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Energy cuts add €90,000 to baker’s bottom line |
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As a former army officer, Dimitar Dobrev knows a thing or two about strategy – and when it needs to change. Having swapped boots for bread in 1990, he and his wife had already marched a considerable way to success in their Sofia bakery business by producing higher-quality loaves than other Bulgarian bakers. But with competition from EU-based bakeries on the horizon and energy prices at record levels, the Dobrevs realised a few years ago that new tactics for survival and growth were required. So with EBRD and donor support, they radically overhauled their operations, cut energy costs and improved productivity. The Dobrevs slashed an astonishing 85 per cent off their energy costs and added €90,000 to the bottom line annually – equal to several employees’ salaries. Heat’s up, costs are down As an army of loaves rolled gently off the production line, Mr Dobrev recently explained to visiting EBRD President Jean Lemierre and journalists how Eliaz-Dobrevi & Co did it, with the Bank’s help. In 2004 the company’s long-time lender, PostBank, loaned the Dobrevs €600,000 from a €5 million credit line the EBRD had supplied specifically to fund energy efficiency and renewable energy projects in Bulgaria. (Similar credit lines have been established with other Bulgarian banks.) The bakers then used the money to substitute an existing semi-automatic bread production line, powered by electricity and located in their own flour mill, with a new, fully-automatic line powered by natural gas. Overall, they cut the bakery’s energy consumption by 59 per cent. “We still have a lot to do to reach the level of Western European companies, but we are doing all we can,” said Mr Dobrev, proudly showing his guests an array of sweets, pastries and cakes, mouth-watering enough to tempt even the strongest-willed. “But you’re going in the right direction,” said Mr Lemierre. Why energy efficiency? Mr Lemierre visited the bakery to highlight energy efficiency investments as the answer to one of the toughest challenges facing countries in transition from command to market economies. Energy wastefulness is an enduring legacy of the old system: relative to western Europe, transition countries use up to eight times the amount of energy it takes to produce each unit of GDP (In Bulgaria, the rate is three times the EU-15 average when adjusted for purchasing power parity.) In the face of rising energy prices, energy inefficiency has become a bottom-line issue and part of overriding concerns regarding energy security in the region. Reducing energy waste increases a company’s profitability and its competitiveness. But these cost-saving measures have been remarkably slow to catch on. Firms in transition countries tend to focus more on increasing production than on cutting costs, while others are too busy surviving today to think about major investments that will pay off tomorrow. For these reasons, and because the international community is helping Bulgaria wean itself off nuclear power from facilities being closed due to safety concerns, grants of 20% for renewable energy and 7.5% for energy efficiency projects are offered in parallel to the loans. These incentive come from the Kozloduy International Decommissioning Support (KIDS) Fund link to created by donors in relation to the decision to close four Kozloduy nuclear power units. Sweet success “This bakery is a very good example of entrepreneurship and shows their capacity to develop a business and create jobs,” commented Mr Lemierre during his bakery visit in mid-February. Eliaz-Dobrevi employs 240 people in milling flour, baking, distribution and retail sales; it has about five per cent of Sofia’s bread market. Its loaves command a 2.5 cent premium over the competition stacked against it on shop shelves. “So people like your bread because it tastes better?” asked Mr Lemierre. “We have certain farmers we work with, and they supply us with top-quality grain,” said Mr. Dobrev. “Our bread is unique also because of how we run the production line.” Said Mr Lemierre: “Bulgaria won’t be able to compete with companies in western Europe if it continues wasting energy. Energy efficiency is crucial for competitiveness, and this company had the wisdom to invest in it. Banks like Post Bank know their clients’ needs because they’ve built up their relationships over a long period, which means they can recognise where energy efficiency and other lending can really impact on the client’s bottom line.” Further information on the small business credit lines: http://www.beerecl.com and on a similar household programme http://www.ebrd.com/new/stories/2006/060208.htm Written by EBRD's Senior Writer Kate Dunn.
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17 March 2006 |
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