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Innovative BoP Business Model Integrating IoT Connected Vending Machines with Reusable Containers for Low Waste/Cost Distribution

In many BoP mom & pop stores products are distributed in ways promoting excessive plastic waste & high cost-we reduce waste & lower prices.

Photo of Brian Bauer of Algramo
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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.   


Idea Title

Optimizing Supply Chain & Integrating IoT Vending Machines into a Sustainable BoP Distribution Model to Lower Waste & Product Costs

Company / Organization Name

We are a social enterprise aiming to use sustainability & technology to decrease the cost essential products for low-income consumers.

Website

http://www.algramo.com Cofounders: https://www.linkedin.com/in/salvador-achondo-469b9232/ https://www.linkedin.com/in/josemanuelmoller/

Where are you / your team located?

We are spread across a network of 1,100 mom & pop stores in & around Santiago's BoP neighbourhoods.

How does this Idea redesign unrecyclable small format plastic items that often end up as waste?

Due to limited & volatile incomes, BoP consumers often buy products more frequently but in smaller formats. Algramo seeks new product offerings that can be sold in reusable containers instead of single use or small format plastic. We are now moving into smaller size reusable containers (<150 ml) to compete with BoP markets for smaller formats like sachets. Our BoP focus magnifies our impact as most BoP areas lack recycling facilities & sometimes even formalized waste management facilities.

Which use cases does your Idea apply to?

All of Algramo's product offerings replace products sold in small format plastic. Historically, Algramo was focused mainly with dry goods in 500 gram reusable containers. We aim to be more focused on selling liquid products, in increasingly smaller volumes–this enables us to stay true to our BoP focus by decreasing per unit cost to our consumers. As we evolve, our liquid product offerings focused on smaller formats, we will increasingly offer a sustainable/cost effective alternative to sachets.

In what geographical context or area does your Idea plan to operate / solve?

We have operated in Santiago, Chile for 4+ years. We have build up a network of 1,100 neighbourhood stores. We will leverage the social licence we have built in Santiago to implement our idea of reusable 75-200ml containers to expand into new areas.

How do you envision scaling up your Idea?

Ideally we seek a win-win relationship with a FMCG company with shared values. Our expertise with vending machines, reusable plastic & last mile BoP distribution make us a valuable partner of strategic vaule for a FMGC. Without a FMGC, challenges will be funding optimal machine development & plastics engineering to match product with container. To scale up we would also like to procure more food from local small holder farmers & decrease upstream plastic waste to increase our sustainability.

At what stage of development is your Idea?

  • Piloting: You have started to implement your solution as a whole with a first set of real users. You may have started to develop a business model for your idea, including identifying key customer segments, relevant partnerships, go-to-market strategy, and draft financials.
  • Full-scale roll-out: You have developed a pilot, tested, and analyzed the impact of that pilot as it pertains to the problem scope. You are ready to expand the pilot significantly and begin to scale.

Please describe how becoming a Top Idea and working with the Think Beyond Plastics Accelerator Program will help to accelerate your solution.

We have 4+ years of experience, support from Ashoka, World Economic Forum and a network of 1,100 stores, with a considerable expertise in the BoP. Support from NPEAP could help leverage all our past successes & partnerships with a values aligned FMGC to expand the impact of our sustainable business model. NPEAP would support R&D of machines/plastic types matched to product, marketing, distribution, partial subsidization of initial containers & ability to max our sustainability across value chain

Please describe from where your Idea emerged

In an Industrial Ecology class at Harvard, I learned about the life cycle costs of plastic. This attracted me to Algramo, who also had a concern for the sustainable use of plastic & leveraged this into an innovative social enterprise focused on helping BoP consumers. I have travelled extensively in Asia & seen the damage of sachets. I have applied university knowledge, travel experiences, Chilean work experiences & worked with Algramo to put forth a potential solution for a global problem.

Tell us about your work experience

Salvador Cofounder-Master's Innovation & Industrial Design José Cofounder-Economist, from family dedicated to social equality & Master's Advanced Design Brian-Entrepreneur & Master's Sustainability

Please describe your legal and organizational structure

In Chile, Algramo is a SpA business (Sociedad por Acciones) this translates as Society for Stocks. We are a for-profit social enterprise.

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Photo of AdnanFX null
Team

Hi Brian,
i would like to know about your organization's structure and control systems and how they match its strategy.
thank you in advance.

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