FRIDAY, March 29, 2024
nationthailand

Social enterprise as a business model

Social enterprise as a business model

The Mae Fah Luang Foundation has reaped tremendous gains with its Doi Tung project

From a royal-initiated project to fight opium and deforestation, the Mae Fah Luang Foundation has developed many businesses that helped make it financially self-sustaining 10 years ago, while creating the now famous Doi Tung brand.
The foundation’s director of the Knowledge and Learning Centre, Pimpan Diskul na Ayudhya, said their businesses include Cafe Doi Tung, Doi Tung Lifestyle Shops that sell hand-woven fabrics, potteries and other handicrafts, as well as tourism, and macadamia nut businesses, which together generate US$13 million (Bt400 million) revenue annually. This is in tune with Doi Kham Food Products, another royal-initiated project, that sells and exports products made from northern Thailand and earns revenue of about Bt300 million annually.
Nevertheless, she said the foundation’s profit margin is only about 5 per cent of sales as the primary objective is to develop the livelihood of the local villagers, while the businesses are just the means to make it financially self-sustaining and not be dependent on taxpayers’ money. With the purpose of supporting local people, the foundation’s weaving factory, for instance, employs traditional looms that use more labour and are costlier than the yarns one can buy from the market.
The foundation’s chief development officer, ML Dispanadda Diskul, said the organisation has the challenging goal of handing over the businesses to the local communities in the next six years.
“Hopefully, we can say that Cafe Doi Tung is owned by the coffee farmers at Doi Tung,” said Dispanadda.
“We’re moving out of Doi Tung. But we’re confident they can continue,” said Pimpan, adding that, “If we can complete the transfer [of project ownership], it will become the world’s first development project that can claim to be sustainable.”
The two foundation executives were speaking at a briefing held for dozens of delegates from many member countries of the Asian Productivity Institute (API) during their study visit to the Doi Tung development project in Chiang Rai last month.
Pimpan said even after the current management team moves out in 2017, the foundation is likely to retain its Bangkok marketing and sales office, which currently employs about 200 people. “But the shareholders will be the local Doi Tung people who will make decisions and cast their votes,” she said.
Pimpan said human resources are currently the biggest challenge to the foundation’s expansion ideas, including its plan to expand the tourism business and a project to penetrate New York’s gift market. The foundation is attempting to build on its recent success in placing its Doi Tung home-ware collection at Ikea’s first Thai store.
“We’ve tried to penetrate the New York gift market. We’ve studied everything. [But] we don’t just have people [to carry on the plan],” she said.
Nonetheless, the foundation’s marketing manager Phukrirk Buasorn said the organisation has also attracted many high-calibre people, including one of its senior executives who is a former chief operating officer of Unilever while its public relations manager is from Body Shop. Most designers of Doi Tung products have graduated from overseas universities, while its development unit has drawn in many young graduates from the world’s top universities such as Cambridge and Oxford.
“My salary was lower by 40 per cent,” said Phukrirk, a former marketing manager at Yum Restaurants International (Thailand)’s KFC unit, comparing his current pay with his previous income.
“Most staff here are inspired by the Doi Tung [foundation] philosophy,” explained Phukrirk.
Dispanadda said Doi Tung characterises itself as a social enterprise, which returns its incomes to the rural communities. Riding on the “coffee phenomenon” kicked off by the opening of the first Starbucks outlet in Bangkok about 12 years ago, Cafe Doi Tung admittedly started as a “copycat” of Starbucks. Nevertheless, Cafe Doi Tung reviewed its initial approach and has been able to find its unique branding.
“Our brand concept is the ‘journey’ of coffee beans to the cups of coffee, where people live on and can co-exist with the nature. This is how we are different from Starbucks, Wawee, and Doi Chang. We are the only one to control the entire process beginning from coffee plantation, while others buy beans from the middle man,” he said.
Taneo Moriyama, managing director of Insight Inc, a Japanese expert invited to join the trip, said every company wants to run an integrated coffee business to earn more profits but it is not an easy task.
“I did not expect this kind of rural development project to obtain business success. It’s really a truly self-sustaining business, which does not depend on donations,” he said.
Another invited expert Dr Singh Intrachooto, a famous Thai architect/eco-designer, commented that the foundation’s target of handing over the businesses to the local communities in the next six years will not be easy to accomplish.
“You have transferred them the skills, but not yet the “tastes” and “designing” [capabilities]. From my own experience, a success rate in doing this kind of thing is only 2-3 per cent,” he said.
Yoshihide Endo, programme officer at APO’s Agriculture Department said the foundation may try to cash in on the ethnic cultures which are currently of interest to many consumers worldwide.
“Now people worldwide, even Japan, are interested in ethnic cultures. If there is an ethnic centre, ethnic dining, and so on, people will come here and buy Doi Tung products. You may also build an ethnic-style hotel. This is the only missing point,” he said.
Meanwhile, Phukrirk said Cafe Doi Tung will this year focus on improving service quality at its 22 outlets as well as communicating the qualities of “premium arabica coffee” and the “journey” of its integrated coffee supply chain – from the farm to the coffee cup.

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