The aim of the R2π project is to find and analyze sustainable business models for circular economy in a variety of industrial sectors. Then, it aims to develop propositions that will support such business models. This report develops the case of Phenix, a French company in the food sector, illustrative of a successful circular business model.
Phenix was created in 2014 by two entrepreneurs, Jean Moreau and Baptiste Corval and went through a steady growth, now having 18 regional offices in France and 3 international ones in Copenhagen, Lisbon and Madrid. The company’s global mission is to “unleash the potential of waste”. With an initial focus on food-waste, Phenix has set up a digital platform that works as an intermediary connecting waste “suppliers” (mainly retailers) and waste receivers (mostly charities). Through this service, Phenix prevents food close to expiration date from being wasted, and turns such waste into food donations. Beyond its matchmaking platform, Phenix also provides partners with a secured supply chain. Phenix achieves ‘triple bottom line’ value creation, by helping retailers to reduce the cost of food waste (economic benefit), enabling charities to get free access to food donations (social benefit), and helping society to reduce the overall amount of food waste produced in our economic system (environmental & circular economy benefit). It is, therefore, an example of a “mission-driven platform”, built on a hybrid model that combines business, social and environmental value creation.
Presently, Phenix works with more than a thousand supermarket clients, has 100 full-time employees and helps to distribute over 40 000 meals per day. Phenix business model is circular by design. The organization offers a service to secure the recovery of unsold food products. Doing so, it organizes a circular sourcing for charities and helps retailers managing their products end-of-life. Because Phenix acts as a service provider, it does not generate waste but rather helps other organizations reduce their own.
As a multisided platform, Phenix has developed a distinct pricing scheme to address each side of the platform. Phenix revenue model is based on monetizing the supply-side of the platform, through a fixed commission on the waste-management gains achieved by distributors using the platform. On the other side of the platform (demand side), Phenix organizes free access to food for social charities, thus achieving a social benefit and facilitating the growth of the platform.
The French legal framework offered a favorable context for the development of a profitable business model for Phenix. As part of this regulatory framework, an existing tax incentive introduced in 1981 under the “Coluche law” providing for a 60% tax deduction for food retailers and producers who donate foodstuffs instead of generating waste. Through its secured supply chain, Phenix organizes traceability, secures savings for retailers and can charge a commission on the total savings on waste management, making the business model viable.
As a fast growing and profitable start-up, the company is currently exploring different opportunities for geographical diversification in other European and non-European countries. The company is also currently engaged in processes of horizontal diversification to expand its services to new types of waste, and explores how to improve its current offer through digital solutions.
While the company strategic position appears quite robust, few points of attention need to be considered: the business model remains dependent on favorable regulations, it remains labor intensive and new market acquisitions require large investments. Yet, new technology such as big data or IoT can radically improve the model’s cost-efficiency. Lobbying skills and network effects can protect the regulatory framework and diversification strategy to other resources (non-food wastes) and new skills (consulting) can strengthen the business model.
Beyond the strategic analysis of the company, this case study has significant implications for public regulators. It first highlights the central role of public regulation in the innovation process. And it illustrates the hypothesis of Porter and Van der Linde, according to which properly crafted environmental regulations not only help to reduce environmental externalities, but they can also lead to profits for innovative companies (Porter & Linde, 1995). Overall our results points toward a mix between a regulatory framework and private dynamics of innovation to create successful circular business model. On the innovation side, the case shows how mission-driven platforms can reconfigure stakeholder relations in a given business ecosystem and improve operational efficiency of these relations in order to decrease waste and increase re-useThis project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 73037
