Key Learnings from Episode 24: Scaling Sustainable Packaging Innovation with Malcolm Waugh, CEO of Frugalpac

In Episode 24 of Beyond the Raise, Malcolm Waugh, CEO of Frugalpac, shares his experience of transforming a pre-revenue packaging innovator into an industrial manufacturing business. Drawing on his background in engineering and international packaging, Malcolm explores the challenges of commercialising sustainable products, navigating difficult markets, raising capital and building a lean, high-performing team. He also discusses how Frugalpac is approaching artificial intelligence, international expansion and the next phase of growth.

Building a Business Around Engineering and Sustainability

Malcolm began his career as an engineering apprentice before moving into the food processing and packaging industries. His experience with Alfa Laval, Tetra Pak and subsequently a UK-listed packaging business gave him an understanding of both manufacturing operations and the commercial challenges of bringing packaging products to market.

When he joined Frugalpac, he recognised that the company was fundamentally an engineering business rather than simply a packaging supplier. Its purpose was to identify environmental problems created by conventional packaging and develop practical alternatives.

The company initially launched the Frugal Cup in 2018, an easily recyclable coffee cup made from recycled paper. However, the arrival of COVID-19 disrupted its commercial prospects, prompting a greater focus on the Frugal Bottle.

Designed as an alternative to conventional glass packaging for wines and spirits, the Frugal Bottle addresses the carbon emissions associated with glass production, recycling and transportation. For Malcolm, the opportunity lies in combining environmental benefits with a commercially viable manufacturing solution.

Key Takeaways

• Malcolm's engineering background has been valuable in understanding and developing Frugalpac's manufacturing technology.

• Frugalpac approaches sustainability challenges through engineering rather than packaging design alone.

• COVID-19 forced the business to reconsider its product priorities and concentrate on the Frugal Bottle.

• Sustainable innovation must address a genuine environmental problem while remaining commercially practical.

Establishing Direction After a Founder's Departure

Malcolm joined Frugalpac when the business was pre-revenue and its founder had recently departed. His immediate priority was to establish a clear strategy that employees, directors and investors could understand and support.

This meant defining which products to commercialise, which markets to target and what the company's longer-term ambitions should look like. He also discovered that members of the board had slightly different interpretations of the business's direction.

Aligning the board was particularly important because its members represented the majority of the company's investors. Without a shared understanding of the strategy, future investment decisions would become more difficult.

Over time, Malcolm's leadership approach has evolved from sharing his experience and establishing direction to giving functional leaders greater responsibility. Rather than directing every decision, he now focuses on coaching a capable team and allowing individuals to take ownership of their objectives.

Key Takeaways

• Establishing a shared strategic direction was Malcolm's first priority when joining Frugalpac.

• Board alignment was essential to maintaining investor confidence and supporting future funding.

• Early leadership involved transferring knowledge and experience to a relatively small team.

• As the business matured, Malcolm shifted towards coaching and empowering functional leaders.

Proving Demand Before Investing in Industrial Manufacturing

Frugalpac follows a deliberate sequence when commercialising new products: engineer the solution, produce physical prototypes, test market demand and then invest in larger-scale manufacturing.

Malcolm believes that putting a tangible product into customers' hands is particularly important. Although digital concepts can communicate an idea, they cannot replace the experience of physically examining and testing an unfamiliar packaging format.

For the Frugal Bottle, the company initially invested in semi-automatic manufacturing equipment capable of producing several thousand units. These bottles were introduced to the market, allowing customers to conduct technical assessments, filling trials and shelf-life testing.

Positive customer feedback and repeat purchases helped justify investment in industrial machinery. Frugalpac then operated and refined its manufacturing equipment internally before offering machines to customers and packaging partners internationally.

Key Takeaways

• Physical prototypes help customers assess unfamiliar innovations more effectively than concepts alone.

• Semi-automatic production enabled Frugalpac to test demand before committing to industrial machinery.

• Repeat purchases provided stronger evidence of commercial viability than initial consumer interest.

• Operating new machinery internally allowed the business to improve performance before supplying equipment internationally.

Developing a Manufacturing Model That Can Scale Internationally

Frugalpac's commercial model combines machinery sales with royalties on bottles produced using its technology.

Rather than seeking substantial profits from selling equipment, the company aims to make its machines relatively accessible, applying a modest markup and generating recurring revenue through production royalties.

This creates a shared incentive between Frugalpac and its manufacturing partners. If equipment is not operating effectively or market demand fails to develop, both parties are financially affected.

The model also accommodates different types of customers. Some wine and spirits producers may choose to manufacture their own packaging, while others prefer to work with local packaging companies or contract packers.

An important advantage is the ability to manufacture bottles locally from flat paperboard and other components. Malcolm explains that the newer bottle design allows more than 9,000 flat-packed bottle components to be transported in a comparable load to approximately 1,000 glass bottles.

This offers potential savings in transportation costs and emissions while reducing dependence on centralised, energy-intensive glass manufacturing.

Key Takeaways

• Frugalpac generates recurring revenue through royalties rather than relying primarily on machinery sales.

• The commercial model encourages collaboration because both Frugalpac and its partners benefit from successful production.

• Working with packaging companies and contract packers allows customers to adopt the technology without manufacturing bottles themselves.

• Local manufacturing and flat-packed materials can significantly reduce transport requirements and supply chain complexity.

Reducing Costs to Make Sustainable Packaging Competitive

One of Frugalpac's central commercial challenges has been competing with established glass packaging on price.

When the Frugal Bottle launched in 2020, it carried a premium compared with conventional glass bottles. Malcolm recognised that environmental benefits alone would not necessarily persuade cost-conscious producers or consumers to switch.

The company's second-generation manufacturing platform was therefore developed with a strong emphasis on reducing production costs.

Improvements include faster machinery, lighter paperboard and a redesigned process for incorporating the internal pouch that preserves the liquid. Previously, Frugalpac purchased more complex, pre-assembled pouches. Its newer equipment can complete additional assembly operations during bottle production.

Together, these improvements have reduced the company's bottle production costs by approximately 50%.

Meanwhile, rising energy costs and packaging regulations are changing the economics of glass. Malcolm highlights UK Extended Producer Responsibility (EPR) charges, citing approximately 1.2p for a Frugal Bottle compared with 8–10p for a glass bottle.

These developments are helping Frugalpac move towards price parity with conventional glass packaging in parts of the wine market.

Key Takeaways

• Sustainable packaging faces a significant adoption barrier when it costs more than established alternatives.

• Frugalpac's second-generation manufacturing platform has reduced bottle production costs by approximately 50%.

• Simplifying the internal pouch assembly has also expanded the range of potential suppliers.

• Rising glass production costs and packaging regulations are improving the commercial competitiveness of paper bottles.

Selling Sustainability in a Difficult Market

The global wine and spirits industry has experienced considerable commercial pressure, with changing consumer behaviour, reduced consumption and tighter budgets affecting producers.

Malcolm acknowledges that sustainability has slipped down the priority list for some major businesses. Although consumer research frequently suggests people are willing to pay more for environmentally responsible products, actual purchasing behaviour does not always support those intentions.

This has influenced how Frugalpac communicates its value.

Rather than concentrating exclusively on carbon reduction, the company increasingly demonstrates how its packaging can help customers differentiate their products, reach new audiences and potentially increase sales.

The Frugal Bottle's printable paperboard exterior offers branding opportunities that are more difficult to achieve with conventional glass labels. Malcolm believes this could be particularly valuable for wine producers seeking to engage younger consumers.

He also describes an example involving a Coldplay concert at Manchester's Etihad Stadium, where the venue reportedly sold eight times its usual volume of wine after introducing the Frugal Bottle. Consumers could purchase a resealable bottle rather than individual plastic cups, improving convenience and increasing the value of each transaction.

For Malcolm, commercial success and environmental progress are closely connected. Sustainable packaging will only deliver meaningful carbon reductions if producers adopt it at scale.

Key Takeaways

• Sustainability can become a lower priority when businesses face immediate commercial pressures.

• Consumers' stated willingness to pay more for sustainable products does not always translate into purchases.

• Distinctive packaging can create opportunities for brands to attract different audiences and improve sales.

• Environmental benefits are more likely to influence purchasing decisions when supported by a compelling commercial proposition.

Expanding Innovation Beyond Wines and Spirits

Although the Frugal Bottle was initially developed for the wine and spirits industry, Frugalpac is exploring applications in other packaging categories.

Malcolm explains that potential investments are assessed by examining the total addressable market, the environmental impact of existing packaging and the practicality of developing an alternative.

One example is a paper-based paint pot currently under development.

Traditional paint containers can be difficult to dispose of, particularly when contaminated with leftover paint. Frugalpac's proposed design uses a removable internal liner, allowing the outer paper container to enter appropriate recycling streams while the contaminated liner is disposed of separately.

The concept could simplify disposal for household consumers and commercial decorators, while reducing the volume of contaminated packaging requiring specialist handling.

Frugalpac is also seeing growing opportunities in edible oils, including olive oil packaging.

However, Malcolm emphasises that the business does not pursue new applications simply because they are technically interesting. Each opportunity must demonstrate sufficient market potential and attract positive feedback from prospective customers.

Key Takeaways

• Frugalpac evaluates new products according to market size, environmental benefits and commercial demand.

• Its paper-based paint pot concept aims to make disposal easier by separating contaminated and recyclable materials.

• Edible oils represent an additional market opportunity for the company's existing bottle technology.

• Diversification is guided by practical market opportunities rather than innovation for its own sake.

Raising Capital in a Hardware-Intensive Business

Frugalpac has raised approximately £25 million, with around £18 million secured during Malcolm's time as CEO.

Reflecting on repeated fundraising rounds, Malcolm suggests that one lesson has been the value of raising more capital earlier, potentially reducing the frequency of subsequent rounds.

The company has successfully developed its manufacturing technology, but external challenges, including COVID-19 and difficult trading conditions, have slowed commercial progress.

In hindsight, additional funding at an earlier stage might have allowed Frugalpac to establish more manufacturing capacity and market presence before those conditions became more challenging.

Malcolm also recognises the importance of delivering against commitments made to investors. Demonstrating progress, even when commercial timelines change, remains central to maintaining their confidence.

Looking ahead, he sees a potential transition from raising capital to support working capital requirements towards securing funding specifically for growth.

A future investment round could support international expansion, additional commercial representation and the wider deployment of manufacturing technology.

Key Takeaways

• Capital-intensive hardware businesses must fund substantial development and manufacturing activity before achieving scale.

• Malcolm believes raising more money earlier could have helped Frugalpac accelerate its commercial progress.

• Delivering against investor commitments is essential to maintaining confidence across repeated funding rounds.

• Future fundraising is likely to focus increasingly on growth opportunities rather than day-to-day funding requirements.

Building a Lean, High-Performing Team

Despite Frugalpac's international ambitions, Malcolm does not envisage building an organisation with hundreds or thousands of employees.

The business currently operates with a team of approximately 30 people, including 12 dedicated to engineering and design. Malcolm believes it may be possible to scale the company significantly with a workforce of around 50, supported by automation and efficient processes.

His philosophy centres on the value employees contribute rather than the number of people employed.

This means recruiting capable individuals, giving them meaningful responsibilities and continually improving the systems that support their work.

As manufacturing technology develops, staffing requirements can also change. Frugalpac's newer, higher-output production platform has already enabled adjustments to operational shift patterns, although additional demand could create future recruitment needs.

Malcolm also emphasises collaboration across departments. He describes how someone outside the engineering team might occasionally identify a solution to a technical problem simply because they approach it from a different perspective.

The aim is to create an organisation where people trust one another, understand their responsibilities and work collectively towards shared objectives.

Key Takeaways

• Malcolm believes Frugalpac can achieve substantial growth without increasing headcount proportionately.

• The business prioritises employee capability, engagement and productivity over workforce size.

• Automation and improved manufacturing technology can change staffing requirements as production scales.

• Cross-functional collaboration helps solve problems and strengthens the effectiveness of a relatively small team.

Using AI to Future-Proof Operations

Frugalpac is exploring artificial intelligence and machine learning, although Malcolm is cautious about adopting new technology without understanding its practical value.

He sees potential applications in manufacturing quality control, particularly where machine vision systems could identify defects in printed packaging or production processes.

Such technology already exists, but sophisticated inspection systems can be expensive. Malcolm believes advances in AI and machine learning could make these capabilities more accessible.

The company is also investigating opportunities in lead generation, customer communications and international commercial operations.

However, Malcolm is clear that Frugalpac has not yet identified a definitive example of AI delivering transformative value within the business.

Rather than using AI primarily to replace employees, he views it as a way to improve productivity and avoid unnecessary future headcount growth.

He is also interested in developments in predictive maintenance, where intelligent systems could identify equipment problems before failures occur. More autonomous maintenance technologies may follow, although he believes fully automated repairs remain some distance away.

Key Takeaways

• Frugalpac is taking an exploratory approach to AI rather than implementing it across the business indiscriminately.

• Machine learning could make sophisticated manufacturing quality control more affordable and effective.

• AI may support international lead generation and customer communications without requiring large additional teams.

• Malcolm sees AI primarily as a means of improving future productivity rather than replacing existing employees.

Choosing International Markets Carefully

With approximately 90% of its business coming from exports, international expansion is central to Frugalpac's growth strategy.

Malcolm believes local representation can be particularly valuable when developing unfamiliar markets. However, employing people overseas and establishing legal entities can introduce significant administrative and financial complexity.

The company is therefore considering different approaches, including partnerships and direct commercial representation.

In India, Frugalpac has established a collaboration with ITC, a major conglomerate with an established packaging business. This provides a potential route into the market without requiring Frugalpac to build an extensive local operation immediately.

North America is another priority, particularly because the region imports significant quantities of glass packaging. Malcolm believes local paper bottle manufacturing could provide an alternative that reduces exposure to international supply chain disruption and tariffs.

The broader principle is to invest where market demand and commercial opportunities justify the commitment.

For Malcolm, international expansion should follow a considered strategy rather than becoming an objective in itself.

Key Takeaways

• International growth requires careful consideration of local representation, partnerships and operating costs.

• Collaborating with established businesses can provide access to new markets without immediately establishing local subsidiaries.

• North America presents opportunities because of its reliance on imported glass packaging.

• Frugalpac prioritises markets where the commercial opportunity justifies the investment required.

Defining Success Beyond the Next Funding Round

Malcolm's longer-term ambitions for Frugalpac are centred on market penetration, recurring revenue and profitability.

He describes a target of approximately 6% market share, which he estimates could generate around £50 million in annual revenue.

The company's royalty-based model could also deliver attractive profitability once a sufficient number of manufacturing machines are operating internationally.

Malcolm believes the opportunity extends beyond wines and spirits as additional applications increase the company's addressable market.

He also acknowledges that Frugalpac remains loss-making, although he expects the business to move towards profitability as manufacturing capacity and commercial contracts develop.

A potential fundraising round in early 2027 could support this next stage, subject to the company's progress and investor agreement.

Despite the ambitious targets, Malcolm remains conscious of the time required to commercialise industrial technology. Asked what advice he would give himself when first joining Frugalpac, his answer was straightforward: it takes considerably longer than expected.

Key Takeaways

• Frugalpac's long-term ambitions include achieving approximately 6% market share and £50 million in annual revenue.

• Recurring production royalties could create significant profitability as the installed machinery base expands.

• Expansion into additional packaging categories increases the company's potential addressable market.

• Malcolm's experience reinforces the importance of realistic timelines when scaling an industrial technology business.

Looking Ahead

Frugalpac is entering a phase where its engineering capabilities, manufacturing technology and commercial model are becoming increasingly established.

The second-generation production platform has reduced costs, while international partnerships are helping the business develop local manufacturing capacity in key markets.

Future priorities include expanding machinery deployment, developing new packaging applications and strengthening commercial representation internationally. Malcolm is also considering how AI, automation and process improvements could allow the company to grow without building an unnecessarily large workforce.

A potential shift towards growth-focused fundraising could provide additional resources to accelerate these plans, although the timing will depend on commercial performance and investor support.

For Malcolm, the opportunity is substantial, but so are the challenges of bringing unfamiliar technology into traditional industries.

Final Thought

Malcolm's experience at Frugalpac demonstrates that successfully scaling deep technology requires considerably more than developing an innovative product.

The business has had to establish manufacturing capability, prove consumer demand, reduce costs, build investor confidence and develop an international commercial model, all while navigating difficult external conditions.

Throughout the conversation, Malcolm returns to the importance of trust, collaboration and having capable people working towards a shared objective.

When asked to describe the Frugalpac team in one word, he chooses relentless.

It is a fitting description of the persistence required to take an engineering concept through commercialisation and towards industrial scale.