The evolving relationship between the for-profit and nonprofit sectors
In our last article on shared value on July 23, 2013, we discussed how innovative companies are gaining a defendable competitive advantage while simultaneously creating tangible social benefit by using their ‘doing good’ platforms (CSR, philanthropy, etc.) in a strategic context. This week, we will focus our attention on Coca Cola’s Coletivo initiative in Brazil.
In this case study1, we examine how Coca-Cola strategically collaborates with a local Brazilian NGO as a ‘distribution partner’ on educating and training low-income youth with the objective of reducing unemployment among low-income youth while simultaneously increasing product sales.
Coca-Cola’s Coletivo Initiative
Coca-Cola’s Coletivo initiative in Brazil creates shared value by increasing the employability of low-income youth while strengthening the company’s retail distribution channels and brand strength to increase local product sales. Coca-Cola has integrated shared value strategy and measurement steps and uses data and insights to unlock new value creation.
1. Identify the social issues to target
In 2008, after six months of studying the needs of Brazil’s growing lower middle class population, Coca-Cola identified skills development among low-income youth as a core social issue for strategic focus. While the Brazilian government was rather successful at providing primary education for all kids, most young people at low-income levels had little or no opportunity to find jobs due to their lack of relevant skills and limited employment opportunities in their communities.
2. Make the business case
To improve the skills and employability of these young people, Coca-Cola sought to use the company’s value chain. The Coletivo initiative, in partnership with local NGOs, trains local youth for two months in retailing, business development, and entrepreneurship while also pairing youth with a local retailer to get their first job experience and recommend ideas for improvement. Coca-Cola hypothesized that the small retailers could significantly improve their operations with trainee assistance, resulting in increased sales of Coca-Cola products and higher penetration of consumers among the emerging lower middle class segment.
3. Track progress
Coletivo supervisors in each community measure and report progress on a monthly basis, tracking the number of youth participating, the number of retailers involved, and the performance of retailers over time. The company also closely monitors the costs associated with the effort to ensure its cost effectiveness and efficiency. Since launching the initiative in 2009, Coca-Cola has trained thousands of youth in retailing, business operations, and basic entrepreneurship concepts. The company now operates 135 Coletivos across Brazil, each with an average of 500 students, and plans to be running 170 by the end of 2012. In 2012, the program’s budget was several millions of dollars.
4. Measure results and use insights to unlock new value
Coca-Cola measures results using four key indicators: 1) youth job placement; 2) youth self-esteem; 3) company sales; and 4) brand connection.
The Coletivo Initiative has been highly successful so far. Approximately 30 percent of the young people trained immediately land their first job with Coca-Cola or one of its partners, and at least 10 percent set up their own business with micro- credit support from the company. From a business perspective, an investment in a Coletivo site is profitable in only two years. Coca-Cola’s rigorous measurement by region, community, and model during the pilot phase allowed the company to identify and focus on the most effective approaches and interventions—ways to unlock new value. For example, in the first year, Coca-Cola focused its training sessions on the technical aspects of retailing, such as merchandising or stock management. Based on measurement data, however, the managers realized that the students faced significant self-esteem challenges that prevented them from finding a job and being effective workers. In response, Coca-Cola revised the content of the training program to put more emphasis on soft skills, including leadership and presence.
Measurement data also revealed that a key success factor was the strength of the local NGO that acted as an implementing partner. The company modified its approach to bolster the NGO partners’ management and leadership capabilities, and helped them build sustainable sources of funding. This support led to better retailer performance and a stronger Coca-Cola brand connection across the community, both of which improved product sales.
As highlighted by this case study1 , the relationship between nonprofits and companies is rapidly evolving and CAF America looks forward to providing more insight and knowledge on shared value and its affect on international philanthropy.
1 Porter, M. E., Hills, G., Pfitzer, M., Patscheke, S., & Hawkins, E. (2012). Measuring Shared Value. How to unlock value by linking social and business results. FSG.