New Research highlights dynamics between Start-ups and FMCGs in Global South

Utrecht University Researcher Wiebe Bor joined the Zero Waste Living Lab team and held 26 interviews with Reuse Start-ups in the Global South and FMCG companies to shed a new light on the powerful dynamics between local reuse innovators and major, global corporations.

The research revealed that there are currently new windows of opportunity opening the transition towards reuse: There is an increasing awareness of the plastic waste problem in Indonesia that is putting pressure on the single-use plastics regime. There is a ban on sachets in the making in Indonesia that could provide an additional window of opportunity to fuel the transition. Globally, the Ellen MacArthur Foundation is channeling the pressure into a call for reuse that is being heard by the FMCG companies.

All multinational FMCG companies that participated in the research are considering reuse, but none have dared to implement reuse in emerging economies yet.

The FMCG companies are concerned about safety issues around reuse, such as counterfeiting, contamination, hygiene and related legal concerns. The industry is found to be risk averse and is not innovative.

Start-ups however, are pioneering reuse in Indonesia, and are proving that there is a market.

Start-ups dare to test out new technologies that are making reuse more attractive. Low sachet prices are a barrier, but only a small discount or a reward is enough to attract price sensitive Indonesians. The entrepreneurs also found that can be more convenient than sachets due to control over the dosage. Moreover, culturally they find that Indonesian are open to reuse and are already used to refilling.

Opportunities to realize a transition towards reuse

To realize a transition towards reuse, start-ups and FMCG companies need to work together. The two complement each other. Reuse start-ups can pioneer reuse models, because they are agile, innovative and willing to take risks. However, they could greatly benefit from the market access and financial power of multinationals. FMCGs see the small start-ups as symbiotic and showed great interest in piloting with the start-ups. However, the two actors had trouble finding each other.

Going forward, one major recommendation towards FMCGs would be to have a clear contact point and protocols in for reuse start-ups to facilitate collaboration. The reuse start-ups need to be aware of the barriers that the FMCG companies see, so that they can innovate to overcome these barriers such as logistics and local hygiene policies. Entrepreneurs also need to be careful that FMCGs do not gain too much power as an investor early on. Building relations with other actors is also important for scaling up. Finding sustainable investors is important, but can also be hard. The international sustainability community proved to be a important multi-level relation for start-ups. They can gain funds and support from awards and international organisations. These and other platforms are also important for entrepreneurs to exchange knowledge about reuse and learn about broader development and opportunities to scale up. Larger start-ups are in a better position to negotiate and provide the logistics and the platform that is needed to realize collaboration with multinationals. 

In the end the transition towards reusable packaging can only be realized when start-ups and multinationals work together towards it.

For more, the full research report:
Wiebe Bor (2020): Releasing the Reuse Revolution in the Global South – The Transition of Businesses from Single-Use Plastic Packaging to Reuse Models at the Base of the Pyramid in Indonesia

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