Peanuts for promoting welfare

Every entrepreneur in Silicon Valley has an elevator pitch, a 90-second spiel to lure a potential investor or customer. But few have one like Thomas Stehl's.

He talks about 17-month-old Rosalor, a child in Haiti who arrived at a hospital weighing just 11.9 pounds.

She was fed Medika Mamba, a nutrient-packed peanut-butter paste made by Stehl's organisation, and in just over a month, she gained five pounds and new vitality.

“Rosalor now has a second chance,'' Stehl says. “There are 120,000 kids just like Rosalor in Haiti. Imagine what's going to happen if they don't get this treatment.''

Stehl has travelled to Silicon Valley not to solicit donations but to get advice from business experts.

Tough challenges

A two-week programme at Santa Clara University called the Global Social Benefit Incubator (GSBI) teams up entrepreneurs such as Stehl with leaders experienced in taking an idea to mass production.

The programme's results reflect the challenges facing non-profit organisations that adopt business models to serve their social mission.

GSBI has graduated some great success stories. But the difficulty of cracking some developing country markets makes traditional entrepreneurs wince.

“We believe it's possible to create value in these underserved areas,'' says James Koch, director of GSBI. “Multinational companies have a huge myopia to these unmet needs.

And they have standard ways of operating that would preclude them from the kind of patient, diligent, discovery-based learning that needs to happen.''

Ambitious goal

Social entrepreneurs may need to spend years figuring out how to design products and services that work in places such as Haiti.

Stehl is the coordinator of operations for Meds & Food For Kids (MFK), which wants to scale up.

In Haiti, MFK buys peanuts from local farmers, manufactures it into Medika Mamba and sells it to healthcare providers — mainly international NGOs and visiting medical missions.

But it wants to make more to bring down the cost per unit.

“Tom [Stehl] said they were at 10 per cent of their production capacity. The question is why the 90 per cent of capacity is not being distributed,'' says Michael Looney, one of Stehl's mentors.

Stehl dived into the challenges. The French firm Nutriset now makes a similar product, called Plumpy'nut, in the nearby Dominican Republic, selling it at a lower price.

Nutriset's profits leave the Haitian economy, Stehl says. He argues that economic development is a key goal of MFK.

Social entrepreneurs run the risk of figuring out a business model only to see a larger company swoop in with better resources.

“Social entrepreneurs that can be closer to the ground, have more trust,'' says Nora Silver, director of the Centre for Non-profit and Public Leadership at the University of California Berkeley, adding that an advantage “they don't have is the money to scale up''.

Non-profits are not oblivious to generating revenue. Data show that 51 per cent of revenue in the non-profit sector comes from fees for services. Government and philanthropy make up the rest.

Wellbeing-oriented

MFK's largely non-profit customers seem to value social impact in their purchasing decisions.

“We are willing to pay a slight premium in price to support a product using local commodities,'' says Rebecca Heidkamp, a nutritionist with GHESKIO, a non-profit health organisation.

Stehl's mentors, accepting that social mission trumps obvious business logic, brainstorm ways to bring price to parity.

Using Haitian-grown peanuts adds cost, because a large portion is infected and must be thrown out. But peanuts aren't the most expensive input — it's dry powdered milk.

The mentors propose asking the US dairies to donate free milk in exchange for publicity of their support to a worthy cause.

That could get price parity long enough to ramp up production.