When it comes to solving everyday challenges, we don’t always need to reinvent the wheel. Sometimes just operating in a better, smarter way is enough.
That’s one of the things that attracted Kiko Ventures to Vytal, when we first met the founders Fabian, Tim and Sven, and why we were thrilled to be able to invest in Vytal. To solve the world’s climate challenges we need both ‘deep’ technology as well as the kind of clever business model innovation that Vytal is a great example of.
What is Vytal?
Vytal is building the tech platform for the reuse economy, eliminating single-use packaging waste. Starting with delivery food and to-go consumption, Vytal offers restaurants, canteens and supermarkets high-quality reusable containers for a pay-per-use price that is below the price of disposables. Consumers borrow containers for free, then return them at thousands of convenient locations or with delivery services like Gorillas. The system is easy to use as restaurants and end-users simply register containers by scanning them with the Vytal App. In the background, though, there is sophisticated technology, which tracks a vast number of individual containers every day and enables millions of transactions.
In less than two years since launch, Vytal has become the largest digital reuse operator in Europe (and we believe world-wide). It has saved over 4 million items of single-use packaging and is available at 1,000s of restaurants, canteens, and delivery services in 8 countries.
What problem is Vytal solving?
Single-use packaging is a growing issue, with an estimated nearly 200 million tonnes in our oceans alone. But we all know the convenience of picking up a take-away lunch or ordering dinner from one of the food delivery platforms. Single-use plastic is very hard to do away with.
The Kiko team has been working in cleantech for decades and we have always been looking for solutions to the packaging problem. Many approaches have been tried but, until recently, none seemed to gain significant traction.
A lot of great science went into biodegradable materials, but these are usually expensive and almost never recycled or composted due to the lack of adequate collection and recycling infrastructure. There are also traditional deposit-based re-use systems, but these don’t seem to scale as they cannot cope with the complexity of the task. Germany’s long-standing deposit system for bottles is the notable exception, but even that never grew beyond Germany and beverage bottles. Deposit systems are also fundamentally flawed as they typically have low return rates, putting into question their true sustainability.
We believe Vytal has found the first truly scalable model for food packaging. The company is taking the ‘as a service’ model known from other industries and applies it to the reuse market. Per-use payment by the restaurants, rather than deposits from customers, enables a much smoother customer experience, and allows for seamless integration with the large food delivery platforms. It also ensures reliable digital check-ins and check-outs, creating complete visibility and smoother logistics.
The efficiency of the system is astonishing: more than 99% of the containers are returned, a far higher fraction than even the German bottle reuse system. The average return time is just four days. And the system operates almost completely autonomously with redistribution and container cleaning achieved through the restaurant partners.
All this is even more surprising considering that Vytal is still a young company and has barely started to penetrate the 100,000s of restaurants, canteens and supermarkets in Germany. The network effects are strong and getting stronger as Vytal dominates the larger cities across the country.
All this means there is huge potential for growth. The system is easy to internationalise with Vytal adding seven new countries in the last 12 months alone. Engagement with the Vytal App is unusually high as customers use the system regularly. Vytal also has valuable usage data, payment details of customers and restaurants, and is integrated with delivery systems, ERP systems, and billing systems. Due to its impact mission, there is also strong positive association with the Vytal brand and the company enjoys high customer trust. So it is easy to see how Vytal could expand into adjacent business areas over the medium term.
The arguments above have been true for years. So why should reuse happen now, if it didn’t succeed in the past? – In fact, we feel there is a “perfect storm” for reuse coming.
Outrage over ocean and micro plastic and the rapid growth of take away and food delivery waste during the Covid lockdowns has increased consumer awareness. Rapidly rising commodity prices and a recent EU-wide ban on cheap Styrofoam have increased the cost of single-use plastics, making reuse the most economical option for restaurants. Technology developments of recent years, like cloud computing, QR codes, and routing algorithms, have made complex logistics easier and cheaper to manage. Finally, a recent EU directive is driving member countries to introduce reuse legislation. This is particularly true for Vytal’s home country Germany, where a mandate for restaurants to offer a reuse option is coming in January 2023. Consequently, the large food chains are looking for solutions. Happily, Vytal is already working with many of them.
Why Vytal for Kiko?
At Kiko we look for innovative businesses run by entrepreneurs who get things done. The Vytal team impressed us with the entrepreneurial drive to grab an opportunity when it presented itself. When Covid hit in 2020, Tim, Fabian and Sven realised that the world was changing and food take-away and delivery was exploding. They quickly jumped on the opportunity and rapidly iterated their operating model to find the secret sauce and achieve scale ahead of others. Regulatory changes are now giving the market another boost and Vytal is perfectly positioned to benefit. We believe that with this second wave the Vytal team will cement its position as the leading reuse system in Europe and beyond.