The Potential of Smart Packaging in Sustainable CPG with Adhithi Aji of Adrich

Decarbonizing Commerce

This week's episode features Adhithi Aji, founder and CEO of Adrich, a smart packaging solution for connected e-commerce. Adrich takes some of the friction out of replenishing consumable products, helping overcome some of the challenge of changing behavior in the shift to more sustainable consumption models.
Tune in to hear more about how it plays a role in accelerating behavioral change in areas like refillable packaging, other use cases and possibilities, and the unit economics of new technologies in the connected packaging space.

Learn more about Adhithi Aji:

• Link to Adrich’s website
• Link to Adhithi’s LinkedIn

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TRANSCRIPT BELOW:
Keith Anderson: Welcome to Decarbonizing Commerce, where we explore what's new, interesting, and actionable at the intersection of climate innovation and commerce. I'm your host, Keith Anderson, and together we'll meet entrepreneurs and innovators reinventing retail, e-commerce, and consumer products through the lenses of low carbon and commercial viability.

I'm Keith Anderson. This is the Decarbonizing Commerce podcast. Thanks for listening. This week's guest is Adhithi Aji, who's founder and CEO of a company called Adrich, which is smart packaging for connected e-commerce. And I had to spend a little time on the website and with Adhithi to understand what smart packaging for e-commerce is all about.

But the more I learned, the more intrigued that I was, because, you know, we've had a few conversations already about the role of refillable and reusable packaging, both on the consumer side and backstage in internal logistics. And one of the big themes of the conversation we had with Mike Newman of Returnity, if you caught that episode, is behavioral change is really challenging.

And even when somebody has an intent to make a choice as a consumer that is maybe more sustainable, inertia and habit play a big role in preserving the status quo, and so I won't steal Adhithi's thunder about how Adrich does what it does, but it takes some of the friction out and effectively automates some of the work of replenishing a consumable product that you might want to reorder and refill packaging with.

And so in our conversation, we certainly got to know a bit more about Adhithi and where Adrich comes from, how it works, how it plays a role in accelerating behavioral change in areas like refillable packaging. But we talk about other use cases and possibilities. I'm always curious about the unit economics of new technologies like this, and we covered that.

We talked about some of the categories where it's a better fit than others and much more. So, I think you'll enjoy meeting and learning from Adhithi Aji of Adrich.

Adhithi, thanks for joining the Decarbonizing Commerce podcast.

Adhithi Aji: Hi, Keith. Thanks for having me here. Excited to talk more.

Keith Anderson: Well, so am I. You know, I discovered your company a few months ago, and the website has a lot of words that were interesting to me. You know, you characterize what you're doing at Adrich as Connected E-commerce, I thought maybe just to contextualize things for listeners, we could start with, you telling us what is Adrich exactly and how did you end up starting the company?

Adhithi Aji: Sure thing.

So, Adrich is a smart packaging enabled e-commerce, and connected e-commerce solution in that it has a hardware, which is a smart label, that tracks consumption of each individual unit of product in terms of the volume remaining. And, it has sensor-based smart labels and smart in the true sense that it's not RFID, it is not a QR code, but it's a sensor-enable label that tracks volume remaining and auto reorders automatically for the consumer or end user without having them to push a button or scan or do anything. And when they're down to 20% it detects that, it reorders, and it routes it to any e-commerce platform. So for you as a consumer, the next time you run out of coffee or shampoo, you'll find one at the door.

And for the brands and retailers, it's really about increasing consumer lifetime value and improving the subscription programs that we have today. Because today, consumers, when they run out or when they opt in for subscribe and save or any such programs, you either get more product than you need or you run out earlier.

And that is not very fun because they charge your credit card. We changed that to individual consumption based subscription, which means you'll get the next product only when you run out. Not early, not too late.

And that way brands are reducing the churn from the subscription programs as well.

Keith Anderson: I'm smiling because I have somewhere around a half dozen subscriptions that either get paused or a month gets skipped as we end up having a surplus and then we end up going a few weeks without, and you know, when, when I was getting to know your platform, it reminded me certainly of subscribe and save type programs and also of the dash replenishment button and dash replenishment service that Amazon introduced and has now sort of retired and rolled into Alexa.

But I remember in, in both of those implementations, the idea was almost an extension of one click ordering for replenishable products to, again, reduce some of the friction of, getting what you needed again, right when you need it. And so, both from a commercial and a customer behavior point of view, this is a really interesting idea.

Adhithi Aji: Right? On the note of the dash button, right, so we are integrated with Amazon on Alexa now, so think of it as the advanced version of the dash button. I think one challenge, with the dash button was, that consumers had to have these buttons all over their homes. And, an interesting, learning from that dash button was the kids were going on pressing the button because it was fun.

And they'd just keep ordering, right? So the parents got a whole bunch of products. So, we're in fact working with Amazon to kind of introduce this as an advanced version of the dash button where it's zero touch. You don't even have to push a button. It'll automatically detect you're running out and auto reorder.

Keith Anderson: Got it. So, tell us a bit about how, how did you end up, you know, working on this problem and creating Adrich?

Adhithi Aji: Yeah, it's interesting. It started as a capstone project when I was studying in Carnegie Mellon. I did a master's specializing in innovation management, right? How do you bring high end research technologies to market? And, you know, during that time, came up with an idea. So I'm an electrical engineer by trade.

And also I have a supply chain management and MBA in that program. And, so the last mile data was sort of missing, right? There was a lot of data up until the retail store, but once the product leaves the store, it's sort of a black box. Brands don't know how consumers are using the product, how much they are now, are they using it once and throwing it in the trash?

That gap in that data set is probably why all the problems of supply chain, marketing, and in terms of inventory control, all of those problems stem from not having consumption data. So the idea, and honestly my passion circles, came together with electrical engineering and supply chain and product management in that our mission became to enable brand managers, retailers with usage and consumption data and that last mile data that could really empower them to build better products suited to consumer needs, make sure they get the right product to the right consumer at the right time. And for consumers, really, our days are so busy these days that we want some quality time and, just bringing convenience into the day to day life. That's really the key and doing that with sustainability in mind because we can enable this auto reordering for refills and not just single use plastic. And that way we are reducing reusing, re refilling, introducing refill and reducing single use plastics.

Keith Anderson: Well, I appreciate you handling that segue on my behalf. That was where I was going to lead the conversation next, because, you know, that's one of the clearest linkages, I think, to what you're doing and some of the goals and targets that a lot of, certainly big CPGs, but not just the big ones, have.

And as you and I were discussing, previously, the, the, a challenge, maybe the biggest challenge to several of these consumer facing refillable and reusable packaging initiatives has really been driving adoption and getting shoppers to, you know, be consistent in using the refillable packaging when the cost and convenience of single use, in addition to just being so widespread and more available, you know, the customer behavioral component is one of the bigger hurdles.

And so tell us more about what you've learned about how this kind of connected label can accelerate the behavioral change of using refillables.

Adhithi Aji: Sure thing. And Keith, honestly, I brought up the sustainability because that seems to be the top of mind for consumers, right? With environmental conditions changing, we've actually seen consumers becoming more cognizant of what they're using, how they're using it. And I think that's a big driver, market driver that, probably CPG retailers, all of them are, also seeing.

And that's a good news, right? I guess it's now about using technology to really help bridge the gap in communication between the brand retailers and the consumers because brands have a purpose of introducing refill to reduce single use plastic and communicating that to the consumers could go a long way in terms of changing the behavior.

We, in fact, are working with, Clorox, Unilever, Reckitt and the like across product categories to be able to introduce refill. And it could be refill at home or refill in stores. And how we're doing that is by embedding our smart labels. So I have a, example of a Clorox, which we worked as a pilot and, introducing this as a smart kit, a smart starter kit, which means we can even position it as a smart subscription program.

We just talked about how, you know, potentially subscriptions get you more products. So consumers opt into this as a starting point saying, "Hey, I don't get the next product until I need it." So that's great news. So they buy into this and, because it's smart, it creates a sense of IOT experience, so it already creates that elevated experience, so they create a one time setup, and then they forget about it, and you can see the label is embedded behind the bottle of Clorox, and this is a bottle for life.

Right? When they run out, it auto reorders refill, which is a diffuse pod, and consumers fill this with water, they diffuse it, and they're good to run out and do this whole thing again. So, by digitizing the system, we are detecting when they run out. But we also create a touchpoint to, to consumers and the brands to understand when they're refilling.

So it creates additional points of engagement, which one informs the consumer that, "hey, you're running out," you know, "you're getting your next refill is on its way," or you can prompt them as to where they can get refills. But more importantly, when they refill, you can encourage them because every time they refill, you can probably communicate the carbon credits that they are saving and empower them with a push notification or a text to be part of this whole ecosystem change and environmental change.

And I think that's very key in driving adoption because I think, you can also, once the digital link is created, you can communicate the brand purpose. You can communicate how they are helping with sustainability and broadly speaking, brands can also use the digital connection to drive the necessary behavioral change, by sending push notification and text automatically at different points of view.

Does that make sense?

Keith Anderson: It does make sense, and I encourage anybody, you know, some of the examples that Adhithi just shared are, you really have to see them to understand them, so I encourage you, visit YouTube, or we're now going to begin posting the videos to Spotify as well, but for those that are just listening, I just want to play back a little bit of what I observed so that if you can't see the examples, you sort of are able to follow everything that we just covered.

You know, the first thing that we looked at was a really elegant, sort of, smart, kit that was packaged in, in well branded packaging that did a couple things. You know, it, it emphasized, the smart connection that the package itself has and had instructions on how it works and also featured some of the environmental and likely other benefits of working with this package.

And then the second example was the refillable package itself and one of the concentrates. And, you know, maybe you can just take a moment, Adhithi, and describe how does the sensor that sits on the package itself work exactly and what are some of the contexts in which you've already demonstrated it accurately detects when it's time to reorder?

Adhithi Aji: Sure thing. So it, the sensor has three, the smart label, and we call it digital IoT label because it has sensors. It has three main sensors in it. One is a motion sensor, so, right off the bat, it detects only usage. So every time you spray or you pour a product or you scoop a product, so it only captures usages and it eliminates any false positives to get technical, basically, if you just move around the bottle or take it from the shelf on the kitchen counter, those data points are eliminated.

So, the motion sensor is used to eliminate, false positive and pick up only usages. Now, within that subset, we have, two other proprietary patented sensors on this label, and it, uses electromagnetic characteristics of the product. So, the label sends a pulse through the product from outside the packaging it takes, the reflection and takes the viscosity and the packaging type, so, whether it's a PET or a HTP and all of those material, characteristics, and determines whether there's product remaining or not. And that's how it uses some neural networks to actually determine volume remaining.

So, it's the same three sensors, whether it's going on a spray bottle or a bottle of spirits or a nutrition pills. The difference is that we calibrate those same sensors to simulate the type of usage, whether it's a pour or a spray or a scoop. And from there, with the viscosity of the product inside the packaging, we determine how much is remaining.

And then it talks Bluetooth, so anything in the home environment that talks Bluetooth, it could be a phone, it could be Alexa or a Google Home or it could be a smart refrigerator. So it's fully automated and then it comes to our cloud and we process it based on individual consumer patterns and it, once you run out, our cloud communicates to any other e-commerce and routes that order.

Now, all of this is done through opt in, right? So there is a one time setup that consumers will do and they know it's smart. So, everything is done with privacy compliance kept in mind.

Keith Anderson: My mind is headed in 10 different directions, so I have to, I have to pick one. What I'm really thinking about are, you know, the several use cases for a technology like this, and then the flip side of that topic is, well, what are the unit economics and how does it pay back, you know, why don't we start with the really fun stuff for a second, which is, what are the possibilities?

Because I think, you know, we've been talking about refillable packaging, which, as, as you've said, is a, it's a topic of growing interest, although it's a very small percentage of all packaging today. And again, part of the reason that I was so interested to learn more is the behavioral change component of what would have to be true for refill to take off at scale is a big part of why the industry is, is, studying it so carefully. But I also think about, you mentioned pills and the sort of compliance component, and that actually got me thinking about, first, refill is so interesting to the brands because it allows them to reduce or eliminate packaging waste, and as in the Clorox example you shared, a lot of refills are concentrated and therefore have less volume, they're lighter weight, which also translates to additional savings on the emissions front in addition to savings from producing less packaging.

But the waste component of the product itself is another one that I don't think we've discussed because I can imagine, you know, if you, if you have as you were describing the opportunities to communicate based on intelligence about the consumption pattern, you know, if you've got the expiry date for a product, I could imagine, I don't know what your pantry looks like.

Mine always has a box of snacks or cereal or something that's hidden that we've forgotten about. And again, just for the sake of the hypothetical and, you know, exploring what could be possible imagine every product in the pantry and every product in the fridge was equipped with this. I'm not saying it makes sense.

I'm simply saying, imagine you could notify me weeks ahead of, "hey, this cereal is going to likely be past its best by date three weeks from now, so maybe you want cereal for breakfast." You know, food waste in particular, but waste in any category is another big topic. And there's so many interesting approaches to food waste.

This, this seems like an interesting possibility.

Adhithi Aji: Yeah, to that point, yes, it opens up a lot of use cases for the consumers as well, you know, to your point, food wastage is huge and, also making it still lifestyle inclusive for the consumers, right? Today, probably you're storing cereals on a, in a airtight container. You're storing pet food in a container.

So brands could probably, give some additional containers that are co-branded with our smart label and the consumers can store it in that. And then it still creates a digital communication where you can communicate the expiry dates and how fresh, you know, in case of coffee, how fresh it is. And, more importantly for consumers, they now have a refillable container that's smart, that'll auto reorder, and brands can ship a recyclable package that they can refill.

So that is one area of still getting sustainability into the market, but keeping it lifestyle inclusive while giving additional, value to the consumer. So, expiry is being one, in case of nutrition and beauty, compliance or regimen building. So if you have to take vitamin two times a day, just make it a smart digital assistance around them to just nudge them on friendly reminders. You know, for beauty, if it's a night cream, you know, just a friendly reminder to be, to create those habits.

So that's in the high involvement category and in the low involvement, of course, like pet food and those, you don't want to run out in the middle of the night and it just... plain convenience, right? Just when you run out the next refill or refillable package shows up at the door. So there are ways to bring about sustainability, reduce food wastage, but the value equation remains with the consumer that will help drive adoption as well.

Because you are introducing new avenues in their existing behavior, not necessarily changing the entire lifestyle. So there is a reusability with your single use packaging as of today, but bringing in the refill using smart bins as a concept.

Keith Anderson: And is that, is that being piloted in categories like pet food or anything today?

Adhithi Aji: Yes, pet food, coffee, those are categories that, we have been working in, have got some great results. We've seenn across categories on an average at least 20 to 30 percent increase in auto reorders because of the convenience factor. And because it auto reorders, brands are getting a increased lifetime value.

And we saw, incremental reorders from the same consumer up to 50 percent. So, because they don't run to the store and, and, try and buy some other product when they run out, you're able to, retain the consumers for a longer lifetime value and at the same time increase your, top line with incremental orders per consumer.

Keith Anderson: Hey folks, this is the part of the show where we say thank you and see you soon to the general audience, plus and higher tier members of decarbonize.co, stay tuned for the rest of the episode.

Well, if folks want to learn more about the capability or get in touch with you, how should they find you?

Adhithi Aji: Yeah, I'm, of course, very approachable on LinkedIn, you know, it's, just a text message there, or I'm also available through our website, and our email is [email protected] so, certainly, email, very accessible, but more than happy to collaborate and talk more about what we are seeing in the industry.

I think they're very positive market drivers to take sustainability to the next level along with subscription business model for CPG.

Keith Anderson: Well, Adhithi, thanks so much for joining me.

Adhithi Aji: So thank you. Thanks for having me.

Keith Anderson: Thanks for listening. I'm Keith Anderson, the executive producer and host of Decarbonizing Commerce. Sonic Futures handles audio, music, and video production. If you enjoyed the show, we'd really appreciate it if you took a moment to subscribe and leave a review or share it with a colleague. For the full episode and more member exclusive insight and analysis, join the decarbonizing commerce community at decarbonize.co. Thanks for listening and we'll see you on the next episode of decarbonizing commerce.

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