Algramo-Creating Sustainable Shared Value Between Chilean Smallholder Farmers & BoP Consumers

Increasing environmental & economic sustainability of smallholder farmers (SF) while lowering the cost of nutritious food for BoP consumers.

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I confirm that I am fully aware of the eligibility criteria, and based on its description, I am eligible to apply to the CSV Prize 2017.

  • Yes, I'm eligible

Preferred language

  • English

Organization name

Algramo

Year founded

2013

Initiative stage

  • Scaling (the solution has passed the previous stages and is growing its impact on a regional or global scale)

Annual budget in 2017 (USD)

  • $1mil - $5mil

Number of beneficiaries impacted so far

  • More than 100,000

Organization type

  • Social enterprise

Secondary Focus Area

  • Water
  • Rural development
  • Nutrition

Headquarters location: Country

  • Chile

Headquarters location: City

Santiago, Chile

Location(s) of impact

Chile: Santiago-we operate in BoP neighbourhoods to save ~225k customers ~30% on food.

San Carlos, Chile-impact for smallholder farmers (SF)

Website

https://www.algramo.com/

Facebook URL

https://es-la.facebook.com/Algramo/

Twitter URL

https://twitter.com/algramo_cl?lang=en

Problem: What problem is this initiative trying to address?

Algramo exists to address a market failure making BoP families pay up to 50% more for purchasing food in small formats. We reduce the cost of essential food via a technology based distribution system–vending machines/reusable containers, in a network of 1,400+ stores, reaching ~225k BoP customers. We have a very direct & cost effective supply chain/distribution. CSV funds could enable us to procure 2x to 3x more beans (~30-45 tons/in 2018) from SF & maximize enviro, social & economic benefits to all stakeholders.

Solution Summary: What is the proposed solution? What do you see as its most promising aspects for creating shared value?

Proposal is focused on benefiting Nutrition, Water & Rural Development in BoP Chilean communities. In Chile, there are an abundance of smallholder farmers (SF) who produce nutritious food. But much of the food has poor distribution channels (especially for stores in BoP areas)-leading to wasted food & lost income opportunities. We propose improving distribution channels by connecting SF food to our network of 1,400+ stores & their ~225,000 customers, who will be served by our innovative distribution system/business model.
Funds would enable us to source more food from SF & maximize benefits to SF via insured upfront milestone–based payments & strategies to lower economic & environmental costs of food production-ex, offer customized agroecology to improve soil & reduce chemical inputs. Funding would allow us to integrate World Resources Institute's Aqueduct into our supply chain to source SF food from areas with lower levels of water stress & document social impact (ideally Jpal).

Impact: What is the impact of the work to date? Specify both the social and the environmental impact of your work

Our impact has been focused on downstream areas like creating cost savings of up to 50% for BoP customers, while reducing plastic waste. In Santiago, our 1,400+ family owned stores benefit ~56,000 families. If each family consumes all of Algramo's product offerings, our reusable containers avert ~2kg of waste/family/month. In just Santiago, we have the potential to avert up to 112,000 kg of waste/month. We foster a recycling culture in BoP communities and reduce plastic leaking into our oceans/rivers & food chains. The cost savings we create, up to 50%, are significant as Chile's BoP allocates 30.3% of its income to food-IDB 2015.
Currently, we lack economies of scale to get optimal prices on most of our food. CSV funds would allow us to optimize our economies of scale with SF beans by enabling us to go from 15ton/year (2017), to ~30 to 45/t/year with CSV funding. This would enhance SF economies while maximizing the sustainability of our supply chain & increase nutrition in the BoP.

Financial sustainability plan: How is this initiative financially supported? How will you ensure its financial sustainability long-term?

In 2017, Algramo won US $260k to develop IoT vending machines (VM). Our IoT VM will lower distribution costs & improve economies of scale by helping to sell greater volumes of food, while optimizing management of our inventory levels via real–time sales data. New low-cost VM are expected to be in stores in Q2, 2018. We are near closing a modest Series A, likely in Q1 2018. This will provide working capital to scale our growth/impact, creating an opportunity to increase sales.
We get income by 2+4. In 2017, we won $300k in grants but it has all gone into R&D–not yet benefiting operations. Our revenue grow has been rapid with a recent monthly sales record of ~US $175k–our 2016 lowest month was US $25k-this is a 700% increase from 2016 lows, to 2017 highs-we're on pace to breakeven Q2 2018.

Unique value proposition: What makes your initiative innovative? How does your project differ from other organizations working in the same field?

For 4+ years we have been building a social licence with our stores in Santiago's BoP communities. With 1,400+ stores selling Algramo's products we are nearing financial breakeven (Q2 2018), which will enable us to expand our operations beyond Santiago, into coastal Chile. Also, as a Top Idea in the Circular Design Challenge we have won a year in the New Plastics Economy Accelerator Program. This program gives us connections to academia, industry experts & investors to help foster our growth.

Founding story: Share a story about the "Aha!" moment that sparked the beginning of this initiative.

Algramo was created when the founders realized there is a BoP poverty tax on smaller sized portions of food (BoP consumers often buy in small sized daily portions). Algramo exits to address this market failure. Lowering the cost of food effectively enables people to increase access to food with higher nutrition-like beans.
For this CSV proposal, I realized that Algramo has exceptional impact on the downstream side of operations. But its focus on providing lowest possible prices, to its price sensitive BoP consumers, makes it challenging to source more food from SF. But with funding won for our IoT connected vending machines-see link below-we foresee an increase in sales, allowing us to buy in larger volumes-especially if we win additional funds from CSV to enable us to buy more food from SF in a manner that CSV.
https://www.expo2020dubai.ae/en/Expo-Live/Global-Innovators/Algramo

Where did you hear about the Nestlé Creating Shared Value Prize?

  • Ashoka page or contact

Program Design Clarity: We are hungry to know more about what exactly your model consists of. Succinctly list a) what main activities are you doing with your beneficiaries, b) where you carry out the activities? c) how often? d) for how many hours? e) who delivers the services? and f) any other brief details

A) Beneficiaries are 1storekeepers (1,400)=50-50 profit sharing + free vending machines; 2customers (~225k) would save 10-15% more on beans & 3 SF. For 1+2 we lower costs of food thus increase access to nutritious food to help decrease consumption of unhealthy food. For 3, funds would enable us to increase SF bean purchases from 15 tons/year (2017 volumes) to ~30–45 tons/year and provide milestone-based payments of ~20% of crop (before harvest) + offer low-cost basic crop insurance + more stable contracts + agroecology-to reduce eutrophication & harmful contaminants entering water.
B) For 1+2 only Santiago (1,400/~225k customers), but now piloting expansion to coast. For 3, we currently source beans from SF in Bio-Bio-Chile's 2nd poorest region. C) 1+2 daily; 3, ~6x per year (total 15tons/year). E) Services are delivered by our sales team who service our 1,400+ stores. Model is focused on optimizing economies of scale to allow us to buy food for lowest cost & pass these savings onto our ~225k low-income customers. F) With expansion to coastal Chile, we will more rapidly expand our network of stores, increasing our ability to distribute nutritious beans which are high in EFAs, vitamins & essential minerals. In Chile, beans have significantly increased in price, meaning low nutrition food like hotdogs are often chosen over healthy options like beans. Optimized economies of scale help insure more families chose beans over low cost, low nutrition sources of protein like hotdogs.

Focus area

  • Nutrition

We are interested in learning more about your initiative's broad impact on sustainable development. Please reply ONLY to the question(s) related to your above focus area.

Our proposal enhances nutrition & life quality in the low-income SF communities that produce our beans and in the BoP communities in Santiago that consume our beans. We propose providing ~20% of payment upfront for SF, based on milestones–reduces financial stress. We will also benefit SF by providing more stable/predictable incomes via providing longer-term contracts & benefits of basic insurance. This enhances economic security/opportunity, giving SF improved financial resources to feed their families.
We predict the benefits/value we provide our SF, combined with larger volumes of beans will enable our SF to give us 10-15% discounts, so we can pass on savings to our ~225k BoP customers. This will mean more of this food feeds/reaches low-income consumers-decreasing undernutrition. To address obesity & malnutrition we lower prices/increase access to nutritious food.
Innovative technology we are currently developing will lower distribution costs & help increase the size of our network, via low-cost IoT vending machines that greatly complement Algramo's use of reusable containers. This averts packaging waste=decreasing plastic leaking into environment/food chains to improve human health. Agroecology expert contacts to be provided to our smallholder farmers (SF) to reduce harmful fertilizer use to improved soil & water quality of SF communities. World Resource Institutes Aqueduct geospatial mapping technology will be used to reduce embedded water in our agricultural products.

Creating shared value: How does your initiative create value for different stakeholders?

Our 1,400 storekeepers + their 4,200 family members: we lower costs of food & share profits 50-50 with stores + free vending machines.
SF: Our beans come from 2nd poorest region of Chile (Bio Bio). SF in developing nations often face major financial stress from only getting paid if/when crops go to market. With CSV funds, we would provide milestone–based payments to SF, to provide ~20% of payment upfront based on crop reaching milestones. To protect against the loss of our upfront payments & to reduce financial uncertainties to our SF, in the event of crop failure due to climate–related events (fire, drought or floods), we will offer basic low cost crop insurance. And provide customized agroecology to produce more food with lower cost/impact.
225k consumers: with above benefits & ~3x more beans purchased we predict a 10-15% discount. Giving us volumes to change distribution from plastic bags to reusable containers/vending machines=increased savings/convenience to our ~225k customers.

How is your initiative funded, now and over the next 5 years?

Algramo has been focused on expanding its network of stores & helping these stores sell more products. As we increase our network we increase our economies of scale. Creating a self-reinforcing positive feedback loop that has perpetuated our growth to 1,400+ stores.
In 2017, 100% of Algramo's funding came from revenue collected from sales to our 1,400+ stores. In 2017, we won US $300k in grants, but all funds used on technology R&D (vending machines & internet connectivity) not yet benefiting Algramo financially. We just set a new monthly sales record of ~US $175k, sustained growth in monthly sales should allow Algramo to breakeven in Q2 2018. We don't rely on grants but grants have helped us increase our sustainability and ability to CSV.

How do you plan to influence your field of work if you are a winner of this edition of the CSV Prize?

In Chile, there are few, if any, companies buying from SF that offer upfront milestone–based payments, low-cost crop insurance & customized agroecology services. Algramo is keen to introduce these benefits to our SF as our reoccurring self–sustaining revenue stream can be used to recycle these benefits, to our SF for years to come. Positive results with this proposal/impact strategy would motivate Algramo to explore sourcing additional food types from SF.

If we can do this, it will likely motivate others to provide similar benefits to SF. This would create major impact on a national level & be a significant driver of CSV/sustainable development in SF communities. This would improve access to nutritious food to our ~225k BoP customers.

How will you leverage an investment from Nestle to expand the impact of your work?

Recently we won $260k from EMF & Expo 2020 to develop IoT vending machines. If Expo 2020 is impressed with the impact these machines create, we have proposed funding to deploy 950 IoT connected food vending machines. We expect our 1st, 100 new food vending machines to be in Algramo’s stores ~Q2, 2018. With CSV funds, we would be able to leverage the higher volumes of beans, with the deployment of our vending machines to increase our economies of scale, while reducing distribution & packaging costs. Lastly, Algramo is interested in partnering with a values aligned FMCG brand if we can create a win-win relationship that enables us to operate according to our values and increase our social impact and environmental benefits-perhaps Nestle?

Spread Strategies: Moving forward, what are the main strategies for scaling impact? What’s the projected impact for the coming years? Are you planning to expand your programme into new locations? On what assumptions do you build your scale-up plans?

Algramo won Top Idea, in Ellen MacArthur Foundation, Circular Design Challenge. This award supports us as a world-class solution that can help reduce the flow of plastics entering oceans/rivers. Plastic entering our oceans is mostly coming from rapidly expanding economies of the developing world- mainly the BoP of these economies. Algramo’s business model is focused on the BoP & the reusable packaging of the essential products that Algramo sells make up many key types of plastic that are leaking into our oceans/rivers-this is ex. of us benefiting water & ultimately human health as plastic bioaccumulates in food chains + clogs drainage=spreads disease. There is a strong demand for our distribution system that reduces ocean plastic pollution, this provides us grant opportunities to help us expand to coastal regions to scale up our impact/profitability-allowing us to sell greater volumes of food. If CSV funds us & impact goes according to plan, we will explore sourcing more food from SF.

Team: What is the current composition of your team (types of roles, number of full-time vs. part-time staff, board members, etc.)? How will this team evolve as your initiative grows?

José Manuel Moller, CEO & Cofounder–José provides leadership by overseeing & advising the team, he has a wealth of experienced advisors helping him make strategic decisions. José has valuable connections/opportunity from orgs like World Economic Forum & Ashoka Foundation-where he is a WEF Global Shaper & an Ashoka Fellow.
Sebastián Burgos-GM-with his background in Commercial Engineering & Business Intelligence, he runs day-to-day operations. His deep understanding of operations enable José to focus on other strategic opportunities.
Brian Bauer leads sustainability/impact strategy. He won Harvard's 2017 Dean's Prize for Outstanding Sustainability Capstone-for his applied research on Algramo. He helps José with international outreach & strategic alliances-like a recent UNEP feature.

Awards: What awards or honors has the initiative received?

Schwab Foundation, Chile's Top Social Entrepreneur of the Year for 2017
Ellen MacArthur Foundation Circular Design Challenge, won Top Idea US $200k, October 2017
Expo 2020 Global Innovator won tier 1 funding of US $100k-May 2017
B Corp Best for World-2015-16
Fast Company-Most Innovative Company in Latin America 2015
CEO Ashoka Fellow 2014

Organizational leadership: How are you influencing your field of work in the present?

Algramo has been a highly awarded social enterprise, these awards help us have greater influence with stakeholders. But, our social impact has been focused mostly on the downstream of our value chain. The majority of Algramo’s awards are for Algramo’s ability to reduce the cost of food for low-income consumers with an environmentally friendly distribution system.

If awarded funds from CSV, we will be able to maximize our impact in the upstream areas-like paying milestone–based payments, micro-insurance and agroecology benefits to our SF. If we can sustain this value creation for our SF, we will put pressure on others to support SF in similar manners & hopefully we expand our impact into other agricultural products that we distribute.

Should you be successful, please confirm your availability to attend the Ashoka Impact Boot camp and Creating Shared Value Prize Live Pitch Event at the World Water Forum 13-16 March 2018

  • Yes, I am available to attend the events on 13-16 March 2018

Evaluation results

3 evaluations so far

1. Overall evaluation

5 - This idea rocked my world. It’s awesome! - 33.3%

4 - This idea seems really exciting. With a little more polishing, it’d be among my favorites. - 0%

3 - I think the idea is great, but it needs some work before it moves onto the next round. - 0%

2 - I liked it fine but preferred others. - 66.7%

1 - It didn’t make my heart beat faster. Needs significant revisions. - 0%

2. Innovation

5 - Absolutely, 100%! - 33.3%

4 - I feel really good about this - very promising - 0%

3 - This has some good elements and some areas for development - 66.7%

2 - This doesn’t inspire me so much - 0%

1 - This entry is weak here - 0%

3. Social and/or Environmental Impact

5 - Absolutely, 100%! - 33.3%

4 - I feel really good about this - very promising - 33.3%

3 - This has some good elements and some areas for development - 0%

2 - This doesn’t inspire me so much - 33.3%

1 - This entry is weak here - 0%

4. Financial sustainability

5 - Absolutely, 100%! - 0%

4 - I feel really good about this - very promising - 0%

3 - This has some good elements and some areas for development - 100%

2 - This doesn’t inspire me so much - 0%

1 - This entry is weak here - 50%

Nothing stands out! I thought it was great. - 0%

5. Potential to Scale / Replicability

5 - Absolutely, 100%! - 0%

4 - I feel really good about this - very promising - 33.3%

3 - This has some good elements and some areas for development - 66.7%

2 - This doesn’t inspire me so much - 0%

1 - This entry is weak here - 0%

6. Organizational Leadership

5 - Absolutely, 100%! - 0%

4 - I feel really good about this - very promising - 33.3%

3 - This has some good elements and some areas for development - 66.7%

2 - This doesn’t inspire me so much - 0%

1 - This entry is weak here - 0%

7. Potential for Creating Shared Value

5 - Absolutely, 100%! - 33.3%

4 - I feel really good about this - very promising - 66.7%

3 - This has some good elements and some areas for development - 0%

2 - This doesn’t inspire me so much - 0%

1 - This entry is weak here - 0%

Attachments (1)

Harvard_Implementing Sustainable Supply Chain Management at a Food Startup.pdf

Above is a PDF describing the applied research I did for Algramo for my Master's Capstone-link is below. This research won Harvard's 2017 Dean's Prize for Outstanding Sustainability Capstone. This article discusses how Algramo plans to use geospatial data to minimize the impact of water scarcity in Algramo's supply chain & the business/sustainability benefits of its IoT vending machines. https://www.extension.harvard.edu/inside-extension/building-sustainable-supply-chain-food-startup

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Photo of Old

Really liked the content of your submission. Another great application of inventive thought. Could be enhanced and collaborated for greater overall benefit. Look forward to hearing more and collaborating in your good efforts

Photo of Brian

@Old Friend Thank you very much for the kind words. Algramo is open to collaborating if we have a values aligned partner who can help us increase our impact or benefit more people. We are open to collaborating with a FMCG brand if we see creating shared value in a similar http://manner.do you have any other suggestions on a potential partner that might be a symbiotic partner for Algramo. Thank you in advance for your advice and best of luck with the CSV contest.

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