Trust in poor communities builds profits

Gretchen Wilson May 11, 2010

Trust in poor communities builds profits

Gretchen Wilson May 11, 2010


Kai Ryssdal: Soft drink sales were down 2 percent in this country last year. So this month Coke is trying something new. What are being called Freestyle soda fountains. Machines that will let you mix and match more than 100 flavors, just in case you ever wanted pour yourself a fruit punch Coke or a diet raspberry Sprite.

In the developing world, though, the key innovation for marketing soda is as simple as letting customers grab their own bottles. Gretchen Wilson reports now from Johannesburg, South Africa.

Gretchen Wilson: The neighborhood of Alexandra is only three square miles, but it is home to nearly half-a-million people. Most are unemployed, and here people protect what little they have. You often find steel bars on the windows of shacks.

Here, store owners keep even soft drinks behind bars. Often they sleep in their shops with guns to prevent late-night raids.

LAURENTI MOTHIBE: Crime is an issue for this community.

Laurenti Mothibe wants to change that. He works for ABI, the local bottler of Coca-Cola. His job is to get shops to sell more of his product. But how he does it tells a bigger story about trust and business in the world’s poorest communities.

At a local convenience store, Mothibe points to an upright refrigerator branded with the Coke logo, in front of the counter, right near the street. So anyone can grab their own soda.

MOTHIBE: As we see, there’s no security guards, there’s nobody sitting, watching over the cooler.

Here, that’s radical. A bottle of soda is only a dollar, but when you’re broke, it’s a luxury item. Mothibe is persuading dozens of shop owners to put those new coolers in front of their stores and to trust consumers to pay instead of run.

Patricia Ndlovu is a widow who’s run the shop for 12 years. And she balked when he approached her five months ago.

PATRICIA NDLOVU: Mmm, a cooler outside! No, aye! Mm, mm.

Even when she got the fridge, she couldn’t believe the company was serious.

NDLOVU: They find me putting the cooler inside. They say, “No Mama! You are supposed to put the cooler outside!” I say no, hay, no because they are stealing it.

But she kept it outside. And not a single bottle has been stolen.

Isaiah Sakwara likes choosing his own soda from the fridge.

Isaiah Sakwara: As a customer, it shows they believe in us, so you definitely won’t steal.

From India to Brazil, global businesses are finding profits by trusting consumers in the poorest communities in the developing world, what’s known in business circles as the “bottom of the pyramid.”

TASHMIA ISMAEL: There is actually spending power in that four billion people that were written off from formal marketing strategies.

Tashmia Ismael is with GIBS, the business school of the University of Pretoria. She says the best “bottom of the pyramid” models are partnerships with local communities.

ISMAEL: They get the benefit of income and employment. You get the benefit of building brand loyalty and a sustainable future market.

Of course, the bottler’s real mission is to sell more soft drinks.

But Laurenti Mothibe says the way to do that is by empowering these shop owners.

MOTHIBE: We want to turn them into proper business people.

He’s talking about people like Sam Sebila, who used to sell sodas out of his family’s refrigerator. ABI built up Sebila’s storefront, gave him a street-side cooler, and started delivering to him directly. His soft drink sales have tripled. He says his wife can now buy whatever groceries she wants.

SAM SEBILA: I afford to pay everything with the profit I get here. I’m so proud.

Critics say the poor really need their money for education and health care, not consumer goods. But Mothibe says building up micro-businesses — and reducing crime — is key to economic growth.

MOTHIBE: If we’re serious about uplifting communities, this is what every single company should be doing.

ABI is already taking this model to other townships across the country.

And among its advocates is Patricia Ndlovu, the skeptical widow who now sells a $1,000 of soda every month. She’s paying for her children to go to school.

NDLOVU: I’ve been an example to other ladies that no matter even the husband is not there, but you can still pull up your socks and be a strong woman and work hard.

She says she never dreamed of this kind of success, but her new reputation for trusting people is paying off.

In Alexandra, Johannesburg, I’m Gretchen Wilson for Marketplace.

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