Around the world, next generation product refill and dispensing systems are gaining popularity among consumers due to their financial benefits, convenience in product consumption and the circular use of packaging. The visionary entrepreneurs behind this commercialization model have learned how to design powerful operations and involve CPGs, retailers, packaging converters, recycling organizations, the end-consumer, and, in general, all parties within the value chain.
In Latin America, a pioneering and leading company in this sort of refill and reuse sector is the Chilean Algramõ. Founded in 2013 by the visionary José Manuel Moller, the firm offers own branded products in bulk and, more recently, also products along with circular economy leading brands such as Nestlé and Unilever, following the principle of “paying a bulk price for a small quantity”. This concept gives customers the ability to follow one purchase with subsequent on that reuses the original container.
The original Algramõ´s initiative has evolved and today, in a more widespread and technological version of its operation, the company has become a regional and world-wide benchmark of the advancement towards the circular economy. The company has received numerous awards and recognitions, is a certified B Corporation for its core purpose targeting solutions to social and environmental issues, and is rated eleventh in the Best Companies for the World honoree list published by B Corp.
Business Development Director, Amin Guenim, explains Algramõ´s evolving process and 2021 work plan, in this recent conversation with Mundo PMMI, where he makes important announcements regarding the strategies they are implementing for their transcontinental expansion, and about the integration of innovative technologies such as the Internet of Things (IoT) to enhance efficiency and boost benefits for consumers and the planet’s environmental health.
Mundo PMMI: Which have been the key factors in making Algramõ a leader of circular economy in America?
Amin Guenim: There is not a factor which may by itself explain all our growth, but an extraordinarily strong one is our commitment to accountability for single-use plastic contamination. We, as a platform, work alongside brands trying to reduce the social problem of poverty, by flexibly selling in bulk, at a constant per kilo price, without the surcharge that a small container imposes, while minimizing the environmental costs by reusing instead of recycling. When you eliminate the cost of a cap, a label, and a bottle, the packaging becomes economically more efficient, which has been a key factor in Latin America, as well as for all of the brands with which we have developed projects around the world.
Mundo PMMI: Can it be said that dispensing and filling systems will be strong driving forces of the circular economy shortly?
Amin Guenim: Definitely, reducing the number of new containers and finding a second use for things we purchase are the main engines of the circular economy, particularly for mass consumption, eliminating single-use plastics. Under this model, reutilization is the most sustainable path, but it needs to be accompanied by incentives that allow for a change of mindset and the education of consumers. These are incentives that we at Algramõ are working on: to reward for the reutilization of packaging, assigning credits for future purchases and making clear to the consumers what their contribution has been each time they refill, and what is their cumulative impact of avoiding the creation of a certain amount of new plastic.
Mundo PMMI: Algramõ has expanded its model with mobile solutions such as electric tricycles that deliver the refill of products to homes. What has that experience been like?
Amin Guenim: In this pandemic, our mobility system model was empowered. We initially believed that quarantines and confinement would undermine our sales, but through the days we realized that, on the contrary, a new opportunity had arisen. Now that people could not leave their houses, we were able to provide them with basic products, something that was highly valued by our customers. On the other hand, when users own the containers that get refilled by home delivery, all external contact that a product suffers before entering a household gets eliminated, in contrast to supermarkets where packaging may be handled by many different individuals. We have been using this home delivery system for a year now. We started with a tricycle, by the third month there were three, by the fifth ten, and today we are escalating operations jointly with Unilever. Initially, the tricycle had many distance restrictions or even sloped areas we could not reach; now, we are building an improved version and integrating a franchise model.
I should note that Algramõ manages three sales channels: first, the home delivery model; the second one, which we are expecting to up-scale and have the largest impact, is made up of self-supported dispensers placed on supermarket shelves; and lastly, on-the-go dispensers that replace beverage machines. In Santiago, Chile, more than one million plastic or laminated cardboard cups per year are thrown into the trash. These products make recycling difficult and costly. That is why we created this on-the-go process so people that recurrently visit someplace may refill their packaging at a lower price per liter, avoiding the generation of new plastic.
Mundo PMMI: By mid-2018 version 2.0 of Algramõ was born, taking technology to a new level, and incorporating the IoT, RFID, and electric tricycles. What concrete results have you had in terms of growth, sales, or waste reduction?
Amin Guenim: The most important indicator is that reutilization of our containers has been close to 70% as of late, a sign that we are on the right path, that once we engage with a customer, he/she is left satisfied and buys again. Another important element is that we have permanently conducted surveys resulting in a 90% Net Promoter Score, which indicates that people would recommend us and that strongly encourages us in face of what lies ahead. In terms of results, the number of plastic bags saved amounts to over 1.2 million, the equivalent of 2.7 tons of plastic prevented with this circular economy model. Other but equivalent numbers relate to 78,000 reused detergent containers and savings of 1,056,000 liters of water.
Mundo PMMI: In terms of impact, could it be said that you are unique in Latin America?
Amin Guenim: No. Even as many bulk-sales solutions are in place, we do not see other companies developing similar operations as competitors, because the problem is so large that the marketplace is divided among multiple actors and there is no competition. We are not contending for the same users. There are many players in the bulk-sales modality; and some have even adopted colors, patterns, and graphics similar to ours, but the intelligent packaging system that we own, with the capacity to deliver traceability to our customers and brands while providing the reassurance that a product can be stored with all variables under control, make us a completely differentiated solution. At the same time, this solution has been patented and our whole Internet of Things (IoT) dispenser system, including packaging with chips associated with a specific customer, is Algramõ’s intellectual property.
Mundo PMMI: What has been the role of IoT and other technologies, such as RFID (Radio Frequency Identification), in the development of the platform?
Amin Guenim: They have been key. We have grown a lot technology-wise and this sets us apart and gives us the ability to offer better solutions to our clients. Our customers not only have the experience of managing their balance through a virtual wallet and seeing the environmental impact it has but can also keep track of the credits they generate by reutilizing, check expiration dates, and controlling each product they are buying. Brands also have a direct line of communication with the users who have their product at home; for example, to tell them “we have noticed that certain batch has a defect, please reach us for a replacement”, things that nobody likes when they occur, but they do happen and this tool solves that problem.
The benefits of these technologies are evenly spread among the brand, the user, the point of sales, and all involved parties. The brand gains product traceability; the user, the assurance of accumulating money in a controlled account wallet, seeing the environmental impact, and receiving discounts from the brand. The retail seller benefits from a cashless and touchless self-service solution where the consumer places his intelligent container on the dispenser which reads it, identifies the user and sends a notification to his cellphone so he can operate the equipment without interacting with the screen that other people have touched. Lastly, a benefit for the reseller is that clients can buy in 1/3, 2/3, and 3/3 product formats, allowing for an infinite number of purchase combinations instead of having thousands of packaging in various sizes and different costs for the end-consumer. Finally, for all involved parties, is the opportunity to provide brands with on-line information about point-of-sales figures; we give them a board where they can watch and monitor all consumption habits, trends, dispensers’ behavior, peak hours and sales valleys, and where they can also extract customer data as soon as a transaction is completed.
Mundo PMMI: How does the platform help brands to comply with their Extended Producer Responsibility (EPR)?
Amin Guenim: The platform seeks to be a tool in reaching plastic collection goals. A producer, in face of the number of packaging that enter the market, must recover part of them and handle it; if, for example, it is proven that 10% of its sales were carried out through a circular economy system and traceability demonstrates that those containers are still in circulation and have not ended in a landfill, sales made through Algramõ can be used as support and contribution to meet their collection goals and achieving norm requisites compliance.
When we say it is a platform for brands, we mean that it takes them to sell without a poverty tax, without issuing new plastic, and contributing to collection goals.
Mundo PMMI: The concept of combating the “poverty tax”, which punishes consumption in low quantities, was central to the origins of Algramõ. Has this perspective changed?
Amin Guenim: It is hard to generate impact when you compete with big producers. Instead, the strategy is to become allies of committed companies that hold sustainability values, and to improve what they are doing in terms of environmental impact. Through it, Algramõ gains scale and efficiency in the construction of dispensers that will allow us to be reintegrated with stores, given that the current cost of a dispenser with these characteristics is remarkably high and the only way to achieve such an expense in capital is to scale together with big companies.
Our heart lies with the traditional channels and mom-and-pop shops, so our main goal is to tear down the poverty tax, but we want to do it through a first-grade solution that we are testing in other countries and economies so we can later be able to expand it to all our lines.
Difficulties persist not only in poor districts across Latin America but in some emerging economies where poverty taxes and hunger are crushing realities. We are working with big brands in a development that allows for food delivery through our dispensers and, once it is scaled, it will have an enormous impact.
Our goal for next June is to carry out testing of this new development in Indonesia, a country where the use of sachets is extremely high, the greatest contributor to ocean pollution, and where 80% of its population lives below the poverty line. Once we have this version ready for expansion to the rest of the world, it will generate a huge impact. In Indonesia, we will deliver daily-use products in packaging that pose an alternative to Doypack at a reasonable price. We will provide reusable packages and discount their complete cost from the product’s price. Based on this Indonesia pilot, we will carry out another in Colombia in cooperation with one of the top retailers chains in this country, Grupo Éxito.
Mundo PMMI: Those brands that have been chosen by Algramõ stand out due to their sustainability strategies. Which are the achievements and the most important lessons learned through these alliances with Unilever or Nestlé, for example?
Amin Guenim: The teachings are constant, but our conviction and objective remain the same: to gain validation from our consumers as a substitute to how they buy nowadays, creating a virtuous circle where through purchases you contribute to extract a container from the landfill and in which, without the generation of new plastic you pay less, increasing efficiency. On average, Algramõ´s prices are 30% lower than those found in supermarkets.
Allied companies have precise goals and strategic plans with clearly defined timelines, so our learning is towards how to reach the highest possible efficiency so we can participate in those plans, generating data and building projects based on those numbers, and then to scale them. We need to be a profitable solution, trustworthy and secure, in compliance with all food safety and quality assurance standards that brands follow, through logistical and operational efficiencies. Each project teaches us, and our learning is increased, so we can grow with them.
Mundo PMMI: Will the model of alliances continue to grow?
Amin Guenim: We have great allies. Unilever, for example, has had faith in us since the beginning and has accompanied us in every achievement we have reached so far. However, we are an agnostic platform, because the only way to have a considerable impact and to make recycling obsolete is by adding all brands to these circular economy platforms. If we concentrate on one, we would be excluding many different brands from the solutions. Therefore, the idea behind this Alliance is to cultivate it and make it grow, while continuing further explorations with other brands. Regarding those products in which Unilever specializes, we will continue to grow with them as a first option, as well as with Nestlé; jointly, they represent nearly 50% of mass consumption products. In the medium term, our objective is to have a platform within the vast supermarket channel, in that “ecosystem”, and to promote the cohabitation of multiple brands and products.
Mundo PMMI: This relates directly to the international expansion of Algramõ: What are the most recent strategies towards growth within the United States and in other countries?
Amin Guenim: We are currently in New York, in Brooklyn and Manhattan, and have ambitious growth plans for 2021. We have our first dispensers in Jakarta and, by the hand of an NGO, are providing Unilever products from the lobby of a multi-family complex holding more than 9,000 apartments, with an occupation rate of 77%; that is nearly 6,000 inhabited apartments. The idea is to keep on growing with this model in Indonesia, and the goal for 2021 is to expand operations to other Pacific Alliance countries, Mexico, Peru, Colombia, and Chile while inaugurating our new European office by March of next year. The office will likely be located near the headquarters of our partnering allies, given that they are already in cities where the circular economy is notably advanced, and where policies that promote it are already in place. European countries that we define as short-term are France, the United Kingdom, and the Netherlands. Also, we are striving to grow in the United States and Canada, to penetrate those Latin American countries I have mentioned, and to finish 2021 with, at least, two or three pilots running in Europe.
Mundo PMMI: Are there any particular criteria for Latin American countries to be included in the platform?
Yes, population size and free trade agreements are considered but, most importantly, to open a new market we need multipliers, and in these countries, we count on incredibly good allies for our operations. The interest of brands to penetrate these markets is also indispensable. I can tell you, for example, that by the beginning of 2020 we were only in Chile, but starting 2021 we want to have a presence in the four countries mentioned. Colombia is practically open, and we expect to have concrete operations in all those I mentioned.
Algramõ is working with international allies to develop cost-effective, reusable solutions that will drastically reduce the environmental impacts currently associated with single-use plastic containers. Even during the recent pandemic, the company has moved forward with an aggressive implementation and improvement strategy that is sure to yield benefits to the company and consumers in several Latin American countries in 2021 and beyond.