Multinationals that failed to take these realities into account saw their best-laid business plans go bust. P&G’s PUR sachets were envisioned as a low-priced competitor to bottled water; in reality, though, poor households are used to boiling their tap water or drinking it untreated. Grameen Danone’s real competition among rural populations wasn’t expensive store-bought yogurt—it was homemade yogurt that consumers produced for a fraction of the cost.
In places where poor consumers benefit from lower prices, they often incur other costs. For example, the informal economy fails to ensure safe working conditions and reasonable wages, product quality controls, or taxes for the state. The brunt of these externalities is borne by the poor, as workers, consumers, and beneficiaries of government funds. Such places may have a “poverty premium” that multinationals could help eliminate, but that premium does not take the form of higher prices.
The Problem with the “Poverty Premium,” Harvard Business Review, Ethan Kay and Woody Lewenstein, April 2013
Ethan Kay gave a Ted Talk about creating cookstoves for poverty survivors.