Alcagüete: The Challenge of Sustainable Growth

The Alcagüete case is an example of a market-focused social initiative (B Corporation) that encountered serious doubts regarding its mission while it was considering an expansion proposal that would allow it to grow exponentially in record time.

Alcagüete produced and sold healthy snacks. A fundamental pillar of the business was its social value proposition of combating childhood malnutrition. This was reflected in the brand and its 1×1 cause-market strategy under which for each product sold, a contribution was made to a social organization working to combat childhood malnutrition in Colombia. This strategy allowed Alcagüete to become a certified B Corporation® and receive domestic recognition and awards for the social work that was a mainstay of its positioning and differentiation strategy.

Alcagüete was founded in 2013 as a small business that sold home-made products direct to consumers and at events. Word of mouth was its main communications strategy. To develop its social proposal, it formed alliances with charities working to combat childhood malnutrition, such as: Aeiotú, SoyDoy and Fundación Éxito. As its commercial strategy grew, so did its social project, and in four years it had delivered close to 505,000 snacks to children from poor backgrounds through its 1×1 cause-market model. However, it had set itself the goal of delivering 1,000,000 snacks by the end of year-five. These numbers show that the progressive growth strategy had been working, but that a more significant scale-up was needed the following year.

One of the company’s strategic partners had offered it the opportunity to sell products at hard- discount stores1, a business model that was growing all over the country. This brought with it the challenge of adapting to this model’s dynamics by, for example, reducing prices and developing production capacity to meet the higher demand. Selling at hard-discount stores would allow them to grow faster, but at what cost?

According to Andrés, one of the company’s founders, if the company did not scale-up its model, it would never achieve significant impact with its social proposition and help transform Colombia’s childhood nutrition problems. However, his business partner, Pedro, was concerned that if they decided on the wrong growth strategy, the model could lose coherence, and it could even destroy the entire social, environmental and health proposition that the company structured around.

Was the hard-discount opportunity worth it? Under what conditions should they go for it? And if they didn’t, what other growth options were available?