From agrarian reform advocate to diversified agribusiness; from environmental activism to sustainable community-based tourism; from protecting indigenous people’s rights to distributing organic rice—these are just some examples of the growing number of social enterprises mushrooming across the country.

In the recent “Social Enterprise: The Next Business Model” conference organized by five of the country’s biggest civil society and business groups, a new breed of forward-looking local practitioners shared how they were able to achieve financial sustainability while making an impact on the communities they worked with.

Indeed, now is the time for the social enterprise, says Bobby Calingo, executive director of the Peace and Equity Foundation (PEF). “They’re not new in the field of development,” he says, “but only in the last few years do you see them coming together, moving up, and scaling in terms of their markets. Only now do we see community-based products being sold in department stores; and these are good products with good packaging and competitive prices.”

PEF, a “one-size-fits-all” social investor, has worked closely with various organizations to provide potable water, healthcare and disaster relief to the country’s poorest communities. “But,” Calingo shares, “in the next five years, we’re focusing on developing the social enterprisesector. This is by doing two things— by financing and providing for thefinancial needs of enterprises; andby looking at the technical assistance and support component. How can we help social enterprises be equipped with the skills and infrastructure  for them to grow and penetrate new markets?”

 

The next business model

Coinciding with its 10th year anniversary, the PEF found it fitting to engage thought leaders in a conference that broke new ground locally as the first to publicize successful business models of social enterprise.

Mark Ruiz, co-founder and managing director of MicroVentures, Inc., relates his experience in putting up Hapinoy, a social enterprise that aims to support communities. “The story of Hapinoy is really two worlds coming together,” Ruiz shares. “When my business partner [Bam Aquino] and I decided to put up a business,” he says, “we wanted that at its core it should help people. And what we try to do in Hapinoy is basically empower disadvantaged women in rural areas, particularly sari-sari store owners working with microfinance institutions (MFIs).”

With over 800,000 sari-sari stores nationwide, and with each store owned and run by a micro entrepreneur, Ruiz and Aquino observed how fragmented the industry was. “What we did was work with MFIs to help gather, aggregate and organize these sari-sari store owners,” shares Ruiz, “and as we gathered them, we had a new channel to reach out to the poor community.”

Hapinoy has since become a channel to support communities who had difficulty accessing the FMCG (fast moving consumer goods) market. “And we now use this as an alternative channel to distribute products and services to benefit poor communities,” he adds, “because when you go to a rural barangay, you’ll see that while there are soft drinks and noodles being sold in the stores, there is no electricity or drinkable water. So aside from FMCG products, what we really want is to bring in solar products, over-the-counter medicine, and drinkable water as well.”

 

Issues, challenges

Joan Cua Uy, an agro-enterprise consultant who works with the Catholic Relief Services, points out that one of the challenges for small rural vegetable producers is the presence of the middleman.

There are many actors in the market chain, Uy says, and often “it is the trader—the go-between in the market chain where at one end is the small farmer/producer and the other end is the consumer—that stands to benefit the most.

The challenge for us producers in the wet market,” she says, “is in knowing what innovations to look at, what segments we can move towards that can give us more value.” The oft-common relationship between producers and traders has always been an adversarial one. “Both parties are under the impression that the other is taking advantage,” Uy relates, “but it would be better for social enterprises to collaborate in a way that will be mutually beneficial in terms of creating value to players in the market chain.”

According to Uy, most producers who work in a mass market, such as those selling commodity goods like coffee and rice, respond by competing as a single organized supplier. Consolidating means bringing their products directly to the buyer, without having to go through the middleman. “But in the end what’s really important,” Uy says, “is that we have to be competitive. We need to organize the producers and their production base, move with high volumes, large markets, economies of scale and reduce our costs.”

Some do this using an unconventional approach: product differentiation thru niche markets. “Not all producers can work in a mass market so what they do is shift to an alternative marketing channel,” shares Uy. Such is the case of Kape Isla, a coffee blend promoted by the Philippine Coffee Board as a quality coffee label that can compete in the global market. “Price competition isn’t even the issue here,” Uy says, “but the value is in the product’s uniqueness.”

Teaching producers about retail figures highly into a product’s chances of success as well, adds Jeannie Javelosa, co-founder of EchoStore, a one-stop shop for sustainable lifestyle products. “Almost all social enterprises are producers looking for markets where you try to give them a doorway to the consumer thru a small echo village store,” Javelosa says, “but the challenge is really how to teach them retail, marketing, how to put their brand on the shelf, etc.,and this is something we learn thru experience.”

 

An untapped competitive advantage

In most industries of any size, the most powerful enabler to succeed in business is the supply chain. “It is that area that will actually determine if your business is going to be profitable, reactive or proactive, if you’re going to be sustainable, have obsolete inventories or if you’re goingto lose the market you’re trying to cater to,” shares Charlie Villasenor, CEO of TransProcure, a supply management company.

According to Villasenor, social enterprises need an end-to-end analysis of where they stand within that particular direction. “What this tells us is one thing,” Villasenor says, “it is easier to gain profitability by managing the cost side of the business than it is getting more customers to sell your products to. Money saved is money added to the bottom line. It’s exactly what the major companies are doing, and for social enterprises to become financially sustainable, they would do well to follow the best practices of existing industry leaders.”

Published in the Business Agenda section of Manila Bulletin, October 31, 2011

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