1. Envirofit International
Alexandria Natarajan, March 29, 2016

2. Qualitative Analysis Customer Value Proposition
Go-To-Market Strat
Sell products directly to consumers and through retail distribution outlets
Competition
Cookstove industry = highly fragmented
Envirofit= most fuel efficient, only product on the Indian market that comes with a 5 year warranty
First Energy
Private company that launched the Oorja stove that used biomass fuel pellets. Stove and pellets expensive.
Spun off parent and faced financial problems  started selling stoves to commercial customers instead of BoP households
Complex product design, hard to use, customers unaccustomed to using pellets, firing up stove was cumbersome
By April 2011  lost > half household customer base and in retrenchment mode
Also competing with a consumer mindset  “Three stones put together constitutes a substitute.”
Marketing
TV infomercials (Urban appeal) – bright colors, message clear, actors made a favorable impression
Rural social marketing campaigns -Videos shown in villages, village demonstrations
Raise awareness of IAP problem through educational campaigns
Technology and Operations
Technology
5 stove options, 1 attachment
Revolutionary design  ultra-efficient combustion chamber that cuts down emissions by 80%, doubles fuel efficiency, reduces cooking time
Patented alloy used in combustion chamber
Use same biomass fuel BoP households use
Lightweight, low-cost, high-performance  5 year manufacturer warranty and 50% savings in fuel
Operations
Subcontract all production to China
Envirofit India Pvt. Ltd.  for-profit company, have a subsidiary non-profit entity in India too
Management team
Qualified, experienced, no visible gaps
Board meets quarterly and holds reviews meetings regularly  board members include founders and funding partners
Customer Value Proposition
Goals = reduce indoor air pollution (IAP), a silent killer, reduce carbon emissions, more fuel-efficient stoves to reduce negative environmental impacts  However, consumers do not necessarily share these values
Consumers want consistent performance, high level of fuel efficiency, appeal to convenience
BoP households show lack of awareness about IAP and connection to health and safety
Need to raise awareness about this problem
Mission = technology development and transfer, energy efficiency and environmental preservation, pollution reduction and end-user health benefits  low-cost, high-performance cook stoves
Target Markets  BoP (Indians rural and urban poor)
Urban vs Rural
Biomass fuel and primitive stoves cause IAP  negative health effects and death (esp. women and children)
Biomass fuel  cheapest and most widely available (92% rural BoP uses biomass fuel)
Customers don’t want to alter cooking habits
Cooking habits and diet vary by geographic location
Speak many different languages (15)
Profit Formula
BoP households are price sensitive and not value conscious consumers  lack of disposable income, lack of resources (ie. Credit and financing alternatives)
Low-cost  low margins
Subcontract to China  alloy at a competitive price, allows affordable prices
For-profit to promote financially sustainable operations
Funding partners  Bohemian Foundation (initial and multi-year grants) and the Shell Foundation (initial funding and continued assistance)

3. Quantitative Analysis
IAP causes death of 1 person every 20 seconds  leading cause of death for women and children under 5yrs  3.6 million people die annually  disproportionately affects the poor  in India, 500,000 deaths annually
Poor households in India earning $2-7/day = working poor of the BoP (base of the pyramid)
If convert 100% of developing world’s 500 million cookstoves to energy efficient models, would save 750 million tons of carbon dioxide annually
Inefficient stoves use lots of energy  rapid deforestation – 304 million cubic meters of wood annually in India
In 2005, the BoP consumer market using biomass and other solid fuels = about 160 million households, of a total 225 million households in India
BoP consumers that Envirofit targets spend about 80% of earnings on food, clothing, and fuel. Fuel alone constitutes 10-20% of household incomes.
See Exhibit 5 for financial date ***net margins do not include product R&D and administrative overhead – when factored in, net loss***

4. Recommendations
Overarching problem: Profits generated in India are insufficient to meet R&D work in the US and overhead to support Indian operations.
Retailers don’t enthusiastically push Envirofit products  more interested in selling higher margin products to affluent customers
Could offer a bonus to retailers who meet a quota of sales of Envirofit products to BoP households in order to encourage and induce more sales
Could create another stove model, with high profit margins, meant for affluent consumers  use these profits to offset/cover costs of the BoP stoves
Marketing
Urban BoP households  Women want to purchase, but husbands opposed purchase  saw the stove as “whimsical shopping”
Engage in more marketing efforts geared at males/husbands that show the necessity of the stove, possibly a campaign that shows the direct effects of disease and death on women and children due to their current stove emissions.
Rural BoP households  marketing investments generated sales while promotions remained in place but tapered off when they ceased  no sustained sales when expensive TV marketing stops
Invest in more permanent marketing efforts (which are also cheaper) so that the product remains at the forefront of people’s minds in order to sustain sales – ie. Posters in villages that show the risks of the current stove models and the benefits of the Envirofit stoves