Periodic Reporting for period 1 - MCodaq (Mcodaq is a new benchtop instrument for fraud detection in cosmetics, perfumes, candles and other consumer products, based on NMR and used by technicians without specific analytical chemistry skills) Reporting period: 2017-06-01 to 2017-09-30 Summary of the context and overall objectives of the project The project aims to deliver a turnkey, fully automated solution for the testing and quality control of labelling claims in consumer products and cosmetics. At present, major retailers of these products don’t have reliable robust solutions for the control of the claims made in the labels of these products and therefore have to rely on information provided by their wide network of suppliers. This generates the opportunity for fraud, which is a significant problem, costing the industry an estimated $8Bn annually.The target market are major consumer goods and cosmetics retailers (Inditex, L’Oreal, Sephora, H&M, Unilever, etc.) and their global network of Contract Analytical Laboratories (1,200+ Worldwide, which are a combination of local or regional laboratories and of large corporate organisations such as SGS, TÜV SÜD, Bureau Veritas, and Underwriters Laboratory among others) which routinely test their products using other analytical technologies (such as LCMS or GCMS (Liquid Chromatography1, Gas Chromatography2) to identify trace level (low concentration) impurities which may be harmful or toxic to humans, but who have no analytical testing solution for a second major problem, fraud in the main components of the products (high concentration). The project is socially important for several reasons:• The estimated $8Bn cost to the industry of this fraud impacts the industry budgets for the R&D of improved products, reducing R&D employment. • The estimated $8Bn cost of fraud to the industry reduces tax contributions, with its corresponding impact on public services.• Fraudulent products can pose Health and Safety risk to consumers. Dosage and frequency of application may also be unreliable.• Fraudulent products may negatively affect the brand and reputation of major retailers who have invested time and money in developing it.• Cost of fraud control is increased for both consumer associations and governments. The overall objective of the project is to develop an instrument that can be used by a network of Contract Analytical Laboratories used by the major retailers, and by Consumer Organisation and Government quality control laboratories, in order to monitor the truth in labelling and main characteristics of their products, to protect the reputation and brand image of the retailers, and the investment and health and safety of consumers. The instrument will take advantage of latest developments in Nuclear Magnetic Resonance, with the development of small, room temperature, automatable and robust instruments which make this technique suitable for routine analysis in non-expert QC laboratories. Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far The proposed members of a Phase 2 consortium are the leading benchtop NMR manufacturer (Magritek GmbH, Aachen, Germany), the leading NMR software developer (Mestrelab Research SL, Santiago de Compostela, Spain) and an experienced method development analytical lab (AMSLab, Lugo, Spain). Our starting point was advanced prototypes of the hardware and software needed to deliver the proposed solution (TRL6), and deep understanding of the needs of Inditex SA, one of the major retailers with interest in this area. The phase 1 project was carried out by Mestrelab Research SL and was seeking to generalise this understanding to the rest of the market and to decide the most valuable turnkey solutions to be implemented in a fully automated finished product. The project also aimed to develop extensive and detailed market understanding and the development of relationships with a set of potential customers.The work carried out has consisted of 2 parallel projects and a final project:- Stakeholder interviewso Identification and contact with a series of potential customers/beneficiaries of the planned solution (retailers and contract analytical laboratories)o Development of a series of questionnaires designed to develop clear understanding of the viability of the planned solution, as well as clear market understanding (final solution design, evolution of the prototype to a market-ready system, business model, pricing, servicing model, key drivers for potential customers and stakeholders, etc.)o Meetings and interviews with selected customers and stakeholders (19 Contract Analytical Laboratories and 3 retailers, selected to cover different organizations, organization types and geographies took part in initial extensive face to face interviews)o Analysis of results of interviews, development of follow up questionnaireso Second iteration of meetings to achieve further clarity- Market Analysiso Estimation of market sizes and identification of potential customers with contact details (all major retailers in the industry were analyzed, to estimate market size and build a database of prospects/sales targets)o Establishment of initial relationships with retailers and other market prescriptors to develop a series of contacts that can be used is an extensive market test of the solution prior to full commercialization- Development of a business plan and roadmapo A detailed business plan was developed based on the outcome of the previous 2 projects. This business plan covers: - Market size estimates - Pricing, business model, service model, expected volumes for the proposed solution - Detailed description of exact solution specification - Sales and P&L forecasts for the projecto Detailed roadmap to take solution to marketAll the above were targeted at the development of a full business plan for the solution, as well as a roadmap to take it to market. This has been achieved and this business plan and roadmap are the deliverable to this first phase of the project. Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far) Our phase 1 study has validated the opportunity to provide the market with a technology which goes significantly beyond the current state of the art.At present, there are no analytical solutions for the analysis of main components in cosmetics and consumer/personal care products, which can be deployed as simple, routine, turnkey solutions. Most analytical techniques commonly used in this market require complex sample preparation which is time consuming and prevents them from being used in a significant volume of samples.Current benchtop NMR systems are open, research systems, which can be used for any number of analytical questions, but which are not developed for automation or high throughput and require extensive technical expertise by the users of the data.Our project will move the state of the art on, by delivering an automated, routine, relatively high throughput analytical solution based on Nuclear Magnetic Resonance.This proposed project has the potential to have very significant impact both socially and for the different stakeholders. The main considerations relating to this impact are summarised below.Impact for consortium membersCurrently the consortium members have a headcount of circa 80 FTE. Our project plan would see us add 27 FTE in year 3 (the first year of commercialisation) and reach 56 additional FTE by year 7. This is a very significant employment creation, amounting to 70% of baseline employment figure.The current revenues of the consortium members are somewhat below €20Mn. Success of our business plan would deliver additional revenues of €11.6Mn in year 3 and €39Mn in year 7 (representing an increment of 200% by year 7 on the baseline revenue figures)EBITDA will also multiply, with the EBITDA for the project reaching €31Mn in year 7, as opposed to a current baseline of circa €3MnThe new product developed will open several new markets for the consortium and for the NMR technique:• consumer goods and cosmetics retailers• Contract Analytical Laboratories• Consumer goods, cosmetics and raw materials manufacturersSuccess in this project would result in a first success for the consortium in the development of a turnkey solution. This can act as a blueprint for further similar developments in alternative/additional potential markets.Considering all the above, the impact of this project can be transformational for the consortium members.Impact for stakeholdersRetailersSuccess of this project would provide to retailers:• Brand protection• Significant reductions of fraud, and therefore huge cost savings (fraud costs industry $8Bn annually)• Reduction of product safety risks• Improved control of suppliers and supplier ranking• Quality improvements in supplier networkGovernment labs and consumer associations, consumers as a wholeThese stakeholders would benefit• Reduction of fraud to consumers• Reduction of safety risks• Exposure to NMR technique, which may be used in future to address other potential problems/applications• Improvement in value for money equationContract Analytical LaboratoriesThe CALs would benefit from project success by:• Enhanced revenues and business volume• Environmental improvements when replacing less green techniques with NMR• Additional revenue stream / technique which can be exploited later on to address new applications and generate new revenue streams• Adoption of safer technique for employees and much less labour intensive, allowing CALs to achieve significantly higher revenues and margins for equal headcountSocial ImpactThe project has the potential to allow retailers to reduce significantly fraud in main components and labelling which is costing consumers $8Bn annually. In addition, consumer health and safety is being put at risk by fraud in the constitution of personal health and cosmetics products, and our solution has the potential to prevent/control these issues and significantly reduce them.
