How One Smart Vending Startup Is Expanding

After 16 months under relentless attack from Russia, Ukraine has suffered catastrophically in terms of lives lost and economic collapse. However, the fog of war can obscure more mundane realities; for instance the fact that life, and business, for many, continue in cities like Kyiv, the capital.

One company, Neuroshop, has developed an automated vending platform for the retail business-to-business (B2B) market based on a smart refrigerator. The startup’s young executives and core investor have taken a business-as-usual approach in the midst of the deadly war.

Their product, branded with the company’s name, is based on a now increasingly accepted idea, thanks to Amazon’s
AMZN
Just Walk Out technology and other similar concepts. The consumer simply picks up what they want from the fridge shelves and leaves.

In Neuroshop’s case, cameras follow the user’s hands while other tech automatically determine what’s gone and it is charged through the consumer’s chosen payment method, usually a credit card that’s been pre-authorized via an app.

The system relies on three technologies to make it ‘smart’ and workable: an RFID scanner, scales, and computer vision. The scales and scanner independently determine the products left in the refrigerator, but mainly act as a control to confirm the camera ‘decision’ and prevent any errors.

“Using clean placement of products on the shelves coupled with computer vision, the system works smoothly. Meanwhile the merchandiser or retailer can also receive timely notifications about food expiration dates,” said Alexandr Goncharov, CIO of Neuroshop.

Uber
UBER
inspires vending platform

Neuroshop’s current 100% investor, owner, and managing partner, told me that it was his “fantastic” Uber experience about 10 years ago, all done through an app that was the impetus for the company’s current direction. On founding in 2018, Neuroshop had focused on various retail solutions but it wasn’t until 2019 that the decision was made to explore the vending market for smart fridges.

Vending machines are familiar to most people, but for decades they have changed little. Only relatively recently have credit card readers, touch screens, cameras, and other tech been added—with product ranges also expanded in places like airports.

Neuroshop sees a gap in the global retail vending machine market which, according to Grand View Research, was valued at $52 billion in 2021 and is expected to have a compound annual growth rate (CAGR) of 10.7% from 2022 to 2030. The Kyiv company is tapping into the chilled food segment where there is increasing demand for on-the-go snacks due to hectic lifestyles, with other players also taking aim.

Moving on from the test phase

So far, Neuroshop has installed its equipment into offices, with retail environments the next step. There are about 20 fridges in Ukraine, four in Poland, six (by July) in the United Arab Emirates; plus Denmark and Moldova; all in business centers where there are shared kitchens or dining rooms.

In Ukraine, partners include Mr.Grill, М’ясторія (Myastoriya), Art of Cooking, and Су-шеф (Sous-chef) and in Chișinău, Moldova the partner is Lunchtime. The test phase, now finished, lasted about two years and production has been ramped up as rollouts are now proceeding.

The products available in the units range from ready meals, salads and soups, sandwiches and burgers costing between $2 to $3.50 in Ukraine. The statistics are looking healthy: each unit sells about 400 dishes per month, earning about $1,150, of which $350 is profit. “While consumers are surprised at first by the concept, not having to ‘do’ anything to retrieve a meal is something people love once they get used to it,” said Neuroshop’s product lead Alexandr Pivtorak.

The fridges have QR codes that consumers use to firstly download the app and input their credit card details. Then they can use their phone camera to unlock the fridge door via the code and take what they want.

The app is integral to the product because it acts as a marketplace that connects Neuroshop’s clients (the fridge purchasers) with the users and food suppliers. “For example consumers may select items they’d like to see in the fridge (from a full list of connected suppliers) and the fridge owner might then take these ‘leads’ into consideration when creating a menu for the following week,” said Pivtorak.

The test phase ironed out some expected and unexpected teething problems. This was crucial in establishing ‘proof of concept’. “Only by ensuring that the business model is functional and healthy—and all processes, including production, are set up and in working order—can we jump into funding rounds which is our plan,” said Goncharov.

The company is building a network of distributors and dealers with the aim of not being a B2C player but a B2B solutions provider in food vending. “Our retail partners know the places where they want to vend and the foods to sell to consumers. That’s why we have two solutions. One is a white label service for larger companies that produce their own food and know where to sell it, while our franchise option is for companies wanting to purchase a fridge as a new, untried business and where we will help with the operational side,” explained Goncharov.

The latter off-the-shelf franchise model has been launched in Ukraine and Poland but the hands-off white label option is being offered in other countries. So far, the geographic expansion, for example, in the UAE, has happened more by luck than design. However, the wider growth strategy is to target European Union countries and, due to interest, Neuroshop has started to look at the United States and Canada.

On a war footing

The logistics of expansion during a war can be complex. Neuroshop’s main office is in Kyiv and there is a small outpost in Poland. Together they employ about 40 people. In Ukraine, men aged 18-60 are not allowed to leave the country due to military call-ups for up to one year. Due to this, the Poland office is being run by female employees.

There is a mechanism to ‘reserve’ a proportion of company staff so that a business remains a functioning entity, but it involves a lot of bureaucracy. At the start of the conflict, the plan was to move the company to western Ukraine but it has not come to that. “We have adapted to the air raid alarms, and the new life that we now have,” said Pivtorak with a ‘keep calm and carry on’ mentality.

Some issues inevitably impact work such as the loss of Internet connection, sometimes for as long as 60 hours, not to mention psychological effects on staff. Generally, businesses in Kyiv know when they will have no electricity as they are given advance warning from the utility companies. “We plan our meetings around this so that developers—who are working from home—can be online at the time,” said Pivtorak.

“More than a year after the war started, the most important thing is that we now have a lot of belief in ourselves, in our product, and in our country. We became much stronger and all of us are far more optimistic than we were—even before the war started,” said Goncharov. “We also believe that we can grown while in Ukraine, no matter the blackouts, missile attacks and possible future assaults. We have no plans to move anywhere, and our network of devices is expanding in Ukraine faster than in any other country.”