no involvement in SC because it is considered a business concern alone.
Ultimately, Bel Group has created, tested, and scaled an innovative and inclusive business model, which creates financial value for the company while respecting and ensuring positive benefits for members of its ecosystem. Addressing both marketplace success and social good, Bel’s initiative has developed an ecosystem of like-minded partners who are gaining a new perspective on the role of the corporation in society, recognizing that being mutual is not just good for business—it is good business. As Antoine Fievet comments, ‘the way in which the Group achieves its results is just as important to us as the results themselves. It is possible, and indeed essential, to combine strong management and best practices, profitability and integrity, growth and ethics.’
___
Notes
‘Polaris: Building a Flourishing Family Business,’ Family Business Network, Ideas Innovations & Inspiration from our Network & Beyond 2 (Bel Group 2016): 35.
J.M. Guesné and D. Ménascé, 1.
J.M. Guesné and D. Ménascé, 2.
J.M. Guesné and D. Ménascé, 2.
Interview with Caroline Sorlin, General Manager, BA, Bel Group, 2013, https://
www.youtube.com/watch?v=DwYB0uoaGVg.
J.M. Guesné and D. Ménascé, 2.
‘Polaris: Building a Flourishing Family Business,’ 33.
J.M. Guesné and D. Ménascé, 2.
J.M. Guesné and D. Ménascé, 3.
J.M. Guesné and D. Ménascé, 6.
In regions where Bel does not have its own subsidiary, the central stock point is
managed by employees of a partner organization, where Bel ensures they receive
at least the same level of social benefits as the street vendors themselves.
J.M. Guesné and D. Ménascé, 6.
Case Study Contributors
Alastair Colin-Jones, Mars Catalyst
Alexandra Berreby, Bel Explorer
Caroline Sorlin, Bel Explorer
Hannah Radvan, (formerly) Mars Catalyst
Justine Esta Ellis, University of Oxford
The Impact of NGO Activism
By Andreas G. F. Hoepner and Qian Li
Marks & Spencer: Improving Supply-Chain Sustainability
By Sudhir Rama Murthy, Mike Barry,
and Justine Esta Ellis
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