For years, Reduce. Reuse. Recycle. has been the waste reduction mantra guiding innovations around packaging sustainability. As a first step, reduce was the low-hanging fruit, as CPGs learned that small reductions in packaging material can amount to big savings. Beginning a decade ago, recycle moved to the forefront of the sustainability debate.
In contrast, innovation around reuse has been limited, mostly focused around reusable totes and pallets for transport, or pouched refills for household cleaning products in rigid containers. But even the latter was a hard sell to consumers, who disliked the messy and time-consuming task of refilling bottles.
However, as the demand for a circular economy continues to ramp up, that’s quickly changing. In the last several years, a large array of unique and creative reusable packaging systems have hit the market, many of them supported by sophisticated supply chains and digital technology. One of the most publicized examples is the Loop platform, available now online and soon at retail, that relies on durable, reusable packaging, returned by the consumer after use for cleaning and refilling.
According to “Reuse – Rethinking Packaging,” a new publication from the Ellen MacArthur Foundation as part of the New Plastics Economy initiative, “Globally, replacing just 20% of today’s single-use packaging with reusable alternatives offers an opportunity worth at least $10 billion.” It adds, “Reusable packaging is a critical part of the solution to eliminate plastic pollution.”
According to the foundation, there are four reuse models: refill at home (e.g., SodaStream), return from home (e.g., Loop), refill on the go (e.g., Coca-Cola Drinkfinity), and return on the go (e.g., returnable beverage bottles).
Also falling under the “refill on the go” model is Algramõ 2.0, a unique pilot in Santiago, Chile, seven years in the making. While Algramõ was originally launched to eliminate the “poverty tax” on small packages for lower-income consumers, it is proving equally beneficial in reducing single-use packaging and its escape into the environment—especially in low-resource areas with poor waste management systems.
The first Algramõ model, Algramõ 1.0, involved the introduction of vending machine refill stations in family-owned neighborhood stores, or FONS. With Algramõ 2.0, the company has taken the technology to the next level, incorporating Internet of Things (IoT) and RFID technology, and electric tricycles to transform “packaging into a wallet” and bring refill stations to the consumer’s doorstep. For this pilot, Algramõ has partnered with high-profile CPGs Unilever and Nestlé Purina to make their household cleaning products and pet food, respectively, more affordable and more sustainable.
Vending reduces product cost
The inspiration for Algramõ came in 2011, when Chilean student José Manuel Moller moved to the outskirts of Santiago. It was there he saw firsthand the nearly prohibitive cost of food products for lower-income consumers. Because they weren’t always able to buy products in bulk, particularly staples, consumers were forced to purchase smaller packages, which by weight can cost as much as 30% to 50% more than the same product in a larger container. Says Moller, 70% percent of the population in Chile and 85% of the population across Latin America are affected by this poverty tax.
His response was to found Algramõ, which translates to “by the gram,” a company that supplies small stores in impoverished neighborhoods with vending machines that offer a range of household cleaning and food products. Consumers dispense product into reusable containers and pay by weight—thereby eliminating the cost of packaging and providing flexibility in the amount of product purchased.
The company’s first vending machine, launched in 2013, dispensed powdered laundry detergent. “Ultimately, it didn’t work out, as the salts in the detergent caused the powder to lump up and not properly dispense,” says Brian Bauer, Circular Economy & Alliances at Algramõ. “From powdered detergent, Algramõ pivoted into dry foods, like rice, black beans, donkey beans, and garbanzo beans.”
From the beginning, Algramõ has offered its own private-label products, now numbering 70 SKUs, created to be high-value but profitable. Adds Bauer, “Additionally, to make use of white space and maximize product offerings to our FONS, Algramõ sells 65 other CPG products. However, many of these products are sold in business-as-usual, non-reusable packaging.” Top-selling products include liquid laundry detergent, floor cleaner, dish soap, fabric softener, pet food, pasta, beans, rice, lentils, garbanzo beans, dried fruit, toilet paper, and paper towels.
Algramõ 1.0 sells to 2,000 FONS in the Santiago area, reaching about 325,000 to 350,000 consumers. Shares Bauer, in 2019, the amount of plastic saved due to consumers refilling product in reusable containers was 37,067 kg; the amount of plastic saved due to bottles returned to the stores was 32,628 kg.
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Enter Algramõ 2.0
The Algramõ 2.0 pilot, which launched in May 2019, propels Algramõ 1.0 light-years forward. The genesis of Algramõ 2.0 was a proposition from Unilever that took place in mid-2018, when the former CEO of the global CPG, Hans Evans, approached Algramõ to suggest a partnership whereby the two would sell co-branded products in reusable packaging.
Explains Rafael Gubelin, Sustainability and Maintenance Manager at Unilever, since it launched its Sustainable Living Plan in 2010, Unilever has been moving toward a circular economy. This includes not only reducing the amount of plastic used, but also designing its packaging so that it can be reused, recycled, or composted—“meaning less plastic in our shared environment,” he says. “The Algramõ refill platform can help us reach those goals because consumers reuse their bottles, throwing away less plastic into the environment.”
The pilot brings the refill machines to the consumer’s doorstep via electric tricycles and transforms the packaging into a virtual wallet through the use of RFID. For the initial tests, Unilever is offering its Omo laundry products and Quix dishwashing liquid, which Gubelin says are two of the company’s more recognized brands in Chile. “By starting with them, we can reach more consumers and then contribute more to a circular economy model,” he says.
The containers provided for reuse are the standard packages used by the brands: a 3-L high-density polyethylene bottle for Omo and a 1.5-L HDPE bottle for Quix. Says Bauer, “Many of the packaging experts with our FMCG [fast-moving consumer goods] partners really like and appreciate the idea of piloting with business-as-usual packaging. If a brand was required to make customized packaging for an early-stage pilot, it would add major financial and time costs. The only customization is an Algramõ-FMCG co-branded label and the RFID technology that sticks onto the packaging, below the label.”
For Nestlé Purina’s dog and cat food, Algramõ had to custom-design a package, as Purina does not currently offer a format in the 15-kg size that can be reused. The result is a rigid plastic container similar to those used for industrial paint.
Once Algramõ moves from pilot to scale up, the intention is to co-develop new packaging structures with its CPG partners that are designed for maximum reuse/refills. “This packaging would use higher-quality resins and likely be slightly thicker,” explains Bauer. “We have had early-stage discussions with some of the world’s largest resin makers and packaging producers, and both are keen to explore this opportunity. Additionally, several high-profile global NGOs are keen to promote our efforts to create a new type of packaging designed for maximum reuse. By using reusable packaging that can be refilled 100-plus times, we can invest significantly more into the packaging so it has maximized longevity and optimized user experience.”
This strategy is similar to the one recently pioneered on a large scale by Loop. For the Loop platform, CPGs have developed more durable and functional packaging made from fully-recyclable materials that are said to be able to withstand at least 100 uses. Unilever’s products offered on Loop include innovations in both packaging and product and include a refillable stainless-steel deodorant package and new toothpaste tablets in a jar.
Says Unilever’s Gubelin, “We are always investigating ways to make all our processes and packaging more efficient. This applies to all our projects.”
RFID links consumer, package
One of the primary enablers of the Algramõ 2.0 reusable system is the RFID tag applied to the container. The purpose of the tag is to link the package to the consumer’s profile in the Algramõ smartphone app [there are more mobile phones in Chile than there are citizens, even among this lower-income demographic]. Using the app, the consumer can schedule a delivery, as well as specify the amount of product they would like to purchase. “When the product dispensation is done, the price is discounted out of the balance of the customer’s account,” explains Cristobal Undurraga, Marketing Analyst at Algramõ. “Also, each dispensation is translated into the amount of plastic the user is avoiding and into a discount applied to the next purchase.” This discount amounts to 11.5% per liter. Additionally, reusing the same package results in 30% less cost versus a product in non-returnable packaging.
Unduragga adds that in contrast to a standard package, the RFID-enabled container acts as an incentive to consumers to take care of the package and effectively reuse it, “changing the way they relate to packaging and making the concept of single-use packaging obsolete.”
Upon their first purchase of a product, the consumer pays for both the product (detergent, petfood, etc.) and the smart package, specifically the container and the digital wallet, or RFID tag, which costs approximately 35 cents. Thereafter, they only pay for the product. Says Bauer, this decouples the packaging waste from consumption. “Each time the customer refills their smart packaging, there is a digitally verified refill,” he explains. “These digital refills can be gamified at the customer, brand, city, country, or global level.”
He adds that in the future, Algramõ would like to explore how digitally verified refills can be used to provide brands with low-cost opportunities to fulfill EPR [Extended Producer Responsibility] requirements. Another simpler use is enabling brands to validate the number of refills their Algramõ relationship has created.
The RFID tags used by Algramõ employ industry-leading technology and are custom-designed to the specific application—for example, RFID tags optimized to work well with liquids. Bauer adds that Algramõ has not seen a single chip malfunction since the pilot began and, based on industry metrics, believes the tags will last up to three years. “As we develop more robust, longer-life packaging, we could upgrade our RFID to have a longer projected lifespan. Also, in the future when we develop new customized and more robust packaging, we can have inlays so the RFID is flush with the packaging and better protected.”
Doorstep delivery via mobile refill machine
The other very unique component of Algramõ 2.0 is the method of delivery: electric tricycles carrying refill machines. At the outset of the pilot, there was one mobile refill station dispensing Unilever products. In January 2020, Unilever funded an additional seven. At presstime, Algramõ was scheduled to have a Nestlé tricycle begin operation in June dispensing Purina dog and cat food.
According to Undurraga, the mobile refill stations that bring product directly to consumers are what distinguishes Algramõ from other refill models. “Not having to exchange packaging or store, transport, clean, refill, and re-transport packaging creates huge economic and environmental savings,” he says.
Each refill machine is customized to meet the supply chain and regulatory requirements of the CPG partner. These requirements vary by product, Bauer says, and determine whether a refill machine can hold one or more products. “One example of a multi-product dispenser we’ve discussed with one of our brand partners is for homecare cleaning products,” he says. “The brand has a cleaning product that comes in eight different scents. We discussed building one machine that pumps the main ingredient and then eight scents. They even discussed how this technology could be used to mix some of the scents to open up custom scent options for the customer—much like Coke’s Freestyle vending machines. Note, this opportunity is currently just a potential idea, but it showcases our flexibility and ability to create innovative solutions for our brands and their end customers.”
Adding another level of connectedness to the delivery system, IoT technology enables Algramõ to monitor the refill machines, without regard to distance. Any dispenser connected to the Internet—including those installed within Algramõ’s FONS network—can be programmed to collect real-time sales data, which enables the company to precisely manage product levels.
It is also through IoT and an RFID reader on each machine that each package is connected with the consumer’s account, including their address for delivery. Says Undurraga, the technology plays a key role in improving the user experience, providing a much more personalized service and increasing the value of the package.
In addition to having the electric tricycles go directly to consumers’ homes, following a set delivery route, Algramõ is also experimenting with positioning them in strategic, high-traffic areas. However, Bauer relates, the company’s digital marketing team supports the tricycles, as they enter new geographies or offer new products.
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Algramõ 2.0 coming soon to the U.S.
As of April 20, 2020, Algramõ reports that there were a total of 6,131 sales via Algramõ 2.0. Additionally, a website offering real-time metrics on the impact of Unilever’s co-branded reusable packaging shows that, as of presstime, it had saved 1,139.1 kg of plastic, or the equivalent of 227,808 plastic bags or 15,384 single-use plastic packages, and 218,079 liters of water.
“We have learned a lot with this pilot in different dimensions,” says Gubelin. “First, working with an entrepreneur has given us a different vision than we normally have, being a multinational company, so it challenged us to think differently. Also, we have seen that having a purpose aligned with a project helped us to add more energy than usual, helping us to speed up each stage of the project. This project is evidence that we can do things differently; there are no limits to innovation.”
According to Undurraga, the next step for Algramõ is to further develop and optimize its distribution system and software to enable a rapid global expansion into new markets. One of those markets is the U.S. Currently, Algramo is working with sustainable investment platform Closed Loop Partners to set up Algramõ USA in New York City. Depending on COVID-19, Algramõ plans to launch there in Q3-2020.
Says Closed Loop Partners Executive Director Danielle Joseph, “Reusable models like Algramõ’s are an important and necessary step in the reduction of single-use plastic packaging. Algramõ is a leading innovator showcasing a circular solution to a global waste issue by ensuring that valuable materials are kept in play for multiple uses.”
The next market into which Algramõ plans to expand is Amsterdam. Other countries expressing interest in the platform include the EU, Indonesia, and India.