Producing Beverages Sustainably with DonQ Rum’s Roberto Serrallés, Ph.D.

May 30, 2011

Roberto Serrallés, Ph.D., is a sixth-generation rummaker and the Vice President of Business Development for Puerto Rico-based DonQ Rum. Dr. Serrallés, who joined the family business seven years ago after studying and teaching in the States, immediately became concerned with the product’s wastewater levels and vowed to make a change. Today, the company displaces nearly 50% of the oil used in its boiler with a “bio-gas” byproduct from its wastewater. Sourcing local power is a big plus for the brand, but the reduced dependence on foreign oil — including the production and transportation — is a major eco-boon. “This is the ultimate in local production,” Dr. Serrallés says. “At the end of the day, we do this anaerobic process, reducing about 70% of the organic material. That wasn’t enough — we had to make this water irrigation-grade water. We end up with a 99% reduction in organic material.”

Transcription

JOHN SHEGERIAN: Welcome back to Green is Good, and today we’re so honored to have a new guest on from a new country. We’ve got Robert Serrallés from Puerto Rico on today. Roberto is going to be speaking about DonQ Rum. He’s the Vice President of Business Development. He’s also an American-educated Ph.D., so he’s Dr. Serrallés. Welcome to Green is Good, Roberto. DR. ROBERTO SERRALLÉS: Thank you. Thank you for having me, John. JOHN SHEGERIAN: Your family story and what you’re doing at DonQ Rum is truly amazing, and I don’t want to give it away. I want you to explain it in your own words. Let me just say this to our listeners. Roberto, you are a sixth generation rum maker, and you’re taking your family business and you’re transforming it. Talk a little bit about coming to America, the education you have, and the whole journey you’ve been on with your amazing brand, DonQ Rum. DR. ROBERTO SERRALLÉS: Thanks for the opportunity, John. It’s been quite a very interesting time. As you say, I did my undergraduate work at Brown University, and then my first job out of college, believe it or not, was teaching environmental education to public school kids in Vermont. I did it for a couple years. When you distill, and the pun is intended, environmental education into fifth and sixth graders, you start getting it in your real heart how simple some of these things are. From there, I decided I want to teach college, so I went and got a Ph.D. at the University of Oregon in Environmental Sciences. And then, as I’m writing my dissertation, my family business is DonQ Rum, which is, by the way, the preferred rum in Puerto Rico. If there’s any listeners out there that are Puerto Rican, you can attest to the fact that if anybody asks a Puerto Rican, “What’s the best rum in Puerto Rico?” they’ll say “DonQ,” because we are kind of like the national product down here. We sell way more than Bacardi at a higher place because it’s kind of like the national product of Puerto Rico. The whole thing started, basically, I’m writing my dissertation, and we have a very cool hardcore environmental issue at the distillery. The old man called me and said, “Hey, I need some help.” I never thought I’d work in the family business, even though I’m a sixth generation rum maker. I came in through the back door. JOHN SHEGERIAN: That is so interesting. So, how many years ago did you make the transition from educator to rum maker? DR. ROBERTO SERRALLÉS: That was about seven years ago now. The problem the family has, and actually all rum distillers around the world, it’s a little-known fact, but most rum distillers, the waste water from the rum making process, most rum makers actually dump it in the ocean or dump it in sugarcane fields. In Puerto Rico, there’s no longer any sugarcane, even though there was when I was growing up. We just couldn’t compete with other markets, so the sugar industry died in Puerto Rico. There was this issue. We would put it in fields, but if it rained, the fields would get flooded, and then you had to stop production because your permit only allowed you, you couldn’t exceed the capacity of the fields. It was one of those issues that was a capacity issue, but it was also an environmental issue. My whole issue was here’s a byproduct, here’s a waste product. What can we get out of it? What can we do with it to turn it? So I started researching what the other industries do because there was nobody in the rum industry doing anything like this. The brewers, Anheuser-Busch and other companies like that, they do anaerobic decomposition of their wastewater. In other words, anaerobic decomposition bacteria in the absence of oxygen, as they eat up the organic material in the wastewater, they produce methane gas. Methane gas has a lot of ETUs. You can clean it up, scrub it, and use it in your boiler for energy. I was like, “Wow, OK, let’s see if we can apply that to our waste water, which is very, very rich in organic material.” That’s how it kind of all started, basically trying to figure out what to do with our wastewater and what kind of benefits we can do. It’s worked so well, that, actually, fully operational, we displace about 50% of the oil we used to use in our boiler from our own what we call biogas, with our own methane gas that’s produced as we clean up our wastewater. It’s a classic wastewater energy project. MIKE BRADY: What’s amazing, too, is as you’re talking about replacing 50% of it to fuel your operation there, you’re also saving more than that. The multiple is the production that you’re saving on producing the oil, extracting it, producing it, refining it, and then transporting it there to your facility. That’s a huge savings. DR. ROBERTO SERRALLÉS: Absolutely. I mean, there’s nothing like producing something locally, and this is ultimate local production. We produce it right in the facility, the gas we use to fire, and then you put on top of that the geopolitical costs, which we’re all very aware of. I’m not going to get into that, but also all of that. Sourcing locally from your own wastewater is the ultimate win-win situation. At the end of the day, what we do is we do this anaerobic process, we reduce probably about 70% of the organic material in the wastewater, and then we do secondary step because that wasn’t enough. We had to make this water be irrigation grade water because we’re in the south coast of Puerto Rico. It’s dry, so there’s got to be some use for it. Basically, we started with 20,000 units of organic material, and we end up, after the aerobic part, with only 150. It’s like a 99% reduction in the organic material. If I can just expand a little bit better, what makes me most proud is not only all of that, which was a very deep learning curve and a lot of problems along the way, but wastewater treatment produces sludges along the way. We dewater those sludges. We dewater them and mix them with old wood pallets and old barrels and stuff, woodchips, and we make an industrial compost out of it. The idea is that there is a complete closed circle. The concept we’re trying to follow here comes down to this professor out of Yale School of Forestry, Marian Chertow, that this whole concept of industry ecology, in ecology, there is no waste. The leaves that fall on the ground become a source of nutrients for the plants, etc. Industry, in order to be sustainable, we need to adopt those kinds of principles. That’s the guiding light behind all this. I’m telling you, it hasn’t been easy. There are still a few kinks in the system, but we’re getting close. JOHN SHEGERIAN: For our listeners out there, if you have your laptop or iPad or desktop in front of you, please look at Roberto’s amazing site, www.donq.com. We’re on the site right now. I’m actually so drawn in to what you’ve done with your beautiful site here, donq.com. I’m on the sustainability section, and please, if you’ve got any of your laptops or iPads open, Roberto, you’ve done an amazing job here. Under the sustainability section, the title is “A Clean Finish.” The DonQ rum in your glass is renowned for its clean finish. The way we make rum has a clean finish too. Your headlines are all about win-win solutions. Please talk about some of the other win-win solutions you’ve created here. Not only do you talk a great talk, Roberto, but this is, just by the visuals and how you’ve laid out the sustainability section, literally how you’ve mapped this out and architected this, the walk is so transparent on your family’s brand. It’s beautiful. Please walk us through the other layers of sustainability here that you’ve created in the last seven years at your wonderful brand, DonQ Rum. DR. ROBERTO SERRALLÉS: It all starts at the beginning. What’s funny about the way rum is made as opposed to other spirits is that the raw material of making rum is molasses, which is already the sugar industry’s waste product. In fact, that’s how we actually got in the rum business. We originally were a sugar business. We said, “Hey, what do you do with this molasses?” There’s only so many cows you can feed it to. When molasses is fermented, you can make rum. You’re already starting to reuse a waste product, and that’s what rum is really about. Along the way, when you ferment, the yeast expires CO2. So we collect the CO2, we scrub it, and we sell it for soda pop for local soda pop here on the island. That’s one of the steps we do. As I told you, the biogas we use for generating electricity and for generating steam for our boiler. We consume over 2 million gallons of fuel oil each year, so imagine, it’s a million gallons of fuel oil that we don’t have to extract, transport, and all the energy embedded into bringing it to Puerto Rico. You can think of all these things that we’re not participating in, and we’re participating less in all that. I told you about the compost element of it, which is all the sludges coming from different systems. There’s also irrigation of the water as it’s done. The idea here is that it’s a closed loop. That’s been the guiding principle. Let’s close all the loops on this process. JOHN SHEGERIAN: Mike and I have been so blessed to have so many wonderful guests just like you who are doing amazing things with wonderful, legendary brands around the world. One of our great guests was Barton Alexander. Barton Alexander was the Chief Sustainability Officer, still is, of Coors over in Colorado. What we learned from him, Roberto, is that as much as we do, there’s always so much to do. This is really just a wonderful process that keeps moving forward. If we were to cut off the seven years of your journey so far, what has been the green initiative that you’ve been most proud of to date? DR. ROBERTO SERRALLÉS: I think it has to be this whole wastewater to energy thing. When you think about energy in general, everybody is very keen to it, energy is sort of the driving force of so many things, not only issues of climate change, etc. There’s geopolitics, there’s all this stuff associated with energy. Any way you can make your own energy locally by cleaning a byproduct, I think that’s the one I feel the most proud of. One of the things for the listeners is that we always think of sustainability as a destination. I think sustainability is process. It’s something we constantly do, and as you say, you can never finish. There’s never a destination in sustainability. It’s how you get better and better and better at doing it because there’s something else we can do better. JOHN SHEGERIAN: Right. With regards to that, so many people that we talk with or potential people that want to come on the show, they always share with us the same story. They’re always worried, they’re always scared before they put the first step forward to really start their sustainability movement at their company, to really start the culture and kickstart it because they’re always worried about cost, they’re worried about negative attention or negative media. Talk a little bit about what this really costs to your family company. Here’s an amazing family brand for all these years, the number one brand in Puerto Rico, the pride of the country, and a brand that’s known around the world. How much was this investment? You came in, you were the new kid on the block, the sixth generation. How much investment did your family have to make to get this green operation up and going? DR. ROBERTO SERRALLÉS: That’s an interesting one. I had plenty of boardroom discussions around it. At the end of the day, the total investment we did on the operation was close to $15 million. It is a big number in any league, and obviously, for people who are considering what they can do to be sustainable, the win-wins are the ones that actually make it worthwhile. Environmental solutions will become even more prevailing as they become economical solutions too. I read some of the stuff about ecology and commerce, and this whole notion of how we marry these two things. There’s always a benefit we can get economically because at the end of the day, business is to increase shareholder value. That’s why we’re in business. People put their money in, they value what we do, but at the same time, we’ve got to put a return. I think one of the things that will start coming are things like carbon credits, things of this nature that start to build value to those intangibles that we are impacting and improving. When you think about the carbon embedded in my cubic feet of methane that I’m bringing into my boiler, there’s so much less carbon than the fuel gallon that I’m not bringing. There should be a credit for the person that’s actually doing that to balance the economics of it. I see a lot of good movement in those directions, and I think there are a lot of investments right now, some federal grants, and that kind of stuff, you just have to find in order to reduce your capital costs. At the end of the day, it’s about doing the right thing. You’re going to be ahead of your competitors because they’re going to have to do it eventually. Consumers right now, they’re really in tune with what the brands that they buy and they engage in, what they stand for. If you can make a brand that stands for something really beautiful and you’re doing the right thing, people will embrace you. Consumers are much more into values than they used to be in the past. JOHN SHEGERIAN: You’re so right, and that’s why Mike and I do this show, because we’re here to highlight great people like you and great brands like your family’s brand, DonQ Rum, that are doing the right thing, that are walking the walk. Now let’s have a little fun. Today is the big day of the board meeting, and you’re walking into that board meeting, you’re the new kid on the block, and I’m either your grandpa or your aunties and your uncles, not your mom or dad, but other family members. This is the day that you’ve got to convince us to spend the $15 million. How did that conversation go? What was your conversation like in that boardroom? What did they asking you? ROI, why do we have to spend this? How did that go down? How did you explain the ROI to them on a hard basis, which is what families usually typically ask, on a hard basis, rather than on the soft benefits, which we all know are really true and really growing? DR. ROBERTO SERRALLÉS: That’s funny because I had that conversation. It was a challenging conversation. At the end of the day, what it really was about was basically about capacity. Right now, we had a set number of acres that we could put our wastewater, and we had a really big client, still do, that was buying huge amounts of rum from us. It was to the point that if it rained a lot, we had to stop production. So, basically, I needed something to deal with my wastewater so that I could actually produce more and I wouldn’t be to the vagrancies of rain, literally. That capacity factor made a huge impact in the ROI. It wasn’t quantified to basically say I can actually improve our production dates from 200 last year, we can actually do 300 days. 100 days additional, we can do another 4 million proof counts. Four-million proof counts will produce a profit of $12 million. It was along those things that you have look at the insulary elements, and that was one of the issues that we were grappling with. It was a capacity thing. On top of it, it was the savings in fuel, oil, and other soft things we just discussed. That was one of the things that really helped that conversation that particular day. JOHN SHEGERIAN: That’s such an honest and a great answer because as we’re looking at these issues of here of sustainability, the three main tenets of sustainability, people, planet, and profits, everybody’s proposition is always different. What’s important to some people is not important to others with regards to where they sit in a company’s food chain. That’s why it’s always fascinating to know who’s the champion and how did they get it across the finish line. Obviously, you were the champion, and it’s always fascinating, and a learning experience for all of us. It’s a teaching moment to understand how you got it across the finish line at your family company. DR. ROBERTO SERRALLÉS: It was one of those things. When you look at the solutions, just look at all the elements around it, and I think you’ll find plenty of benefit that justifies the position. JOHN SHEGERIAN: Let’s talk about the great island that you’re on, Puerto Rico. How do all of these amazing green initiatives that your family and you have undertaken with your brand, DonQ Rum, what’s the domino effect to the island and the people of Puerto Rico? DR. ROBERTO SERRALLÉS: Basically, I feel happy that we have to import one million less gallons of fuel and all the risks associated with that. We have beautiful beaches. It’s a beautiful island, it really is. I’m feeling happy about that impact, and I’m feeling happy about creating 10 additional jobs with this whole wastewater treatment and composting operation. We’re looking to expand that. Those are very tangible ones. We are also doing our little part. It’s our little corner of the world. We are trying to close the loops. We’re trying to reduce any waste, turning all our waste into something useful. It used to be raw wastewater; now it’s irrigation grade water. All those things are what we’re doing here for Puerto Rico. Being an island, you have a particular challenge. One of them is solid waste. I’m feeling really good about the fact that the sludge is going to end up in the landfill, and that I’m diverting a whole bunch of pallets and wood and stuff from the landfill just by doing the composting and reducing. We don’t make a lot of money in it because we’re in the business of making rum, but we make a tiny little bit and it helps the whole operation and it makes it happen. Those would have to be some of the main benefits that we’re getting. JOHN SHEGERIAN: You’ve become, now, not only one of the leading brands of rum in the world, but now you’re probably the leading brand of rum leading the green revolution forward. How many other of your competitors or folks in the distillery industry have now come to you and said, “Hey, Roberto, help a brother out. Tell us what you know and how do we do this?” How many are resistant and how many are following your paradigm that you’ve created? DR. ROBERTO SERRALLÉS: That, actually, has been very exciting in some ways. It’s one of those things where in the back end, when you start in the back end of the business, not the marketing side, but the back end, we have a lot of good relationships with other producers because their problems are similar to my problems and we share a lot of information. In reality, being pioneers in this, there is a new distillery built in the USVI by a large multinational, and they are using the project manager that built our operation to build their new state-of-the-art wastewater treatment. So, I’m feeling pretty good that all of that that we created here is going to be recreated in the USVI. There’s plenty of people from all over the world, Venezuela, India, Dominican Republic, looking at what we’re doing to try to understand and how they can recreate it. I’m feeling pretty good about that ripple effect. It’s one of those things where you can be jealous and you can hold it in, or you can realize this is fine. It’s all good. Share the good. Why hold it too close? JOHN SHEGERIAN: You’re right. That’s why we do this show, because if the ocean goes up, all the boats on the ocean go up, and we all live on this one planet together, so we agree, sharing the information and democratizing the great information and the great paradigms that are created by families like yours and people like you is what this is all about. That’s why Mike and I do this show. We’re down to the last couple minutes here or so. I want you to just share a couple things here, two things. What’s next in line? Seven years are behind you, but you’re a young man and there’s a lot to do in front of you. What are the next two or three major initiatives of sustainability in front of you at DonQ Rum? Next, also, speak a little bit about your journey. There’s a lot of young people listening to our show around the world, actually, besides the United States, and they want to become the next Robert Serrallés. How does that work? What do they do? DR. ROBERTO SERRALLÉS: It’s funny. One of the things that, as I started in the back end, basically set up your processes right. That’s the one thing that makes the most sense because it is the process itself of building whatever you’re building, whether it’s bicycles or bottles of rum, make it right. Make it green. That, I feel, we’re getting very close. The next step for me is going to be materials. We basically sell rum, but we also sell materials. We also sell a lot of packaging and all that stuff, so that’s the next step that I’m looking into. How do we actually integrate all that, buy recyclable materials, and make them also recyclable? In general, that’s going to be my next focus. I think the message here to anybody is there are a lot of opportunities out there, and we just have to find our niche. Whatever you do, do it with integrity. Do it with a lot of love and a lot of care, because at the end of the day, that’s what really is going to drive you. You’re going to be happy and your family is going to be happy, and at the end of the day, that’s what you take home. The love you take is equal to the love you make. JOHN SHEGERIAN: I love it. Roberto, you are going to always be invited. You have an open invitation, as you continue the journey at DonQ Rum, to come back on Green is Good and share the love with our listeners. We’re just so honored to have you on, and thank your family for us for all the great work they’re doing. For our listeners out there, please go to Roberto’s beautiful website. It’s the best rum .com out there, it’s www.donq.com. Dr. Roberto Serrallés, you are a visionary eco-preneur and truly living proof that green is good.