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.