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Algramo

A sustainable IoT connected machine distribution system to eliminate in-home sachet use & create major cost savings for BoP families.

Photo of Brian Bauer of Algramo
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Describe how your Idea has or will evolve during this phase

We have now received significant funding to further develop our low cost, IoT connected vending machines. Current funding will deploy a pilot of ~60 new low cost IoT connected machines.  We expect first new low-cost machines to be  introduced into our stores in October. 

We have a call scheduled with Linus Jiremark, of PACKGROUND, to gain insights on B2B solutions and technical plastics engineering opportunities to increase durability (# of life cycle uses of containers), while improving performance of our reusable containers. The aim being to minimize environmental cost of our plastic packing while improving performance of our plastic packing and developing a strategy to recycle end of life plastic. We are especially interested in creating a packaging solution that will deliver liquid products, like shampoo, conditioner or liquid detergent, in volumes from 35 ml to 140 ml.   

We are researching potential technological innovation from FMCG brands that could erode the importance of our proposal. Like Unilever's Indonesian pilot of its CreaSolv Process to recycle sachets. However, we believe if a LCA was applied to the idea Algramo is presenting in this proposal and compared to Unilever's CreaSolve Process (which entrenches the use of sachets), Algramo's solution would have major environmental benefits, plus significant social impact benefits. Our economic modelling, based on offering a 50% discount on a per/ml basis for shampooo, suggests a 35ml reusable container would save $7.45 over the 25 refill life cycle of the 4 cent container and this would eliminate the need for 75 sachets. With larger 140 ml containers, the economic savings relative to sachets, is US $29.88 and 300 sachets are eliminated. We have recent got some quotes and here in Chile we can buy quality shampoo at wholesale prices, for 600 Chilean Pesos (US $0.95) per litre-at this rate we could easily increase discount rate over sachets up to 70% savings, which would add significant strength to our value proposition and competitive advantage. See above Excel file "EconomicModelSachet_VS_Algramo_Aug30" for modelling.

In regards to a a 140 ml bottle averting the use of 300 sachets, if a cradle to gate LCA analysis was conducted on the material inputs for a 140 ml plastic bottle, verses the corresponding material inputs for 300 sachets, the analysis would likely favour sachets. But many LCA studies have a limited impact assessment or understanding of what happens to the packaging material post consumption. We believe our system is designed to capture and recycle a very high percentage of our packaging (due to deposit paid on container). Clearly, sachets have very poor rates of recycling and have very high environmental impacts-even cradle to grave analysis has a limited ability to quantify how sachets can impacts marine ecosystems and how to quantify these staggering negative externality costs. These post consumption disposal factors must be considered to accurately assess the objective costs and benefits of our proposal verses conventional sachet distribution systems.   

We will research how environmental policy and regulatory forces may put pressure on FMCG brands to move away from sachet focused product distribution and thus incentivize a solution like Algramo is proposing. 

Below explains Algramo's innovative business model, technology objectives and its social impact objectives

Algramo is a Chilean based social enterprise that has been dedicated to distributing food & essential liquid based products to the BoP for the lowest possible cost, with maximum sustainability. We strive to correct a market failure that results in low-income families paying what we call the 'poverty tax'. In much of Latin America, the lower ones income, the more likely they buy most of their food in small daily portions from neighbourhood mom and pop stores (MAPS). MAPS get most of their products from inefficient supply chains and information asymmetries often raise the cost of food, and other essential products for the storekeepers in our MAPS. This results in many low-income families paying about 30% more, sometimes up to 50% more, for food, on a per unit cost basis. In Chile, BoP families use 30.3% of their incomes for food (IDB 2015). A key objective of Algramo is to use our innovative business model that integrates technology, into our network of 1,100+ MAPS. We do this to lower the cost of essential products and maximize socio-environmental benefits across the Algramo ecosystem. Algramo makes technology as a force for good that reduces social inequalities in Latin America.

Our reusable containers have a deposit of US ~30 cents to motivate our low-income consumers to reuse containers. We have found 35 ml plastic containers (that would compete with sachets) for as low as 2 to 3 cents per container. We believe this idea is viable with container in the 10 to 15 cent range. Especially, if we could create containers with greater longevity (more refills), better performance and easy recyclability. We can adjust container cost (deposit) to maximize container reuse-this varies by regional income levels of end consumers. 

Currently, in Chile, containers costing US ~30 cents are not overly cost prohibitive for our customers to purchase, but the cost is sufficient to ensure consumers reuse containers. Depending on product, reduced costs (product savings), will pay for the cost of the reusable container after as little as 1 use. With some container types/products it could take 2 uses to pay off the ROI for the container cost. We are interested in designing our containers to have maximum longevity, ideally 25+ refills/container. However, it might be possible to have containers with significantly greater longevity. 

To increase the circular use of our plastic containers, old containers no longer serviceable will have a value of ~1/3 of their original cost which can be traded in for a discount on new containers. These end of life containers will become a quality homogeneous feedstock for new containers or another type of polymer input which decreases demand for virgin plastic inputs. 

IoT technology in our vending machines lowers delivery costs and improves inventory management, both create a positive feedback cycle (via decreased product costs) that increases demand for our innovative business model based on selling products in reusable containers. Despite having a network of over 1,100 stores we still lack ideal economies of scale which would enable us to get lowest possible prices on our food and liquid cleaning/personal care products, so we can pass on savings to our MAPS and end consumers. This is a key reason we are interested in a partnership from a values aligned FMCG brand.  

On the July 26th webinar, Angus Grahame of Splosh! noted that vending machines can be complicated to integrate into stores as they require the stores to modify and upset display space. I am sure Angus understands his UK based market sector well. However, in the context of Algramo's Latin American BoP markets, I would argue the vast majority of our storekeepers are very keen to embrace using our vending machines. In fact, Algramo has noticed a significant percentage of new stores who are strongly motivated in joining the Algramo movement based on their store having a vending machine. We have had a considerable number of storekeepers say they want to join the Algramo movement, but if we tell them we do not have vending machines currently available, they often say that they are not interested in working with us until we have a vending machine for their store.

Algramo's vending machines are a technology platform that subconsciously fosters a responsible consumerism and recycling culture, in areas where these concepts previously did not exist or were extremely nascent. This is critical as formal waste management infrastructure is very limited, sometimes even lacking, where Algramo distributes its products. This makes the impact of our reusable containers much more significant than if we were operating in developed markets were advanced waste management and recycling infrastructure exist. 

This factor, that our distribution is focused on BoP centric distribution, means waste aversion attributed to our machines is environmentally much more significant than it would be in developed economies with advanced recycling and formal waste management systems. In Chile, our market research shows that a family of four using all Algramo's product offerings would avert 2 kg of plastic waste per month. Our 1,100 stores are estimated to serve 40 families/store, for a collective 44,000 families. Thus, in Santiago de Chile, Algramo has potential to eliminate about 88,000 kg of plastic waste/month. Furthermore, much of this 88,000 kg of plastic would be poorly managed and virtually non of it recycled-as is common in most BoP communities in LI or MLI countries. 

Much of the discussion for ideas presented in this contest were focused on developed economies. Really it is all important, but the evidence is clear, most of the environmental damage associated with mismanaged plastic waste comes from underdeveloped economies. If there are limited funds to decrease the environmental impacts of plastic pollution, underdeveloped economies/market segments will provide the greatest environmental impacts and social benefits per dollar invested.

For all of the above reasons, Algramo offers a world class market-based solution to a more sustainable and circular use of plastic that is especially impactful due to its focus on underdeveloped markets that lack advanced, sometimes even basic, waste management systems. We have a proven distribution strategy, a robust social licence, significant experience designing and integrating vending machines based product distribution into a network of 1,100 MAPS. The social impact we create is noted by B Corp as "Best for The World". We believe all these accomplishments should make us a viable partner for a values aligned FMCG brand looking to increase its impact and exposure in BoP markets. 

References

IDB 2015: https://publications.iadb.org/handle/11319/6992


Idea Title

Replacing the Low-Cost Connivence of Sachets With More Affordable & Sustainable Technology Based Distribution for BoP Markets

Company / Organization Name

Algramo uses technology & sustainability to solve a market failure forcing BoP families to pay unfair prices for small format consumption.

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 located in Santiago de Chile's BoP neighbourhoods, spread across a network of 1,100 stores.

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

First, Algramo replaced plastic packaging for dry food packaging with reusable containers & now liquids. For this proposal we will customize machines & reusable plastic containers to directly compete on price/connivence with sachets. With a 4 cent, 35ml reusable container we can sell shampoo for at least a 50% discount per/ml verses sachet costs. Depending on container size 35ml to 140ml, respectively, each container refilled 25x will replace 75/300 sachets & save consumer $7.45 to $29.88.

Which use cases does your Idea apply to?

Algramo's idea relates directly to Case 1 single-use for liquid consumer products.

We offer a solution that outcompete sachets on price (50%+) & connivence. Since our machines can dispense by converting any payment into a per/ml volume, we outcompete the low cost of sachets. For example, if a sachet costs 20 cents, but a BoP customer only has 10 cents, with our system the customer could buy 10 cents worth of shampoo-with our 50% discount they would get 15 cents of shampoo by sachet prices.

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

Grand prize would enable implementing our idea into an area like Indonesia-an ideal location as sachet use is rampant with huge enviro impacts & our cost saving create major social impact.
Smaller prize would restrict our focus to Latin America.

How do you envision scaling up your Idea?

Challenge is securing a FMCG brand dedicated to sustainability to create symbiotic partnership to market & distribute our IoT connected machines & FMCG product offering in our machines. How/why a FMCG might be attracted to us: With optimal dispensing machines & reusable plastic, we can replace many types of sachets with 35ml-140ml reusable containers & create major cost savings for price sensitive BoP customers. The IoT connectivity of machines optimizes delivery & supply chain management.

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.
  • Operating Concept / Startup: You have fulfilled the stages of testing, undertaken a full scale roll-out, and are currently operating this concept/idea as a business.

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

Exposure would help us attract attention of a major FMCG to partner with & spread our project at scale. Also gain us access to experts in plastic engineering who could design an optimal container for key sachet products we aim to replace. Each product will require an optimal plastic type to dispense product well & provide max longevity of plastic. Funds would support R&D of machines/plastic types, marketing, distribution, subsidized initial containers & ability to maximize our sustainability.

Please describe from where your Idea emerged

In an Industrial Ecology class at Harvard, I learned about the impacts of plastic. This attracted me to Algramo, who is dedicated to the sustainable use of plastic & has leveraged this concern into an innovative social enterprise focused on helping the BoP. I have travelled extensively in Asia & seen the impacts of sachets. I have applied academic knowledge, travel experience, Chilean work experiences & worked with Algramo to put forth a potential solution for a global problem: sachet pollution.

Tell us about your work experience

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

Please describe your legal and organizational structure

Algramo is a SpA business (Sociedad por Aciones) this translates to 'Society for Stocks'-to the best of my knowledge very similar to an LLC.

Please describe, in detail, your business model and how you intend to test and iterate this model.

We work with BoP MAPS. We aim to make MAPS more competitive so they can pass on major savings to their customers. We do this with an innovative business model & by integrating technology based solutions into our network of 1,100+ MAPS.

We have been evolving our social licence with our storekeepers to enable us to integrate technology into our MAPS. Our MAPS are connected to about 176,000 customers. Our stores & their customers are ideal for testing, iterating and evolving our business model.

Please explain how your innovation will work within, potentially improve, and provide benefit to the plastics system.

We reduce plastic use by using reusable containers. Our containers cost ~US 5–30 cents. We will offer a deposit on end of life containers equal to ~1/3 of new container cost to increase recycling rates. Our offer will provide 50%+ cost savings on shampoo/other common sachet products. All containers are designed to be easily recycled & economic incentives can be adjusted to maximize reuse and recycle of end of life containers. Recycled containers used for feedstock for new containers/products.

Please describe, in depth, how your solution will reduce the overall environmental footprint of packaging.

See 'Sachet_Costs_Aug 25' each 35ml reusable bottle will eliminate the need for 75 sachets or 300 sachets for a 140ml bottle. End of life bottles will have a deposit value to motivate recycling. All bottles will be designed to be 100% recyclable. Cost saving will motivate BoP consumers to use our products, one 35ml bottle will save US $7.45, a 140ml bottle will save $29.88. Deposits will make 90%+ of our packing recycled, compared to 90%+ of sachets not recycled-many ending up in our oceans.

Please outline how your design, material, and delivery choices will influence price, and how you intend to address the price increase that may result from this solution.

Integrating our vending machines with IoT connectivity & SaaS (grant funded) enables us to gain real time sales data. This helps us coordinate optimal delivery schedules & more fine-tuned just in time inventory management. Providing major cost savings/competitive advantage. These savings can help us slightly subsidize container cost to nudge price sensitive consumers-if needed. See 'EconomicModelSachet_VS_Algramo_Aug30' with container costs we significantly lower product costs-by at least 50%.

Please explain how your solution will impact user behavior, and what design considerations you've included to ensure easy and intuitive interactions with your Idea. 

Our machines are designed to gamify the purchase of essential daily items. Our machines bring modern tech into MAPS that have not technologically evolved in many decades.

We will design our plastics to ease the distribution of products to be more convenient/efficient than sachets (for liquid products). Our machines can dispense smaller % of total bottle size, by calculating ml/unit of payment-this is ideal for volatile BoP incomes & allows us to outcompete even ultra low costs of sachets.

Please describe how you intend to use the prize funding, if selected as a Top Idea. Be specific.

Funds used to attract a values aligned FMCG partner to optimize economies of scale & enter new markets. To do this, funds would optimize machine design, develop SaaS & improve reusable containers for longevity, performance, cost & recyclability.
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Attachments (2)

EconomicModelSachet_VS_Algramo_Aug30.xlsx

Excel modelling showing one of our recyclable 35 ml or 140 ml bottles, refilled 25x, will respectively eliminate the need for 75 or 300 sachets & our containers will create cost savings of US $7.45 and $29.88 over sachet use. These major cost savings (of at least 50% on a per/ml basis) and the sustainability and convenience our distribution system offers create a potentially disruptive solution to upset BoP sachet markets in developing economies.

Aug21 slide deck.pptx

Brief Powerpoint explaining how our IoT connected vending machines create value and increase Algramo's sustainability. Explains some key facts about why Algramo would be a valuable partner for a FMCG brand aiming to reduce their reliance on sachet based sales.

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Photo of Lauren Ito
Team

Hi Algramo Team and Brian Bauer !

As Refinement Phase quickly comes to a close in 12 hours, I want to remind you that the following must be submitted by tonight, August 31st at 11:30 p.m. Pacific Time.

1. Submit the Refinement Questions Form online that was sent again via email yesterday evening! This is mandatory for Top Ideas consideration, so this should be your first priority in the final stretch.

2. A secondary priority, which is optional, is to update your Refinement Phase post. I see you've already significantly updated your concept on the platform.. But please share any additional information, photos, and documentation of your progress throughout this Phase!

Looking forward to reviewing and celebrating the amazing work you've achieved this Refinement Phase!

Photo of Brian Bauer of Algramo
Team

Lauren Ito Hi Lauren, thank you for the updated information.
However, I am a bit confused about the 'Refinement Questions Form online that was sent again via email yesterday evening'. I have already submitted my refinement questions-I did this a couple days ago. If possible, can you confirm that you have received my refinement questions and also please confirm that there are not new additional refinement questions. Thank you very much if this is possible and sorry for any confusion. Cheers, Brian

Photo of Lauren Ito
Team

Brian Bauer thanks for following up! We have received your materials. We appreciate the information you have added to the post to provide more context for the Idea on the platform.

Cheers to a great Refinement Phase and we're excited to have you as a part of our OpenIDEO Community!

Photo of Brian Bauer of Algramo
Team

Thanks a lot for the clarification Lauren. Best of luck to you and the IDEO team in the next stage of the Circular Design Challenge! It has been an amazing experience so far!

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