Episode 42 – Brian Bauer of Algramo

Interview Transcript

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Catherine Weetman  00:00

Brian Bauer explores how we can use circular approaches for plastic packaging, so we get the benefits of plastic without the impacts of mismanaged plastic waste. Brian works with Algramo, a Chilean startup that refills product by the ground from vending machines. Brian and the Algramo team are currently working with Unilever, Nestle and other brands, developing game changing packaging as a wallet technology, so their reusable packaging can communicate with internet of things connected vending machines. This means people can use cashless payments and small volume purchases to buy things much more affordably. Brian’s proposals have won awards for Algramo , including top idea in the Ellen MacArthur Foundation’s $1 million circular design challenge. The MIT Solve Circular Economy challenge and the National Geographics ocean plastic Innovation Challenge. Brian’s research on the internet of things and supply chain management one Harvard’s 2017 Dean’s prize for Outstanding Sustainability Research. Brian, congratulations on all those awards. And welcome to the circular economy podcast.

Brian Bauer  01:12

Thank you so much, Catherine. It’s a pleasure to be here. And yeah, amazing to be on a circular economy podcast in the Rethink, part of the Rethink Global movement.

Catherine Weetman  01:21

Thank you. And it’s and it’s good to be talking to you in Chile today. And I’m curious to know how all of this got started. Can you tell us a bit about Algramo, and how you got going with the refillable packaging idea?

Brian Bauer  01:34

Sure, I’d be happy to do that. So Algramo’s a seven year overnight success story. So if we rewind seven years ago, Jose Manuel Moller founded Algramo. And the reason he founded is because he was he came into a situation that created a complex problem for him and his roommates and his community around him. And he wanted to do something about that problem. So a little context on that is he was living with his family. And he was around 20 years old at the time, and he wanted to move out and move in with some friends as since he was a university student, he was studying economics in business. And they moved out and moved out into the workforce because they didn’t have a lot of financial liquidity, they had to move into a low income area. And things changed a lot for him when he did that, and one of the big changes was he was in charge of buying food. And the way that people typically buy food in Latin America, and much of the developing world for that matter, is if they’re in the bottom of the pyramid is they buy from small family or neighbourhood stores, and they buy in really small formats. So if you live in a developed area, and you have financial resources you typically buy in larger format. So we’re still we’re talking about, say, a one litre two litre three litre size. But in these marginalised low income areas, people are forced to buy in very small quantities. And that leads to pain about 30 to 40%, more on a per unit basis for that product. And Jose Manuel put a name on that he called it the poverty tax.

Brian Bauer  03:05

So while Algramo came into existence to solve that poverty tax, and there’s some there’s kind of a nexus between the poverty tax and plastic pollution. And that is, there’s two key drivers there. One is if you live in a underdeveloped area, there’s typically less waste management facilities to capture waste. And then the other thing is when you, the smaller the format the packaging is, the more likely it is to escape into the environment or places it shouldn’t be. So Algramo came into existence to address those two interconnected issues. And Algramo started out with its own white label brand products, which were simply essentially competing directly against the big global brands. And they started out with a few vending machines, but quickly moved to more of an exchange system where you would buy the, you’d pay for the packaging and the product the first time. And then once you use the product, you’d bring the empty packaging back and exchange it for a full packaging. And Algramo was involved with the reverse logistics in that process. And they did that until about 2018, when they reached financial breakeven, after developing a network of about 1500 stores. And around that same point, Jose Manuel had an epiphany. And that was that the the problem or the enemy wasn’t the brands that were putting the plastic into the environment, the problem or the enemy was the plastic itself. And he wanted to take Algramo ‘s business model, when I forgot to mention important thing too, is our reuse rates initially were less than 10%. And by 2018, they were over 80%. And going back to that epiphany had that the plastic packaging is the enemy. He realised that if he wants to really have impact with Algramo, he needs to work with the big brands that are putting most of packaging into the into the global economy, which ultimately ends up a lot of it and ends up escaping into the environment. So in 2018, we start talking with Unilever. And we, the discussions were focused around almost laundry detergent. And that’s one of the top selling brands for Unilever in many markets across the world. And we started, we started those conversations mid May 2018. By mid 2019, the pilot got off the ground and was publicly launched. And it started to scale up significantly, in early, basically in January of 2020. So yeah, it’s kind of a quick overview of where Algramo was and where it is today.

Catherine Weetman  05:31

Hmm, that sounds interesting. And and before I ask how you got involved, just going back to the Unilever thing, so did Jose Manuel approached them because of their sustainable living plan and Paul Polman’s, you know, commitment to sustainability and the circular economy, or was it something more about their position in local markets?

Brian Bauer  05:53

I believe I believe how it happened is that the Unilever’s leadership in the sustainability field caught Jose’s attention. And then Algramo wasn’t, he’s a fairly high profile entrepreneur here in Chile. So he was invited to and I forget the exact name of it, but it’s basically like an entrepreneurship innovation group that meets and Unilever CEO, Unilever, CEO of Chile was there. His name is Han. His name is Hans Evans. But unfortunately, he’s left he’s working on a different project right now. But Hans and Jose Manuel met through that platform and started talking. And right off right off the bat, it was really promising and there was major interest from Unilever to push this idea forward. And it’s going really well, Unilever is really happy with it. Algramo’s really happy with it. And we’re scaling it up quite soon.

Catherine Weetman  06:43

So one of those examples I love, of when you set your mind in a certain direction, and then fate steps into lend a hand. So yeah, great.

Brian Bauer 06:50

Yeah, absolutely.

Catherine Weetman  06:53

And Brian, how did you get involved with Algramo ?

06:58

So I was doing a Master’s in sustainability. And I had to do a capstone project. And I wanted to do a capstone project with something with real world impact and real world potential. So I sent an email to Algramo and said, Hey, I’m doing a sustainability Capstone. And would you guys like me to do a project on Algramo . And like, literally 10 minutes later, I got a response and met them  for a coffee and did my project on them. I won an award for top top sustainability researcher. And shortly after that, I started working with Algramo as their sustainability manager. And I’ve been working with them since then going back to about 2016 in 2016.

Catherine Weetman  07:42

Fantastic. So I understand from some of the research I’ve been doing on platforms like greenbiz, and so on, that Unilever’s now testing several refill models, including our grammar, and that to incentivize reuse, the Algramo packaging is equipped with RFID. So radio frequency identity chips, that contract customer use, and earn customers credit every time they refill the container. Can you tell us more about that and how that’s going?

Brian Bauer 08:12

Sure. So what’s the RFID technology enables is what we call packaging as a wallet. And one of the big motivations to create this system is six years of doing Algramo, what we call 1.0. Working through the family owned neighbourhood stores with reverse logistics, reverse logistics are complex, expensive economically and environmentally. And we were motivated to use technology RFID and Internet of Things technology to kind of eliminate the need for those reverse logistics on the reusable packaging. Because that can create a lot of convenience cost savings. And like I said those savings are both economic, and environmental. So that’s what we did. So what we what we’re doing if you think of a card to get into the metro, most most major cities in the world have a card and you pay a certain you pay 10 pounds or 10 euros or whatever onto that card. And then you have 1010 units of credit to that card and you can go to the metro X amount of times, we’re taking that same idea and putting that into packaging. So with Unilever, we’re using business as usual packaging for their own bottle. It’s a three litre bottle, and we put the RFID sticker which is not very expensive. But there’s a misconception Some people think it adds a lot to the to the cost of the packaging, but we’re paying around 10 or 15 cents for RFID tags. And then we put the label over top of it.

Brian Bauer  09:33

And that’s how it works. So that enables the the packaging to communicate with IoT connected vending machine. And we have a payment platform that connects across brands and across products. You put money into the payment platform from a credit card from a bank from a FinTech provider, and then you have money in that account and you can transfer it onto your packaging. In regards to the brands there. Unilever is currently giving our Omo customers what we call a sustainable consumption credit. And I’ll put some put some numbers on that. So when a customer here in Chile buys, buys a litre of almost detergent from us, they’re paying 2500 pesos per litre. And for every litre they buy, they get 200 pesos deposited into that packaging for the next use. So that basically means there’s close to a 10% discount on the next refill. And our regular prices at Algramo are about 30 to 35%, below the regular prices of most major supermarkets. And on top of that we’re getting you’re getting that stable consumption credit as well. So we’re really proud of those cost savings able to pass on to the end consumer.

Catherine Weetman  10:45

So that really has, you know, impacted the poverty tax that drove Jose Manuel to do this in the first place, and creates tremendous opportunities for customer engagement for Unilever as well. You know, in terms of encouraging customers to come back and, you know, maybe communicating with them in in other ways, or, or is it all anonymous can can Unilever communicate with the customer, or is it just just about the financial transactions.

Brian Bauer 11:18

We haven’t gotten to the point and we haven’t really deeply explored if Unilever will be communicating directly with the customers theoretically, they could we do have the customer information, we know how much product they bought. And we would be able to do that. But we’d obviously have to respect the privacy concerns of the customer and make sure they’re comfortable with doing that. Before we did that. I just want to make one quick comment though on I like to put metrics and, and quantitative analysis on some on things so people understand it a little more clearly. But on the poverty tax, I was recently doing some research. And without Algramo, people can buy a 500 millilitres, so a half litre quantity of dish soap. And that’s a lot more expensive in retail if you don’t have the financial resources to buy the full litre 1.2 litre bottle that they typically sell. And without Algramo, we’re charging 1600 pesos per litre. So if you buy the half litre, that’s 800 pesos. And that’s our regular price. And I should also mention too, that that includes at home free refills, so it’s like essentially comes to your doorstep, you don’t have to go to the grocery store. And if you go to Walmart here in Chile, their regular price on that exact same Unilever detergent of dish soap called quix is 1890 pesos. So we’re, they’re effectively over 200% more expensive than we are, if you’re in that unfortunate position where you’re going to where you don’t have the financial liquidity to buy the big bottle, you’re gonna find the half litre bottle.

Catherine Weetman  12:46

So is there not a danger that the likes of Walmart and so on will push back against this? Or is it across too many products for them to, to kind of target? You know, I’m thinking of if, if one of the I won’t name any retailers in the UK in case I end up slandering them, but you know, they’re all they’re all competing on the price of key things. So, you know, bananas, a whole whole chicken? Bread, I can’t think what else but you know, there’s there’s kind of a basket of items that they all compete on for price. And I think if they felt that one of the convenience store operators was undercutting them once or something like that. They would just cost cut until they you know, hurt the convenience store. How do you guard against that?

Brian Bauer  13:42

One in this case? I mean, if they’re their regular prices, 1890 I can’t see them having the capacity. I mean, they they’re no huge retailer, they could potentially do that. But they would be losing a lot if they went from 1890 down to 800. But I mean, really, most of the people that are buying our product are buying in larger amounts. I’m just pointing that out as an example, on how how much we can potentially save people, especially people that don’t have the financial liquidity to buy in those larger sizes.

Catherine Weetman  14:13

Yeah. And I guess there’s the whole, you know, people are buying in smaller sizes because they don’t have the cash flow. They don’t have the storage space. They perhaps don’t have an easy means of getting to a big Walmart and carrying, you know, loads of bags of shopping back with them. It’s it’s, you know, it’s a different way of shopping, isn’t it versus popping into a local corner store to top up on what what you’re running out for a couple of days with a shopping.

Brian Bauer  14:42

Yeah, absolutely. And another important point to point out today in the context of the circular economy is being able to buy actually, Algramo, a lot of people like to hear this to what it actually means. In Spanish, it means by the gram. So you’re being able to buy by the ground. If you live in if you’re not a part of have a big family, if you live by yourself, quite often, if you’re if you buy in a really big format, especially if it’s got an expiration date, you can end up wasting the product because you don’t consume it in time. So our system, especially on products with a expiration date, enables people living in smaller families, or perhaps by themselves to buy exactly how much they they want and need, they pay the fairest price, there’s no packaging waste. And by being able to buy a small amount, they eliminate that waste that is created from buying too much, because you’re forced to buy a larger format.

Catherine Weetman  15:31

Brilliant. So it sounds as if it’s going down really well with customers. You know, are there any barriers or reasons why people, you know, wouldn’t wouldn’t just buy into this rather than by non reef non refillable packaging,

Brian Bauer  15:50

I guess there’s there’s a couple potential kind of pain points for the customers want is that they have to download the app. But as we form new brands and partners into our application, we create positive network effects. And we create more incentive for people to download the app. So right now, as an example, here in Chile, we’re currently working with Nestle and Unilever, for a total of four different products. And we’re in discussions with most major brands, I imagine a year from now we’ll have easily double or triple the amount of products that we have right now. So as we pull more brands and offerings into the platform it there’s more motivation for people to download the app. But in general, people really like the app because it enables like where I live right now. It’s it’s very high density apartment buildings. And people can do things like go to work, leave their leave their packaging with their front desk person, and use the app to page the tricycle to come and do a refill. They can tell the app how much they want. And you don’t, it’s not like you have to give the front desk guy $5 to cover the cost and then get the change and all that kind of thing. You just leave the bottle there, it gets filled, you come back and it’s full. And that also creates some significant advantages in the context of COVID. With the packaging is a wallet, it’s your packaging, there’s no reverse logistics, only you touch that packaging. And in the United States where we’re working with Clorox and some Colgate, we’ve made our dispensers so they’re truly touchless so that you can control the dispenser through your cell phone. So you just put your packaging unit and only you touch and then control the refill for your cell phone.

Catherine Weetman  17:28

Wow. sounds brilliant. So tell us a bit more about the at home refill system, because you mentioned that just now. But up to now we’ve been talking about people going into a store and using a vending machine.

Brian Bauer  17:44

So the at-home refill system is that we’re using electric tricycles. So these kind of look like tuk tuks if you’ve been to Asia. And they have a payload of around 400 kilos. So they can hold about 400 kilos of product. And it’s just the exact same technology that we’re developing for the retail market but on wheels and it comes to your house. We do this for specific products products that are a little heavier typically, and, and have a kind of a regular consumption pattern. So we’re currently doing this with Unilever products with our omole liquid laundry detergent, and quicks dish soap and with Nestle, or working with their Purina dog food line, and we provide that service through our electric bicycles.

Catherine Weetman  18:30

So is that is the tricycle services that relatively recent or is that been going for quite a few years?

Brian Bauer  18:36

I’m not started. It was publicly released in mid 2019. But we worked basically all of 2019 we were just working out the bugs, developing optimising things. And it started to scale up in January of this year. And we now have eight tricycles with Unilever and three with Nestle.

Catherine Weetman  18:55

Right. So perhaps, now’s a good time to talk about the plans for the next phase of phase of the business because it sounds as if developments been pretty rapid so far. So I’m sure you’ve got some exciting plans for the next stage.

Brian Bauer  19:12

Yeah, that’s a good question. So basically, if you went back one year from now you were talking to me, it would have been just myself and Jose Manuel, discussing and developing what we call Algramo 2.0. No, Algramo 2.0 is simply the package is wallet technology, working with global brands, so they can sell just the product and not the packaging. And since then, last year, we raised a $2 million investment. And that enabled us to significantly expand our team and technology development we’re now, Algramo 2.0 is now around 30 people. And we’re now in the process of closing a major investment round much larger than last year’s investment around. And that will give us financial capital to expand into key markets in Latin America markets. We’re interested in here or Mexico. Peru and Colombia. And we’re also going to be setting up global headquarters in Amsterdam early next year. And a couple of our other really kind of key markets for Europe are London and Paris. And then beyond that we’ll be interested in other key markets in, in Europe, but in the shorter term, those are, those are key focus areas.

Catherine Weetman  20:22

So in Europe, London, Paris, and Amsterdam, and will that be with the with the bicycles, or just in convenience stores or a mixture of both.

Brian Bauer  20:35

Um, basically, what we’re doing is we’re getting implementation partners in our in our specific market. So we’re finding people that can facilitate the process of Algramo  entering new markets, we’re using the local knowledge of those implementation partners. And then also the knowledge of the brands in those local markets to figure out what the best solutions are. And see, we don’t really know right now, but we imagine it will be a mixture of of all the different options, but we see retails retailers been a really big part of it. I mean, it’s pretty simple to the massive, the massive amount of volume of CPG products goes through retailers. So we see the retailers being a really critical part of the, of our distribution system. So we’re in the early stages of reaching out to key European retailers to set up pilots in specific markets with our, with our reusable packaging distribution system.

Catherine Weetman  21:27

And that sounds good. And I think particularly the fact that, you know, you can do the refills without touching anything. And the tricycle delivery, you know, it’s still your piece of packaging. So that will provide reassurance for people. Because it’s, you know, it seems as if the, the rigours of the lockdown, and physical distancing, and being really careful what you’ve touched, and all the rest of it seems like that’s going to be with us for some time to come. So what what struggles have you had, and what surprised you in the process of building on Algramo?

Brian Bauer  22:04

See, struggles would be I guess it’s it’s common with any kind of technology platform, but developing the app working out all the bugs there, the tricycles, developing them working out all the bugs, sometimes things take a little longer than you plan. But I think those are all pretty common across technology startups. But we’ve created solutions to the problems and challenges and move forward. So I think we’re doing good there. As far as key strategic partnership development, the cpgs are the fast moving consumer good companies, they’re seeing very interested and keen, they typically come to us a lot of them. And they’re very interested in in using reusable packaging systems, because their CEOs have made pretty aggressive global commitments to reduce the amount of plastic that they’re putting into the, into the economy. So that’s pretty, that’s we’ve got good relationships and opportunities there. But one of the challenges has actually been the retailers, there are a lot more, they’re less interested in innovation, it seems. And they move slower, and are more complex to get to embrace reuse systems. But we’re starting to see that change a little bit. We’re seeing Loop as an example. they’ve they’ve they’ve got a lot of retailers engaged with them. And we’re starting to get a lot more interest in opportunities with retailers as well. But I think they’re a really critical part of the reuse kind of ecosystem.

Catherine Weetman  23:29

And other retailers in in Chile, are they mainly kind of ‘mom and pop’ stores – lots of independents? Or is it a bit like over here where there’s a mix of independents, but there’s also some of the big players like Tesco and so on, have their own convenience stores as well as big supermarkets.

Brian Bauer  23:48

In Chile, the retail environment is essentially Walmart is one of the biggest players. And then there’s a bunch of big players, but they’re self American. So they’re they’re pretty significant in size, obviously a lot smaller than Walmart, but they’re set up in the key markets in Latin America. And I should mention, too, that we’re actually starting a retail pilot in Santiago with four – its either four to six locations we haven’t determined exactly yet. And it’s with the significant, a significant retailer. So we’re really excited to start that pilot and start gaining insights and learnings from working with a multinational retailer.

Catherine Weetman  24:30

Brilliant. And Brian, what are your lessons learned and top tips for other businesses wanting to either start something circular or go more circular?

Brian Bauer  24:41

That’s a good question. I think one critical thing is for circularity, to thrive, it needs it needs like a diverse network of stakeholders supporting a circular ecosystem. So try and think about, try and think big try and think from a systems perspective and think about How strategic stakeholders can help you be successful. And in general, I find the circular economy movement is quite open to at least a high level pre competitive collaboration. So try and leverage stakeholders and people invested in making the circular economy happened to support your your growth.

Brian Bauer  25:22

And we’re also starting to see a lot of government initiatives to coming in. coming in to support circularity like three or four months ago, the city of Amsterdam announced that they’re going to use donut economics as an economic recovery strategy for their post COVID recovery. And just yesterday, I saw that Ireland is looking to do the same thing at the national level. So we’re now seeing national governments embracing things like donut economics, which isn’t exactly circular economy, but it’s borrowing a lot of key principles or integrating a lot of key principles of circular economy into the fundamental ideologies that keep my work put forth and donut.

Catherine Weetman  25:58

Brilliant, I’ll see if I can find a link to the to the Ireland one. I was on the… Ireland has either just had, or was having a Reuse Month, you know, aimed at consumers and encouraging people to reuse things. So I was on a podcast with somebody from America and somebody from Ireland who were all –  We were all podcasters talking about sustainability and circular economy. So that was quite an interesting conversation. Brian, who would you recommend as a future guests for the programme to inspire people about the circular economy?

Brian Bauer  26:35

That’s a good question as well, I can think of a couple people off the top of my head, one would be Returnity. And the CEO and founder of Returnity is Mike Newman, I’d be happy to introduce you to Mike. Returnity really quickly, basically is like reusable packaging systems for Amazon type purchases. And they’ll work with a bunch of other different companies and types of business models. But it’s essentially all based on the premise of business through mail, which ecommerce has been exploding lately. So it’s a pretty important area. Mike’s a really interesting person that has some really good insights on circular economy. So I recommend him. And then a technology company that’s really interesting is called Williot Wi l IoT. And if you’d like an introduction to Steve Statler from Williot, I’d be happy to introduce you to Steve, but he’s got some kind of next generation, they’re not RFID, but similar in function to RFID. And they’re Bluetooth or Wi Fi powered chips that have a lot of interesting sensor technology, and really interesting implications with a circular economy with that technology that’s in early stages, but soon going to be ready for being integrated into various opportunities within the circular economy.

Catherine Weetman  27:48

Yeah, I don’t think so much is happening at pace in technology terms, with lots of different enablers for the circular economy. I’ve just been, well is now nearly about nearly a year ago when I was doing the updates to my circular economy handbook. And had to really expand the chapter on technology enablers and bringing things that even back in 2016. You know, I think I’d put something in about AI. But it was it was like a, you know, a couple of lines. And now it’s, you know, a page or so talking about the implications of that. So it’s just, you know, developments getting ever faster. And Brian, what about, you know, what your contact details? How can people find out more about you and Algramo?

Brian Bauer  28:38

Yeah, sure if anyone has any collaboration opportunities, whether you’re a brand new retailer or a potential implementation partner programme on the new market, I’d be happy to have a conversation. My email is Brian, that’s b. r. I am at L gramma.com. A lg RA mo.com.

Catherine Weetman  28:57

Thank you. And I’ll put that in the show notes as well in case people don’t have a pen to hand. And is there anything to follow on social media? or?

Brian Bauer  29:08

Yeah, we’re on we’re on Facebook, Instagram, LinkedIn, and we have a webpage or webpages Algramo.com a lg RA mo.com. And yeah, that’s, that’s, that’s about it.

Catherine Weetman  29:24

Right? So it sounds like things are happening. Absolutely at speed. And, you know, lots of lots of achieved so far. And lots to come in the next in the next year or two that could be absolutely groundbreaking, you know, in for consumer packaged goods and other things all around the world. So brilliant. Thank you for sharing all of that with us, Brian. And I wish you and Jose Manuel and the rest of the Angramo team, the best best of luck for the future.

Brian Bauer  29:52

Thank you so much. It was an honour to be here and best of luck with all your future podcasts.

Catherine Weetman  29:56

Thanks, Brian.