BY POOJA KOTHARI
When CK Prahlad wrote the path-breaking
The Fortune at the Bottom of the Pyramid, he could just as well have been talking about Cosmos Ignite. The companies in Prahlad’s book, selling everything from soaps to cell phones in countries as far apart as India and Peru, were creating a new market for their offerings – the poorest of the poor. They were revolutionising business by finding profits amidst those who couldn’t afford much by usual logic.
Like them, Cosmos Ignite is finding its way around the bottom of the capitalism pyramid. With a solar-powered light in hand, its founders, Amit Chugh and Matthew Scott, are fighting “swathes of darkness” around the world.
From Panama to Afghanistan, and closer home, in villages such as Chidambaram, the poor are readily taking to the MightyLight. It is a simple, plastic contraption that can be hung from the ceiling or the wall to light a house, or carried into the fields at night. But it is making a huge difference to rural lives and livelihoods. Children can now study at night while fishermen and weavers can extend their work hours. Even inside rural homes, this waterproof and shockproof light-emitting diode (LED) lamp is slowly replacing kerosene lanterns, which are more expensive and dangerous.
Make no mistake. It may be a product serving a social cause but Cosmos is a business venture. “I am not a bleeding-heart
jholawalla. It makes economic sense to be at the bottom of the pyramid (BoP),” says Chugh. According to him, India has the single largest population of people with no access to energy; 380 million to be precise. The comparative global number is more than a billion.
Using less than a million dollars from angel investors such as Vinod Khosla and incubation support from Stanford, Chugh and Scott embarked on this journey in 2004. “We wanted to apply the discipline of business and our managerial ability to an intellectually-challenging area,” adds Chugh, who had worked with MNC firm, Coats, for nearly a decade prior to Cosmos.
They’ve had a decent run so far. “We haven’t burnt large amounts of cash. We haven’t taken a penny in donations either. And we get independently audited by a Geneva firm to validate our sustainability,” adds Chugh of his “profitable” social enterprise. He claims to have crossed a million dollars in revenue as well.
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The mighty lamp: how it happened
It is hard to imagine Amit Chugh, who belongs to an upper-middle class family and has worked and lived abroad for years, turning to rural India for setting up his own business.
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“My father told us stories of how he would study with a lantern during his growing up years in a village in Pakistan. Then, when he set up a paper plant for ITC in Hyderabad, I observed swathes of darkness everywhere,” adds Chugh, who feels there were many influences in his life that led him to that decision. |
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After spending nine years with an MNC, Chugh came back to India in 2002 and looked around for avenues which allowed him “to make the maximum impact”. Luckily for him, he did some work on green energy for the government at a
time when the latter decided to privatise some bits of power generation
and distribution.
“I found energy intellectually as well as emotional exciting,” says Chugh.
Thus was born Cosmos Ignite and the lamp that’s lighting lives.
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Through a mix of breakthrough price points, distribution channels and financing, they’ve been trying to widen their reach. “We’ve impacted 130,000 lives so far,” adds he. The challenge has been in getting the pricing right so that the needy can buy it directly. “Traditional models of bringing energy and lighting to BOP markets have focused upon solar home systems costing in the region of $200-$500. While these models have had some success, penetration rates into poor and low-income markets are still less than 1%,” says Scott, who handles international business development at Cosmos.
Even for Cosmos Ignite, much of its sales have been due to the efforts of not-for-profit bodies such as foundations and multilateral agencies. At times, corporates too have stepped in to popularise the product. In December, for instance, eBay donated 15,000 MightyLights on behalf of its employees to schools in Africa and India.
However, the Scott-Chugh duo knows that direct selling to the poor has to become the norm in future. So, like other businesses struggling with their marketing initiatives, they are also trying different things. On one hand, they are exploring synergies with distributors who have existing marketing networks in rural areas. On the other, plans have been drawn up to sell through a variety of channels such as self-help groups, micro-finance and micro-franchising.
Some of their experimentation seems to be bearing fruit. Where an outright sale was proving difficult, Cosmos used other ways to get the poor to try the product. It approached shopkeepers in rural areas with a new business idea: buy a MightyLight for Rs 1,500 and rent it out on a per-night basis. It believed that households, which were already spending Rs 5-7 per night on kerosene lamps, would not find it difficult to switch to a product that was less polluting and less accident-prone.
For the shopkeeper, at Rs 5 per night, it would take less than a year to recover the cost of the MightyLight. Given the solar torch’s life span of 10 years, it was a reasonable business proposition. This format is already being used in Uttar Pradesh, where an entire village has paid for one light, and is renting it out at Rs 5 per night.
To make the product deliver greater value-for-money, Cosmos has come out with an improved version, complete with a radio and a cell phone charger that spouts nodes for every mobile phone make available in India. Efforts are on to find out how the same handy torch can be used to run a small battery-operated machine.
The firm is also working hard on keeping costs low. Since solar modules, which form nearly 50% of the cost of the MightyLight, are very expensive in India, Cosmos has been sourcing them from international locations depending on the projects. It has recently opened an associate office in China to keep track of the latest developments in solar module production there. At the same time, it is trying to backward integrate the production line to overcome the challenges of solar production locally.
They’ve also managed to keep the cost of additional features, such as the cell phone charger, down by manufacturing them in India. “Other than the LED and the solar modules, everything else is made by Cosmos at its assembly unit,” says Chugh. As a social enterprise, Cosmos is committed to creating jobs locally.
The future’s looking bright for the MightyLight. Scott is currently in the midst of finalising funding from a leading social investor in the BoP energy space. “We intend to partner with a number of additional investors, who (have) expressed interest in supporting our vision of bringing lighting and energy to BoP markets,” says he.
Plans are also afoot at the international level for a range of activities, including technology partnerships, carbon development and international distribution. “Having established the model, our key challenge is now execution and scale – finding the right financial partners, building the right team and then managing rapid growth,” explains Scott.
From what it seems, Chugh and Scott are not likely to stop till they’ve lit the entire world.
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