Lakheni: Buying together is power
Lakheni gives low-income communities access to food and services at fair prices by aggregating the demand of homes linked to daycare centres
I confirm that I am fully aware of the eligibility criteria, and based on its description, I am eligible to apply to the CSV Prize 2017.
Lakheni Group (Pty) Ltd
Growth (the pilot has already launched and is starting to expand)
Annual budget in 2017 (USD)
Number of beneficiaries impacted so far
Headquarters location: Country
Headquarters location: City
Location(s) of impact
South Africa: Cape Town low-income communities
Problem: What problem is this initiative trying to address?
18 million South Africans live in informal settlements and they have disproportionately high acquisition costs for goods and services. The reasons for this poverty premium are complex and include structural issues created by the legacy of Apartheid. As a result, 60% of these families are food insecure while market-based solutions of retail have failed to provide the equitable access so sorely needed by these communities.
Solution Summary: What is the proposed solution? What do you see as its most promising aspects for creating shared value?
Lakheni uses a mobile ordering platform that aggregates the monthly grocery needs of groups of low-income families and places bulk orders with suppliers to secure discounts that can be passed on to the customer. The groceries are then distributed locally to customers via local collection points such as daycare centres, stokvel groups, churches, etc. The Lakheni model addresses the issue of equitable access by organising demand for goods and services through groups of people who already have established relationships and asking them to extend the scope of those relationships to create economic value for themselves. It also provides economic benefit to groups through the commissions paid and reimagines distribution channels so that customers do not carry the cost of supply chain inefficiency and bloated infrastructure overheads to strip out the poverty premium being paid.
Impact: What is the impact of the work to date? Specify both the social and the environmental impact of your work
Since April 2016, we have signed up and transacted with 104 buying groups representing approximately 580 individuals. We have delivered over 25 000 kg of food to our daycares and families. Data collected from the pilot reveals that Lakheni customers acquire their groceries for an average 4% less than the shelf-cost of their baskets at the largest local retailer. Furthermore, Lakheni customers save a further 5% to 15% on their acquisition cost ie. taxi and bus fares to and from local retailers and wholesalers. In real terms, an average monthly household basket of R750 at a local retailer costs people between R780 and R820 to acquire. The same basket purchased through Lakheni and delivered locally costs R720; a saving of R30 to R100 per month.
Financial sustainability plan: How is this initiative financially supported? How will you ensure its financial sustainability long-term?
Our pilot project has proven that our collective distribution model will be financially viable once Lakheni vertically integrates into the position held by a wholesaler in the food supply chain and has 300 active buying groups on the platform. Since April 2016, the pilot operations have been funded as follows:
1. 83% Grants
2. 17% Earned income
Unique value proposition: What makes your initiative innovative? How does your project differ from other organizations working in the same field?
The power of Lakheni lies in the community-based buying groups and locally nominated distributors. No service provider in the food retail or wholesale space in our market is looking to aggregate customer buying power by leveraging natural community behaviour and mobile technology. Our solution brings nutrition closer to families at a lower cost because our model shares value through distribution and collective collection points.
Founding story: Share a story about the "Aha!" moment that sparked the beginning of this initiative.
Our founders, Nokwethu and Lauren, met in 2014 while studying a social innovation MBA at the University of Cape Town. They combined their active research efforts into understanding the Early Childhood Development challenges faced by daycare centres in informal settlements around Cape Town. During this immersion, they were struck by the academically under-appreciated resilience within these communities. In this space of material scarcity, communities have forged rich networks of support within themselves and they rely on communal effort for survival. Lakheni has been founded on amplifying this tremendous strength and providing the platform for communities to scale this shared value.
Where did you hear about the Nestlé Creating Shared Value Prize?