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"Building  Business  Cases  to  Reach  Scale:  A  Study  on  Biomass  Cookstove  Business   Models  in  Asia  and  Africa"  

 

 

CASE   STUDY  

ENVIROFIT  -­‐  INDIA    

 

Company's   stage   of   development:   ENVIROFIT   India   is   currently   in   expansion   with   a   re-­‐ designed   Business   Model.   Centralized   roduction   in   Indiathrough   one   high-­‐mechanized   factory.  Serving  the  national  market  since  January  2009  and  exporting  to  Nepal  since  April   2014.   Cookstoves   are   designed   to   meet   the   diverse   cooking   needs   of   Indian   families.   ENVIROFIT  India  is  currently  engaged  in  the  manufacturing,  distribution  and  sales  of  other   energy  efficient  products  (stove  accessories  like  pressure  cookers  &  solar  lighting).     Product:   Industrial   production   of   a   portable,   single   pot   stove   with   insulated   vertical   chimney,  usually  constructed  from  metal,  any  biomass  fuel  can  be  used.  Saves  up  to  50%   of  fuel  compared  to  traditional  stoves.  (G-­‐3300  Wood  &  B-­‐1200  Wood),  65%  Reduction  of   CO,  80%  Reduction  of  smoke  &  toxic  emissions,  and  40%  reduction  of  Black  Carbon   Price:  Fixed  price  30.5  USD  nationwide.   Sales:  An  estimated  400,000  units  sold  between  from  January  2009  to  May  2014  

Investments  are  done  at  different  levels:   • Monitoring,  reporting  and  verification  (Carbon  Credit)   • ENVIROFIT  India  Officer  sitting  in  the  Unit  of  Production  -­‐  Manufacturer  (quality  standards  and  quality  control)   • Training  to  the  Officers  of  the  MFIs  and  NGOs  –  Incentive  mechanism  to  best  seller,  they  become  promotion  officers   All  investments  along  the  Value  Chain  are  financed  by  Commercial  Loans  and  Microcredit  by  local  MFIs   Channel  strategy:  solid  partnerships  with  reputable  NGOs,  MFIs  and  Private  Sector  (CSR),  retailers,  cooperatives  of  producers.   ENVIROFIT  India  facilitates  the  supply  chain,  outsourcing  all  services   Company   reported   figures:   Carbon  finance  –  Carbon  Credits,  registered  in  2012  &  Carbon  Offsets  –  VERs,  CERs  &  Gold  Standard.  ENVIROFIT   India  holds  a  loan  from  IntelleGrow  for  an  18  months  period  (2013  -­‐  2014).      

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HISTORY  

 

India  

Established  in  2008  as  a  subsidiary  of  ENVIROFIT  International.   Vision:   A   Social   Enterprise  that  aims  to  develop  and  distribute  clean  technology  solutions  that  improve   health,  livelihoods,  and  the  environment  while  enhancing  energy  efficiency  across  Asia.   Design  is  done  in  collaboration  with  engineers  at  Colorado  State  University  (US);  the  Clean  Cookstove   was  tested  in  their  labs  to  ensure  that  it  reduced  emissions.   Mission:   ENVIROFIT   specializes   in   the   design,   development,   and   production   of   improved   biomass   cookstoves.   As   the   first   organization   to   brand   improved   cookstoves   in   the   Indian   market,   they   offer   high  quality  cookstoves  in  the  industry  with  a  warranty  on  all  the  products.    

Partners:   Corporations   • Participate  in  improved  cookstove  distribution  through  CSR  activities   • Make  an  impact  among  employees  and  local  communities   • Invest  in  a  social  program  with  a  local  impact  that  offers  both  societal  and  financial  returns   • Work  through  ENVIROFIT's  carbon-­‐based  large  scale  programs  or  non-­‐carbon-­‐based  programs   Microfinance  Organizations   • Play  a  key  role  in  creating  financing  mechanisms  for  improved  cookstoves   • Provide  loans  for  customers  to  buy  improved  stoves  from  the  nearest  retail  location   • Reach  larger  communities  in  rural  and  urban  areas   Government  Institutions   • Tribal  Development   • Forest  Conservation   • Low  Cost  Housing   • Mid-­‐Day  meals   • Rural  Development  under  Women  and   • Child  Welfare   Non-­‐Profit  Organizations    

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• Distribute  lifesaving  products   • Encourage  women's  empowerment   • Create  a  sustainable  program  with  a  revenue  stream  that  can  be  reinvested  into  other  programs   • Work  with  ENVIROFIT  independently,  through  loan-­‐based  structures  or  through  CSR  initiatives   Online  partners     ENVIROFIT  is  selling  internationally  through  Amazon  &  Evan's  Outdoor  Store  (http://www.evansoutdoorstore.com)   Organizational  Structure  and  Management   Team  leaded  by  Mr.  Hachan,  Executive  Director.  Team  includes  one  Marketing  Manager  and  Head  of  Sales   for   West   India,   one   Logistics   Manager,   once   Finance   Manager,   and   one   Manager   of   Operations   and   Business   Development.  They  have  received  recognition  in  several  programs  including  MNRE  and  USAID   ENVIROFIT   India   outsources   all   services   of   the   value   chain   from   different   partners.   All   partners   are   legally   registered  businesses  or  organizations,  and  ENVIROFIT  India  signs  MoUs  bilaterally  with  all  of  them.   Ownership  of  Business  Units  –  partners   All   partners   are   specialized   in   their   field   of   work   (manufacturing,   logistics   and   distribution,   microfinance,   saving  &  credit  women  groups,  etc.)   ENVIROFIT   India   assists   all   their   partners   with   Supply   Management   as   well   as   support   in   marketing   and   distribution  of  ICS:     •  Specialized  pricing  for  larger  orders   •  Comprehensive  training  on  cookstove  use  and  demonstration  skills   •  Customized  training  materials  in  the  regional  language   •  Regular  field  visits  to  monitor  stove  usage   •  Support  for  warranty  claims  during  the  warranty  period   •  Assistance  in  developing  carbon  based  programs  for  dissemination  of  improved  cookstoves   Funding:   Sources   of   funds   are   grants   (Shell   Foundation),   awards,   Carbon   Credits,   loans,   and   revenue   from   sales   of   ICS.   ENVIROFIT   currently   offers  the  option  to  participate  in  their  carbon  program  to  increase  cookstove  adoption  across  the  APAC  region  (partnership  can  be  established   with  ENVIROFIT  through  purchase  of  carbon  credits)      

 

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THE  BUSINESS  ENVIRONMENT1:   India  has  grown  to  be  the  third  largest  economy  in  the  world  (in   Purchasing   Power   Parity   -­‐   PPP   -­‐   terms)   and   its   population   of   1.2   billion   presents   an   enormous  market  opportunity  for  emerging  businesses.   Growth   has   not   been   equal   and   large   challenges   remain:   35%   of   its   population   lives   on   less   than   $1.25   a   day,   health   and   educational   outcomes   remain  on  average  low,  physical  infrastructure  is  weak,  and  access  to  energy  is  a  challenge  for  the  majority  of  the  population.     Solid   fuels   remain   a   critical   part   of   the   energy   formula   for   many   households.   67%  of  households  (equivalent  of  166  million  households)  use  solid   fuels  as  their  primary  source  of  cooking  fuel.  Conversion  to  modern  fuels  has  accelerated  only  in  urban  areas.   The   use   of   solid   fuels   and   inefficient   cookstoves   has   had   significant   impacts   on   health   outcomes   and   livelihoods,   particularly   for   women.   400   million   people   in   India   (of   which   90%   are   women)   are   exposed   to   the   negative   health   impacts   associated   with   indoor   air   pollution   from   inefficient   cookstoves,  resulting  in  respiratory,  pulmonary  and  vision  problems.  In  addition  inefficient  cookstoves  and  practices  entails  that  women  spend  up  to   5-­‐8  hours  per  day  on  cooking  activities,  with  20%  of  that  time  devoted  to  the  collection  of  fuel.     Despite  the  large  market  potential,  there  are  a  limited  number  of  players  in  the  market  and  few  have  reached  scale.  There  are  a  wide  variety  of   cookstove  technologies  on  the  market  –  ranging  from  basic  improved  cookstoves  to  renewable  energy  solutions.  While  there  is  a  thriving  and  growing   set  of  private  sector  actors  (and  NGOs),  the  majority  are  small  and  have  yet  to  scale  up  to  meet  the  magnitude  of  the  problem.     Donors   and   multilateral   agencies   are   scaling   up   their   efforts   in   ICS   industry.   New   initiatives   such   as   the   National   Biomass   Cooking   Initiative   and   National  Clean  Energy  Fund  have  sought  to  incorporate  lessons  learned  from  the  prior  policy  initiatives  and  are  focused  on  enhancing  the  role  of  the   private   sector,   but   have   been   slow   to   start.   Cookstoves   have   become   a   popular   focus   area   for   donor   agencies   and   multilateral   programs   and   new   programs  on  supporting  research,  financing  and  implementation  are  beginning  to  emerge.     High  potential  for  ICS  industry  to  become  an  attractive  opportunity  for  the  private  sector  and  an  impactful  mechanism  by  which  to  improve  health   outcomes   and   livelihood   opportunities   for   millions   of   households.   In   order   to   scale   up   support   is   required   in:   (i)   facilitating   greater   partnerships   between   stakeholders   and   sharing   of   knowledge   within   the   sector,   (ii)   developing   and   promoting   acceptable   and   minimum   standards   for   stove   performance,  (iii)  promoting  awareness  of  cookstoves  and  the  positive  benefits  they  hold,  and  (iv)  providing  and  promoting  a  wider  base  and  diversity   of  financing  options  available  to  both  consumers  and  suppliers.  

   

 

                                                                                                                1

 From   the   document   "India   Cookstoves   and   Fuel   Market   Assessment",   by   DALBERG   Global   Development   Advisors   on   behalf   of   the   Global   Alliance   for   Clean   Cookstoves,   it   dates  from  February  2013  

 

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SWOT  Analysis    

STRENGHTS       • • • •

• • • • • • •

Strong  leadership   Strong  managerial  and  technical  skills   Manufacturing   facilities   can   increase   production   easily   according   to   demand  (but  with  limitations)   Registration   and   recognition   by   Indian   Government.   Partnership   with   government   agency   (national   as   well   as   local)   is   critical   to   navigating   the  complex  political  and  regulatory  environment  of  India   Strategic   partnerships   with   well   established   organizations   (MFIs,   SACCORs,  CSR,  government  agencies,  etc.)   "Indian  product"   Good  monitoring  and  evaluation  systems   Monitoring  of  centralized  project  has  a  more  efficient  transaction  costs   of  carbon  finance.   Strong   support   service   providers   (Post   sales   service   and   product   warranty  for  two  years)   Market  access  strategies  very  diversified   Market   information   and   industry   knowhow:   customer   insight,   business   model  

WEAKNESSES       • • • •

• • •

Business  model  and  distribution  channels  built  from  scratch   Business  model  might  find  difficulties  operating  at  larger  scale   Limited  access  to  capital   Weak   link   between   BoP   producers   and   end   demand   (build   through   partnerships   -­‐   high   dependence   on   the   performance   of   the   partners   and  their  sources  of  funding  -­‐  mostly  ODA)   Weak   customer,   producer   and   channel   awareness   of   new   market-­‐ based  solution  and  appreciation  of  its  benefits.   Project   management   -­‐   Complexity   due   to   the   project   engineering   -­‐   (Carbon  Finance)   Role   of   women   remains   marginalized.   Women   not   integrated   into   design  and  dissemination  strategy.    

               

 

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OPPORTUNITIES   •

• • • • • • • • •

• •  

   

 

Facilitate   cooperation   within   the   sector:   share   effectively   in   terms   of   lessons   learned,   best   practices,   research,   etc.   In   order   to   strengthen   the  industry   Further  work  on  bringing  partners  to  the  value  chain,  widen  network  of   target  consumers  and  distributors.     Developing   and   promoting   accepted   standards:   there   is   a   current   need   of  performance  standards     Large    market  potential   High  number  of  IAP  related  deaths  creates  a  strong  case  for  change   Women  empowerment  can  bring  a  shift  to  the  sector   Significant   livelihood   improvement   opportunities,   particularly   for   women   Diverse   cookstove   sector   in   terms   of   technologies   and   variety   of   products  present   Entrepreneurial  culture  with  many  active  community  organizations   Improving   general   awareness   of   the   problem   will   help   the   development  of  the  market     Additional  work  on  access  to  carbon  finance  might  bring  more  players   to  the  sector   ENVIROFIT's   partners   are   currently   giving   women   a   central   focus   for     when  implementing  their  strategy.  

THREATS   • • • •

• • •

• • • •

Infrastructure  still  a  challenge   Challenges  in  identifying  partners  for  distribution  to  rural  areas.   Absence  of  national  quality  standards  favours  lesser  quality  cookstoves   to  gain  market   Increase   the   availability   of   and   access   to   testing   centres   -­‐   currently   expensive   and   arduous   process.   That   will   incentivize   players   to   invest   in  ensuring  their  products  are  up  to  standard       Customer  awareness  need  to  be  created   Limited   access   to   working   capital,   limited   financing   available   to   the   sector     Market   recovering   from   subsidies   and   "donations"   of   government   policy   through   national   program.   And   in   general   variable   government   policies   Other  sources  of  cooking  energy  (LPG)   Current  demand  for  carbon  credits  is  minimal   Carbon   markets   are   in   a   transitional   period,   waiting   for   the   new   international  agreements  in  2015   An   inclusive   industry   needs   to   be   built:   diversity   of   firms   and   healthy   competition  will  bring  greater  value  for  customers  

 

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BUSINESS  MODEL:  (through  Value  Chain  Analysis)    

ENVIROFIT  VALUE  CHAIN    

 

 

Distributor   (x1)

 

 

 

 

 

 

 

NGOs   Coopera CSR tives (IVDP)

 

   

VALUE CHAIN

 

ENVIROFIT signs contracts with: End  Users • The Industrial producer • Distributor • Partners (MFIs, NGOs, CSRs,...)

MFIs   (Fullerto

Industrial   Producer  (x1)  

                                         

 

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Envirofit india case study summary