EBRD and EU boost Darmek Pharm’s growth through an energy efficiency facility
When the Covid-19 pandemic first hit the Kyrgyz Republic earlier this year, Darmek Pharm, a growing chain of pharmacies in the Osh and Batken regions, made a conscious decision to keep its prices in check for vital medicines. While many pharmacies doubled their prices for a blood thinner used to treat Covid-19 patients, and some speculators resold the product for an 800 per cent margin, Darmek Pharm kept its prices unchanged.
“Coronavirus patients and their families were desperate at that time. We would never want to benefit from others’ misfortune and any money you get this way does no good,” explains owner Zairbek Kyrgyzbaev.
Forty-two-year old Zairbek has built Darmek Pharm into a popular chain, starting 10 years ago with a single store in Osh. Back then, he managed everything himself, from running the counter to making deliveries. Coming from a dynasty of doctors, Zairbek also studied general medicine. However, before starting Darmek, he managed a bakery and grocery shops, sold clothing and food products, and worked for public health, water and sanitation projects.
Now, Darmek Pharm employs more than 150 staff at 42 pharmacies. With the help of the EBRD and the European Union (EU), the company built a modern and energy-efficient warehouse. For a long time, Darmek rented a small 400 square metre warehouse dating back to the Soviet period. The use of this old facility meant expensive bills for heating and cooling and did not meet the stringent storage requirements for working directly with international medical suppliers, one of Zairbek’s goals for his pharmacy business.
In 2018, when Darmek Pharm began receiving consultancy support from the EBRD, the company lacked the resources to invest in a modern facility. It was also not familiar with the relevant standards for pharmacy warehouses. With Switzerland’s assistance through the EBRD’s Small Business Impact Fund, Darmek developed a business plan and secured a US$ 350,000 loan from local DemirBank, through an EBRD risk sharing facility and the Kyrgyz Sustainable Energy Financing Facility (KyrSEFF+) programme, both financed by the EBRD and EU.
Shortly afterwards, Zairbek benefited from the Bank’s Advice for Small Businesses initiative, which is supported by EU funds and provided him with international experts and local engineers for the architectural planning and design of Darmek’s new facility. During the project, Zairbek was able to travel to Austria to see how world-class pharmacy storage facilities are built and operated.
The company quickly built its planned 1,600 square metre facility. Even though it is four times larger than the previously rented warehouse, it is much more energy efficient. Owing to thermal insulation, energy-conserving windows and doors, lighting, heating, ventilation, cooling and efficient water-supply systems, the company spends the same amount on utility bills as it did before.
In addition, through the KyrSEFF+ programme, the European Union provided a US$ 45,000 grant for the construction to include energy-efficient technologies, decreasing Darmek’s loan by that amount. KyrSEFF+ finances and provides grants for owners of commercial and residential buildings to invest in measures that save energy, water and other resources. Since 2013 the programme has financed more than 3,000 energy efficiency projects for over US$ 50 million. It has also provided US$ 6.3 million in EU grants to 1,930 projects. In total, each year, these successful projects save 177 million kilowatt-hours of electricity, conserve 111,000 cubic meters of water and reduce CO2 emissions by more than 61,000 tonnes.
These investments are particularly important for the Kyrgyz Republic’s energy-intensive economy, which faces annual growth in power usage, recurring periods of low water supply, and outdated energy and heating infrastructure.
The new warehouse enables Darmek Pharm to procure more drugs in bulk and partner directly with producers and suppliers, avoiding intermediaries. Its operating expenses will also be lower due to the environmentally friendly facility. More efficient business practices now allow the company to continue its mission of keeping the prices of medicines affordable, especially as the Kyrgyz Republic battles the pandemic’s second wave.
Darmek Pharm is well positioned to achieve its objectives. The firm currently receives international consultancy support from the EBRD and EU, focused on its growth strategy, online marketing and merchandising. It expects a 35 per cent increase in turnover and plans to launch pharmacies in a new region of the Kyrgyz Republic, eventually achieving a presence throughout the country. The firm also has plans to start manufacturing some popular products, such as packaged medicinal herbs and antiseptic solutions.