Algramo operates in BoP communities in urban and peri-urban areas of Santiago, Chile-across a network of 1,100 family owned neighbourhood stores (FONS). We have conducted considerable market research on how BoP consumers purchase their food and essential daily items. Research from InterAmerican Development Bank (IDB) shows that on average Chile's BoP consumers spend 30.3% of their incomes on food-this makes food by far the largest allocation of income.
IDB's and Algramo's research shows that the lower a consumers income the more likely they are to buy the vast majority, if not all, of their food from FONS. Algramo distributes its products exclusively to FONS. Traditional supply chains for FONS have a non-vertically integrated distribution chain with multiple intermediaries to package, promote and deliver products to hard to reach markets. The result is a market failure we call the poverty tax that delivers excessive packaging and high costs for the end consumer. Algramo aims to correct this market failure. Algramo's market research finds that on average their business model can significantly reduce plastic waste while reducing product costs by about 30 percent for BoP consumers.
Algramo uses a fair, economically beneficial and sustainable partnership with FONS, to lower food cost by about 30% and significantly reduce plastic waste. We reduce plastic waste by significantly shorting the supply chain (removing unnecessary intermediaries) and replacing small format, single use plastic with reusable plastic containers.
With funding we can improve the sustainability and circularity of our plastic by having a significant percentage of the container being made from recycled plastic, enabling customers to return end of life containers for a deposit that reduces the cost of new containers-allowing us to cycle end of life products into new container feedstock. Winning funds would also allow us to increase the amount of food we buy from local small holder farmers. Doing this would allow us to explore ways to reduce plastic waste in the upstream of our supply chain (waste typically not recycled).
With our current product offerings to 1,100 FONS and about 44,000 families, we have potential to eliminate up to 2 kg of plastic waste/per family/month-88,000 kg of plastic waste per month. This is critical as almost all plastic waste is smaller format plastic single use plastic. Virtually none of this plastic would get recycled and a lot of it would leak into the environment due to a lack of recycling facilities and limited waste management facilities.
As we evolve our business model to dispense liquid products into smaller formats (75ml to 200ml reusable containers) we will be increasingly offering a viable cost competitive sustainable option that can out compete environmentally harmful plastic use like sachets. Most of our liquid based product offerings come in large, usually 1,000 litre, reusable plastic containers. We dispense the liquid into reusable containers that get delivered to our stores. Soon we will be distributing liquids directly into our vending machines and product will be dispensed at a set price per ml, so that we provide product levels perfectly balanced to the limited budgets of our BoP customers.
We aim to integrate our innovative supply chain, products distributed via vending machine into small format reusable plastic containers to allow Algramo to distribute food and liquid products in a truly sustainable manner that radically reduces plastic waste. Winning funds from this contest would greatly accelerate our ability to achieve these objectives. Winning would also help us attract attention from a values aligned FMCG brand that could help accelerate the spread of our idea into new products and markets.