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Contxto – Not long ago, we covered Algramo’s participation in the Ocean Plastic Innovation Challenge through National Geographic. Before, it even made an appearance in our market map devoted to all things sustainability in Chile. Today, we’re switching gears yet again, this time pertaining to its U.S. expansion.
Specifically, this New York-based firm supports early-stage startups with closed-loop economic models. What this means is that products are continuously reused rather than disposed of in a landfill.
Meaning “by the gram” in Spanish, Algramo began six years ago. In the beginning, it mostly sold staple items such as laundry detergent and bulk foods at neighborhood grocery stores. For the past six months, though, the company has been offering these same services through its portable vending system.
“By creating low-cost reusable packaging and reducing the cost of distribution through our vending machines and dispenser system, we dramatically cut costs for customers and allow them to purchase small quantities of products at an affordable price,” said Jose “Cote” Manuel Moller, founder and CEO of Algramo.
“This benefits brands, too, who want to sell products, not packaging. Our system easily integrates into local bodegas, large grocery store chains, and can be delivered to a customer’s home through our mobile delivery app.”
Prior to Algramo’s inception, Moller was an MBA student and sustaining himself on a small budget. During this time, he realized that low-income people essentially pay a “poverty tax” on small consumer items. That’s to say, tiny units cost up to 50 percent more than the same item in larger sizes due to packaging costs.
Noting this, the Chilean startup devised a business model where consumers gain rewards for reusing packaging, whether it be cleaning supplies or bulk food items. Even better, customers can buy as little as they want without it changing the price per gram.
Originally, users went to physical locations to stock-up on goods through one of Algramo’s vending machines. Now, the startup is providing the same services through its traveling mobile units.
Essentially, it’s like one of its vending machines, simply mounted on a tricycle. With all of the amenities, it travels around Santiago where users refill dish soap, detergent, lentils, rice, among other items. With support from Unilever, nine more vehicles will be launched this fall.
Equipped with RFID codes on packages, users also earn “sustainable consumption credit” discounts for resourcing containers. Applied to future purchases, discounts can range up to 11 percent off the original value. Therefore, people always have the incentive to bring their container.
Moreover, this recycling scheme is cashless, which reduces costs due to fewer financial risks. Logistically, the transportable machine follows a pre-determined route throughout the week and specific locations over the weekend, like recycling centers.
Plans in the U.S.
According to reports, Algramo plans to bring its portable refill system to the United States. Eventually, it will be present at locations such as laundromats, apartment buildings, as well as retail stores.
Since 20 percent of single-use packaging is reportedly reusable, the startup intends to begin with the easiest items to restock, such as laundry detergent.
“We want to have as many products in the system as possible so that we can create that value and create positive network effects across the platform,” said Brian Bauer, who spearheads circular economy and strategic alliances at Algramo.
At the same time, Algramo is seeking to collaborate with new brands to help them save resources. Instead of investing and shipping thousands of tiny containers, partners can sell items more effectively through bulk items. In the end, refill systems reduce shelf space.
One of Algramo’s newest partners will be Nestlé. Together, Algramo plans to sell pet food with a Latin American retailer with larger packages being refillable.
Regarding weight, small products can cost up to 50 percent more than the same item in larger quantities. Not only is this more costly for low-income people, but also more wasteful.
“When you buy in small formats, you pay between 30 to 50 percent more for the product, depending on what the product is,” said Bauer.
“In doing that, you also produce a lot of packaging waste. That’s typically the type of packaging waste that’s most likely to escape into the environment because it’s smaller format, and it’s also in low-resource areas where there aren’t very good waste management systems in place.
Both consumers and sellers benefit from buying in bulk based on how packaging costs become more obsolete. When it comes to business incentives, such a system eliminates overhead costs.
“The system also makes it possible to sell detergent more cheaply than in stores in part because the brand isn’t paying for packaging for each sale,” added Bauer.
“Generally, the smaller the format of the packaging, the more of the overall product cost it can make up—in extreme cases, packaging can account for up to 50% of the product.”
First National Geographic and then MIT, safe to say that Algramo has worked with some prominent groups. This past summer, the Chilean company won the Circular Economy segment of the MIT Solve program, a competition for startups developing sustainable solutions.
Despite ongoing protests throughout Chile, the sustainability startup is still operating.
“There are still protests, many supermarkets are not working, therefore neighborhood stores are serving many families,” said Gabriella Valle, head of administration at Algramo, in recent email correspondence. “We are working every day to be able to supply the warehouses.”
As of today, Algramo has expanded its service to over 2,000 bodegas in Santiago. Also growing over time is the reuse rate among customers, going from 10 to 80 percent.