March 26, 2010 Small & Sweet

Volume 13 | Issue 2

Della Coletta Bioenergia’s 50-plus years in the Brazilian marketplace confirm the adage that bigger isn’t always better. José Roberto Della

Della Coletta Bioenergia is inhaling the sweet smell of success.

The small producer of ethanol and sugar – located in the interior of the state of São Paulo, and based in the sugar-growing region surrounding the town of Bariri – has recently been growing in leaps and bounds.

In the last seven years, Della Coletta Bioenergia has gone from producing 75,000 tons of sugar per yearly harvest to two million (the amount predicted for 2010). Revenues have also been rising – from R$160 million (roughly US$90 million) last year to an estimated R$210 million (US$120 million) this year.

“Things really improved [in 2010],” reports Chief Executive Officer José Roberto Della Coletta. “The international price for sugar rose and sales of alcohol went up. We also milled more sugar cane than ever before. Since we expanded our plant two years ago, we’re now able to mill two million tons a year.”

HALF-CENTURY HISTORY
Della Coletta Bioenergia has been in the sugar business for close to 60 years, but its forays into the ethanol and sugar markets are more recent. The company, founded by the Della Coletta brothers in 1953, manufactured alcoholic liquor made from sugar cane (known in Brazil as cachaça). Originally, the plant was situated on a farm in the municipality of Cordeirópolis, São Paulo, but as it grew, more space was required. In 1968, Della Coletta Bioenergia moved to its present Bariri location. The new site was not only larger but in close proximity to other cane cultivators/suppliers (currently, Della Coletta Bioenergia cultivates and harvests 50 percent of its own cane, and purchases the rest from third parties).

A radical transformation took place in the watershed year of 1984: The company stopped producing cachaça and invested in a new mill and distillery. This led to the launch of a new product – hydrated ethanol – that served Brazil’s automobile market.

In 2000, Della Coletta Bioenergia began producing anhydrous (pure) ethanol. Three years later, it began manufacturing VHP (Very High Polarization, i.e. raw) sugar as well.

ENVIRONMENTAL EMPHASIS
Today, the company’s business is split evenly between ethanol and sugar. Last year’s harvest yielded 71.7 million liters of the former and 116,000 tons of the latter. While most of Della Coletta Bioenergia’s ethanol is sold at home, the majority of the sugar produced is exported overseas. “Ethanol demand is much larger within Brazil, due to the booming automobile industry and the fact that almost all new cars produced in Brazil today are flex fuel,” explains Della Coletta. “Although sometimes a window opens in terms of U.S. and European markets, it’s often the case that overseas ethanol prices are actually lower than domestic ones. For this reason, exports represent only around 20 percent of ethanol revenues.”

Meanwhile, in terms of sugar, 90 percent of the company’s current business resides in exports, continues Della Coletta. “The reason for this is that VHP sugar is more popular overseas, while Brazilians prefer refined white crystal sugar. In fact, it’s with domestic consumption in mind that we’re working toward producing white crystal sugar ourselves. Due to the large domestic demand and the continually rising price of high quality crystal sugar, our biggest project for the future is to build our own plant for white sugar production.”

Actually, the company has many plans for the future, and the one thing that all these plans share is an overwhelming emphasis on environmental impact. “We’ve been working a lot on the environmental aspects of our business,” concedes Della Coletta.

For instance, in terms of sugar cultivation, already 70 percent of the cane the company grows is harvested by environmentally friendly methods that don’t involve traditional burning. Its treatment of soil and use of pesticides also comply with environmental standards. Moreover, the company, which produces 5MW an hour, currently supplies all of its own energy needs. Concurrently, the company is also involved in a co-generation project with the goal of selling energy to other businesses in the vicinity, perhaps as early as next year.

The eco-friendly focus, Della Colleta points out, was behind the company’s name change. In June 2009, Della Coletta Sugar and Alcohol became Della Coletta Bioenergia, or DC Bio. “At the end of last year, we received Green Energy certification, which means that the ethanol we supply is certified,” indicates Della Coletta.

Why is this important? “Environmental certification not only represents a huge trend, but it is especially important to us if we want to meet the demands of foreign markets such as Europe, where sustainability is critical,” answers Della Coletta.

Indeed, the company plans to begin exporting its certified ethanol to Europe in 2011. Meanwhile, it has teamed up with Assobari (the Bariri Sugar Cane Producers Association) and Sebrae (a government agency that provides support to entrepreneurs and small businesses) to create a certification standard that would the sustainable growth and harvesting of sugar cane.

WINNING MIXTURE: CUTTING-EDGE AND CAUTION
Environmental commitment opens the company’s mind to the adoption of technology both green and cutting edge. “In fact, it is this openness to new technology that enabled us to grow over the years,” reveals Della Coletta.

Indeed, his company helped its own cause by placing itself at the vanguard of market and technology trends – considering the fact that it’s perceived as a small- to medium-sized player in a segment increasingly dominated by big groups capable of producing between 10 million and 40 millions tons of product each year. Despite larger competitors’ daunting volumes (and the accompanying revenues), Della Coletta Bioenergia managed to leverage its modest size to realize several advantages. “We straddle two worlds and experience the best of both because we can mix elements of a traditional family company with those of a highly professional corporation,” explains Della Coletta. “As a family company, we benefit from knowledge and experience passed down through generations. At the same time, the family members boast professional educations and training.”

He describes the benefits of such a mix: “Decision-making is much quicker, there’s less bureaucracy involved, and we’re more open to change.”

TAMING THE COST BEAST
Meanwhile, the company’s size allows it to control costs, which are often significantly less than those of larger competitors. Costs (and cost control) remain a major issue. The segment’s massive growth rates attracted many new players, at least until two years ago, when the sugar-alcohol industry suffered a major crisis, which forced the most overeager players to sell out after they were hit with substantial debt.

Remarkably, Della Coletta Bioenergia managed to keep its head above water while others went under. The company credits its survival to savvy administrators who demonstrated the courage to be daring when necessary (as far as implementing new technology) but financially conservative. To be sure, that’s a tricky high-wire balancing act, but Della Coletta Bioenergia pulled it off. “In terms of debt, we have one of the best records in the industry; less than R$50 (US$28) per ton,” boasts Della Coletta. “You can’t be at the forefront of anything if you’re in debt. For this reason, we make decisions with our feet firmly planted on the ground while remaining very vanguard in our use of new technology. It’s this mixture that sustains us and allows us to grow.”

Bigger isn’t always better. No one demonstrates that better than Della Coletta Bioenergia.

Subscribe to Industry Today