Algramo: Using Smart Packaging to Catalyze Reuse
Codeveloping smart reusable packaging & IoT connected dispensers with global supply chains to decouple FMCG consumption & packaging waste
Pitch us on your solution
Problem: The world produces over 1 million single-use bottles per minute. These bottles are typically used for minutes and then take hundreds of years to ‘go-away’.
Solution: Connect technology dots–IoT, reusable bottles and RFID-to maximize customer convenience & cost savings. Our solution will make reusable beverage consumption the logical choice by providing maximized convenience with lowest beverage costs. Our solution will: lower beverage prices by 20–50%; will offer insulated high-quality bottles for a cooler, greatly improved drinking experience; enable cashless payments to great decrease time spent paying for the product. This opens up new exciting convenient retail opportunities.
Our solution can greatly reduce the demand for single-use bottles and enable low-resource customers to purchase beverages (and other products), for the fairest lowest possible prices. Doing this increasing disposable incomes and keeping bottles in the economy and out of our oceans–a major win for everyone and our oceans.
Film your elevator pitch
What is the problem you are solving?
Mismanaged single-use plastic bottles are creating a worldwide crisis. Single-use bottles account for 14% of plastic waste (Plastic Oceans 2019). Single-use bottles are especially problematic in LAC as the region often lacks effective waste management systems and many regions have heavy seasonal rains that disperse plastic waste.
The root problem with single-use bottle pollution (and other plastic packaging) is that single-use plastic is inexpensive and convenient. A promising solution that can eliminate the need for ~1/5 of the world’s single-use plastic are innovative reusable packaging distribution systems (RPDS). Algramo exists to help reduce the need for single-use packaging by offering inclusive smart 21st century consumption that maximizes convenience while minimizing product costs.
Reusable beverage distribution systems can offer excellent convenience and cost-savings-the most critical variables to motivate consumers to embrace reusable packaging opportunities. We see reusable beverage distribution systems as an ideal segue for Algramo to catalyze consumer behaviour change to embrace reusable packaging systems. This makes beverages an excellent initial product for Algramo’s new market entries. Once we have created demand and awareness of Algramo’s RPDS, with beverages, we will be well positioned to motivate consumers to embrace RPDS for a wider range of products.
Who are you serving?
Algramo exists to help catalyze reusable packaging systems. Our path to galvanizing consumer behaviour change is business model innovation and technology solutions that enable global brands to replace ~20% of single-use packaging with reusable packaging. Our research shows 30-40% cost savings, over business as usual (BAU) prices, are required to incentivize mainstream consumers to embrace RPDS. Consumer acceptance of reusable packaging is also highly correlated with convenience. Algramo applies technology-based solutions, circular design and human centred design principles to maximize convenience for our brands and their customers.
Our distribution system addresses customer needs by ensuring our technology provides safe, secure and convenient product distribution. With Unilever’s Omo and Quix cleaning products we are currently reducing product costs by ~35-40% below BAU supermarket prices.
We do this while meeting Unilever’s stringent global quality control regulations. We are proud that the cost-savings and convenience created by our reusable packaging distribution systems (RPDS) are designed to be especially compelling to lower resource customers in developing markets (due to price sensitivity), while also being attractive to upper-income customers in developed markets-everyone embraces lowest prices with maximized convenience.
What is your solution?
Our solution is to identify the fastest moving consumer goods products that are the safest and simplest to distribute via IoT-Connected-Vending-Machines (ICVM) that dispense into smart reusable packaging. Since May 2019, we have been selling Unilever laundry detergent (Omo) and dish soap (Quix).
We will be selling Nestle products in Q2 2020. Current distribution points are electric tricycles with app-based home refill. We will have Algramo’s first cashless/zero waste store opened in Q2 2020. The smart dispensers in Algramo’s store, serve as a showcase/demonstration and will integrate into large corporate retailers, convenience stores, even apartment buildings. The store also serves as a logistic hub for our fleet of electric tricycles. Major retailer interested in piloting our IoT-connected vending machines (ICVM).
An innovative technology solution Algramo invented is packaging/bottle as a wallet (PaaW/BaaW). PaaW uses RFID integrated into packaging to turn packaging into a digital payment system-much like a metro card enables cashless entry into metro systems, our PaaW enables cashless purchasing of FMCG products. This happens when our PaaW technology communicates with Algramo’s app-based payment platform and our ICVM. Our payment platform enables customers to transfer funds onto their account via debit, credit card, cash paid to Algramo employees and a variety of inclusive fintech solutions to maximize the socio-economic inclusiveness of our distribution system.
PaaW also enables brands to reward sustainable consumption with future financial incentives that solidify brand loyalty and gamify sustainability. Currently with Unilever, customers pay 2,600 peso/liter for Omo laundry detergent. For each liter purchased, Unilever rewards the customer's packaging with 300 pesos-equaling a future 11.5% discount on their next litre of Omo. This 11.5% future discount is in addition to our Omo detergent already being 30% below the regular prices at supermarkets.
Another benefit of our distribution system is low-resource customers can buy a half litre of detergent and pay the exact same per-unit-price, as if they bought 3 litres. Meaning customers with limited incomes are offered an opportunity to purchase smaller sized portions for the lowest possible bulk prices. Our convenient distribution system can greatly outcompete sachets and other small format packaging on the per unit cost of products. In addition to offering economically inclusive consumption, we also enable low-resource customers to decouple product consumption from packaging waste. At scale, our solution can significantly reduce municipalities waste management costs-by greatly reducing the need for recycling and landfilling FMCG packaging.
Select only the most relevant.
Where our solution team is headquartered or located:Santiago, Chile
Our solution's stage of development:Growth
Describe what makes your solution innovative.
Algramo’s solution is a symbiotic mix of connecting existing technology dots to create new innovative distribution systems that can be used to catalyze reusable packaging systems on a global scale. Examples of technology dots that Algramo is connecting to enable business model innovation is integrating RFID technology into reusable packaging, so that our co-developed and co-branded packaging can communicate with our payment platform and our IoT-connected vending machines (ICVM) to enable customers to purchase products without cash.
Currently our innovative cashless distribution system is enabling Algramo to sell co-branded Algramo-Unilever Omo laundry detergent for 40% less than BAU supermarket prices. We also enable low-resource customers to buy smaller quantities of products and pay the same per unit cost as buying large format packaging. This means we can outcompete small format single-use packaging. It’s important to note that our payment system and platform will work across brands so one digital wallet will enable a customer to purchase dozens of product types, from many different brands, while paying the lowest price with maximized convenience.
The benefits of using reusable packaging to enable customers to buy in smaller sized portions, for the lowest possible prices are especially impactful in LAC’s BoP where low-resource families often pay 30-40% more, on a per-unit-basis, for purchasing in smaller sizes. We also enable municipalities to reduce recycling and waste management costs-by offsetting single-use packaging with reusable packaging. This keeps packaging in the economy and out of our oceans.
Why do you expect your solution to address the problem?
Our TOC postulates if we provide the lowest possible prices, with the maximized convenience we will help foster wide-scale adoption of reusable packaging. This TOC is validated by Algramo’s 6+ years experience, where we use a lean supply chain and reusable packaging to provide lowest cost, highest quality products to motivate consumers to use reusable packaging. This system has seen packaging-reuse rates surge from <10% to >80% today. Testimony to its success is Algramo now has a network of 2,000 convenience stores-that reach ~350k customers. Algramo’s reuse success opened the doors for Algramo to work with global brands to co-develop reusable packaging solutions.
With our new smart-packaging and the support of global brand partners, we are confident we can further increase our reuse rates and the value capture reusable packaging and a lean/smart supply chain creates for our brands/end-customers.
Our reusable beverage distribution system maximizes convenience by 1. enabling customers to pay the lowest possible costs (projecting 30-50% cost reductions); 2. reduces payment process by 300-600% (cashless payments-eliminates waiting in line); 3. drinking cold beverages for hours instead of minutes (insulated bottles). For beverage companies, we offer an opportunity to shift consumption away from single-use bottles and non-concentrate beverages, to concentrate based beverages and reusable packaging. Concentrate reduces weight of soda by ~82%. Lastly, our reusable beverage distribution system will open up new distribution points for our brands-increasing sales for brands and convenience for customers. Possible new distribution points include high-profile beaches, metros, malls, zero-waste sporting or music events.
Select the key characteristics of the population your solution serves
If you selected Other, please explain here
Business model designed to appeal to BoP & high income customers on a global scale.
In which countries do you currently operate?
In which countries will you be operating within the next year?
How many people are you currently serving with your solution? How many will you be serving in one year? How about in five years?
Algramo’s initial distribution selling Algramo-branded products (Algramo 1.0), now reaches ~2,000 FONS and ~350,000 end customers. Our new smart-packaging system (Algramo 2.0) had an average of 3,000+ people/month sign up for home refill. However, with only 1 tricycle operational from May 15th to December 15, 2019, Algramo was able to service a very limited geography.
Algramo’s tricycle program is now moving from early-pilot stage to expanded pilot, as of January 15th, there are 8 tricycles operational. Unilever has provided funding for 22 more tricycles to be operational in second half of 2020. With Nestle having confirmed tricycle investment and other brands interested in tricycles, we project having ~45+ tricycles within a year. If each tricycle reaches 500 customers per month, our fleet will have potential to reach 22,500 customers per month or 270,000/year, by January of 2021.
We are currently starting a pilot for retail dispensers (the same dispensor technology as the tricycle dispensers), with one of the largest retailers in the Americas. Algramo has started to scale into the US-where Algramo-Unilever dispensers will be piloted into low-income, high-density apartments and major US retailers. We are piloting our dispensers into apartment buildings in Santiago-starting in March 2020.
It’s difficult to pinpoint the number serviced in 1 and 5 years. However, conservatively, in 1-year Algramo will have the capacity to serve 2 million-optimistically 4 million customers per year. In five years, we could service between 50 million-500 million refills/year depending on consumer adoption and how effectively we fundraise and scale into new markets.
How do you measure your solution’s positive impact? If available, what measurable impact have you had in the last three years?
Algramo is dedicated to maximizing its environmental, social and economic impacts. However, just this year we started to more formally quantify our impacts. Since 2013, key impact metrics we tracked, with varying degrees of detail, are number of stores serviced and by extension families/customers reached. Approximate cost savings we create for the low-resource families in our distribution network. Environmentally, we track avoided single-use plastic due to our reusable packaging.
For 2019, Algramo sold 1,527,419 liters of cleaning products in reusable packaging. Our reusable packaging offset the need for 37.49 metric tons of single-use plastic. Over 95% of Algramo’s sales occur in low-resource communities with limited and over-stretched waste management systems. This means a high percentage of the plastic we offset is likely to escape into the environment and by virtue of Chile typically being <180 km wide and having a coastline 4,270 km, it's probable much of this packaging waste would find its way to the Pacific.
Socially, we are proud to support our network of family-owned-neighbourhood-stores (FONS) and that ~70% of the stores in our network are led or owned by women. On average our reusable packaging and lean supply chain reduce the cost of our products by ~30%. By saving low-resource families on the cost of life’s essential’s we increase disposable incomes. Avoiding the economic costs of landfilling or recycling, our reusable packaging can save significant waste management costs for municipalities. By decoupling packaging waste from consumption we create major economic savings for our brand partners/society.
What are your goals within the next year and within the next five years?
Algramo worked diligently in 2019 to close its series A investment. We are thrilled to have to values aligned impact investors, Closed Loop Partners (CLP) and Sky Ocean Ventures, who also bring significant non-financial benefits that will help Algramo scale its business model and impact into the world.
We are currently focused on implementing the promises that we made to our investors. Specifically, to expand our team and then rapidly develop and refine our technology and platform in Santiago, Chile. As part of securing investment with CLP we agreed to let them lead the expansion of Algramo USA-starting in mid 2020. The primary reason for entering the US is CLP is a robust well connected implementation partner.
Our expansion strategy is working with brands and values aligned stakeholders (hopefully IDB), to identify the most promising new markets for Algramo’s reusable packaging distribution system. Beyond this, we will further prioritize markets where we find capable robust implementation partners. We have been speaking with a Dutch NGO, Enviu, who are potential implementation partners for Algramo Indonesia and India.
The focus for this proposal is a reusable beverage distribution system. We see using existing supply chains, soda dispensers and integrating these with our PaaW technology and payment platform as easy/light to scale. Beverages can be a great first market entry. Once Algramo develops a name and starts to drive reuse with beverages, they will be well positioned to introduce a wider range of products with their FMCG partners.
What are the barriers that currently exist for you to accomplish your goals for the next year and for the next five years?
Key barriers are motivating brands who typically work in a competitive manner to work in a pre-competitive manner. To help do this we have NGOs like World Economic Forum, WWF (No Plastics In Nature) and WRAP advising us on how to foster pre-competitiveness. A key reason these NGOs support Algramo is they are keen to promote shifts in consumption behaviour.
Another key challenge is adoption chain risk. The brand partners using our distribution system will need to adopt to our innovation sufficiently so that the full value proposition of our distribution system is clearly understood by customers. There is also co-innovation risk in that we are pulling together diverse retailers, technology providers, governments and investors and all these stakeholders need to work together optimally and efficiently to optimize the value creation of Algramo and their brand partners distribution system.
Many markets have complex regulations for refill. This is often due to refill regulations being from twentieth century regulatory processes that were created when much of the technology solutions that make refill safer and more secure did not exist. Excessive antiquated legislation can stifle refill opportunities by making them overly complex and expensive. Similarly, excessively litigious legal systems can stifle refill opportunities. Working with stakeholders to drive smart twenty-first century regulatory and legal frameworks can help catalyze reusable packaging opportunities. Intelligent regulatory and legal frameworks are critical to enabling refill to be done for the lowest prices and low prices are a key driver of consumer adoption.
How are you planning to overcome these barriers?
1. Work with circular economy and sustainability specialists within brands that understand the importance of pre-competitive action when trying to shift and create new consumption habits. 2. Work with investors, potential media partners like Sky and World Economic Forum and other NGOs to help us advise brands on the importance of pre-competitive solutions for complex market failures (plastic pollution) that require systems level challenges. We are also creating a high-level advisory board of global experts, mainly from c-suite of global brands or technology companies to support strategy development.
2. Co-innovation and adoption change risks (CIACR)
Use advisory board and NGOs to help strategize mitigation strategies for CIACR. Manage challenges and opportunities from a systems thinking perspective to reduce weaknesses of stakeholders in our distribution system. Pre-competitive behaviour can encourage stakeholders to support each other and create win-win strategies that reduce CIACR and optimize the strength of the platform and distribution system.
3. Regulatory and Legal Barriers
Leverage the knowledge and expertise of our brand partners to deeply understand regulatory and legal risks for potential markets. Only sell product types that are simple and inexpensive to distribute-more regulatory complex markets will have less product offerings. As we prove safe secure distribution with simpler, less regulated products and better understand how to leverage technology to increase traceability and security of refill, we will be able to move into more challenging refill products and markets.
Please select one.
If you selected “My solution is already being implemented in Latin America and the Caribbean,” please provide an overview of your current activities in the region
Algramo started in low-resource communities of Santiago de Chile in 2013. Algramo was created to solve what we call the poverty tax-which occurs when low-resource families lack the income to buy in larger sized packaging. This consumption typically occurs in FONS and the per-unit cost of life’s essentials is about 30-40% higher. Beyond inefficient supply chains for low-resource communities, small format packaging drives up product cost, this packaging is also much more likely to escape into the environment. Algramo solves this socioeconomic and environmental challenge with its reusable packaging distribution system. Today in Chile, Algramo reaches ~2,000 FONS and about 350,000 end customers.
Beyond Chile, Algramo was operational in Barranquilla Colombia for about a year in 2015-16. However, at this time Algramo lacked the financial and human resources to operate both Algramo Chile and Colombia. This forced Algramo to close Algramo Colombia.
We see Algramo’s partnerships with global brands (Algramo 2.0), as a much more scalable and financially sustainable business model to soon scale into new markets. With two high-profile NGOs we are currently finalists for a P4G proposal that would support Algramo scaling into Mexico in 2021. With the right implementation partners, Colombia, Peru, Argentina and Brazil could all be attractive future expansion markets. Three major FMCGs are keen to see Algramo's distribution system in Brazil.
What type of organization is your solution team?Other e.g. part of a larger organization (please explain below)
If you selected Other for the organization question, please explain here.
We are a for profit social enterprise and we have been a B Corp for over 3 years.
How many people work on your solution team?
Full time 29
Part time 3
Student internships 6
And 5 contractors currently transforming our webapp into a cellular app for Play Store and Apple Store. Our webapp will be made into a cell based app for Google Play by January 30, 2020 and for Apple by February 14, 2020.
For how many years have you been working on your solution?
Why are you and your team best placed to deliver this solution?
José Manuel Moller CEO & Founder
BA Economics and Business Administration and a Master of Advanced Design.
Ashoka and TED Fellow. World Economic Forum 2015 Global Shaper and 2019 Young Global Leader. Lead Algramo from a concept to a high-profile social enterprise that is transforming how people consume life’s essentials. Under José’s leadership, Algramo has grown its network of stores from 1 to 2,000.
Nicolas Gunther CTO
Cofounder and CTO of Neuropsyx Technologies, Systems Engineer Manager at Deloitte and R&D Head Architect for Telefónica Chile
Nicolas leads Algramo’s technology development, including IoT, AI, Machine Learning, platform development and all other technology development. He has over 10 years’ experience leading a wide range of technology projects. Nicolas enjoys support from Algramo’s advisors at MIT and Cisco.
Pedro Alamos General Manager BSC Civil Engineering
Pedro brings over 15 years of international supply chain management and logistics experience. Including almost 7 years of experience at P&G where he was responsible for 3 high-profile P&G brands across Latin America.
Brian Bauer Circular Economy & Alliances
Holds a Master’s in Sustainability from Harvard. He applies Circular Economy principles into Algramo’s technology development and business model. He represents Algramo at many Circular Economy conferences and accelerators which provides him a deep network of experts across FMCG brands, Packaging Industry, NGOs and governments.
Francisco Diaz COO
Holds a BSC in Commercial Engineering which enables him to provide valuable strategic planning, supply chain optimization and project management expertise.
With what organizations are you currently partnering, if any? How are you working with them?
Deloitte D2i Fellowship provides Algramo with significant pro-bono consulting aimed at increasing our impact, scalability and market knowledge.
World Economic Forum-The WEF's Future of Consumption Program is interested in helping promote Algramo's inclusive reusable packaging distribution system.
UN Environment Invited Algramo to be founding members of the United Nations Green Technology Initiative-invites Algramo to high profile UN events.
WWF No Plastic In Nature Program has had early stage discussions on supporting Algramo.
MIT Solve Awarded Algramo as a 2019 Solver in its Circular Economy Challenge. We were one of four Solvers from 2019 cohort to win $50,000 to implement AI into our operations.
Cisco Has offered a generous innovation grant to Algramo to help integrate Cisco technology into Algramo’s platform and distribution system. They are also offering us pro-bono AI, Machine Learning and IoT consultants.
Harvard Center for the Environment has invited Algramo to several of its conferences where Algramo is featured as an effective market based upstream solution to plastic waste.
Algramo won National Geographic's Ocean Plastic Challenge in the Circular Economy Track. Possibilities for Nat Geo media support.
What is your business model?
Algramo 1.0, sells Algramo branded products in reusable containers, via 2,000 FONS. This distribution system reaches 350,000 end-customers who have shifted consumption to reuse. We have increased our reuse rates from <10%, to over 80%. Coke Chile’s reuse rates are ~40%.
In 2018, Algramo’s success with reusable packaging attracted the attention of global brands keen to improve the circularity and sustainability of their packaging. By mid 2018, Algramo started its pioneering relationship with Unilever. By Q2 2019, Algramo launched Algramo-Unilever cobranded liquid laundry detergent and dish soap pilot. In mid 2019, we started working on a pilot with Nestle to sell Purina pet food in reusable packaging. We are currently in discussions with most major FMCG brands, including beverage companies to workout win-win pilot projects to enable brands to decouple single-use packaging waste from product consumption.
Our business model is to have brands provide the CAPEX on hardware (tricycles and dispensers-ICVM), while Algramo funds the software that runs the distribution systems. Algramo creates new innovative distribution points and can become an exciting distributer and retailer in one. This, coupled with savings from reusable packaging, enable us to sell our products for a significant discount (currently 40% below BAU with Unilever). Algramo earns a margin on every refill it distributes. Margins can cover operational expenses, but our most significant future revenue will come as we capture massive volumes of real-time data and develop monetization strategies for our data. Also opportunities to use data for EPR and real-time sustainability reporting.
What is your path to financial sustainability?
Algramo 1.0 (the sale of Algramo branded products to family owned neighbourhood stores (FONS), reached breakeven in Q1 2018.
Algramo 2.0 (scaling Algramo's reusable packaging distribution system into FMCG supply chains), is being funded by equity investment. In December of 2019, we closed a sizeable Series A investment, led by Closed Loop Ventures, with additional funds coming from Sky Ocean Ventures and we are in the last stage of investment assessment by MIT Solve’s Innovation Fund-expected confirmation in February. If our Solve investment works out, it is a smaller investment projected to be 100-200k. We project starting our Series B raise in Q4 2020. Additionally, we hope to win innovation grants to help catalyze investment capital for our Series B and to fund higher risk/higher impact technology development.
Our current investors see a clear path to financial sustainability via capturing margins on the products we sell for our brand partners. The digital nature of our distribution system makes our business model and its network of global brand partners light and scalable. Ideal for a franchise or joint venture scaling structure. In addition to the margins on products sold, our real-time data will exponentially grow in size and value as we scale up operations. We see the margins as the means to cover operational expenses and provide modest profits, but the data capture will be the primary driver to increase Algramo’s profitability and value creation.
Why are you applying to the Rethink Plastics Challenge?
One of our biggest challenges is trying to shift consumption habits from single-use to reuse. This complex cultural change requires support from diverse and powerful networks of aligned stakeholders. Another form of support IDB could provide is sending a signal to our Series B investors that Algramo offers a practical investible market-based solution that can lower the cost of life’s essentials, while decoupling packaging waste from fast moving product consumption.
IDB can also help connect us with municipalities and local governments interested in using our distribution system to reduce demands on their recycling and waste management infrastructure. These government connections could be used to help physically integrate Algramo into new markets, as well as to enable us to establish connections with government partners to help create policy and regulatory frameworks that promote, instead of inhibit reusable packaging systems.
If IBD has R&D facilities for technology based solutions they could be used to provide Algramo with technology related support to optimize technology in our distribution system and/or platform. We would be especially interested in understanding how to effectively integrate inclusive fintech solutions into our payment platform, so we can maximize the financial inclusiveness of our cashless distribution system. IDB could also support helping to structure an innovative private public partnership between a municipality-Algramo-and a FMCG brand, to validate the cost effectiveness and the social/environmental benefits reusable packaging can create for meeting Extended Producer Responsibility schemes. This would be especially interesting for beverages like water, juice and soda.
What types of connections and partnerships would be most catalytic for your solution?
With what organizations would you like to partner, and how would you like to partner with them?
Use IDB Innovation Lab to pilot an Algramo project to get life’s essentials to highly marginalized people. Use IDB Innovation Lab to help add inclusive fintech solutions into Algramo’s distribution system and payment platform. We are also interested in being connected to government partners of the IDB who are interested in using refill credits as a low-cost digitally verified EPR credit.
We have been speaking with a high-profile philanthropic family foundation and they are keen to support smart vending machines that can sell nutritious foods, for the lowest possible costs. In the second half of 2020 we are keen to collaborate with this family foundation. This foundation has a focus on getting low-cost high nutrition food to BoP families. If IDB knows of governments or brands (nutritious food providers) who would be interested in this opportunity, we are keen to explore the opportunity.
Specific to this proposal, we would highly value any introductions to industry, government or technology providers who could help Algramo scale its reusable beverage distribution system into LAC markets. From the private sector, we are currently speaking with some of the world's largest beverage producers about reusable beverage distribution systems that connect with our packaging as a wallet (PaaW) payment platform. Any support IDB could bring to support the technology development and piloting of our reusable beverage distribution system would be highly valued.
Brian Bauer Circular Economy & Alliances, Algramo