"(I'm) fascinated with his development of the first and (sadly) only sustainable distillery in the world..."
On a recent trip to Puerto Rico, I had the pleasure of spending time with Roberto Serralles, Vice President of Destileria Serralles. I first spoke with Roberto last year because I was (and still am) fascinated with his development of the first and (sadly) only sustainable distillery in the world. He is the sixth-generation rum maker in this still family-owned business based in the town of Ponce, located in the southern coastal plains on the shores of the Caribbean Sea.
Serralles grew up in the family business, playing around the distillery as a child. As an adult, he radiates a Willie-Wonka-like excitement that illuminates his passion for family, people, and his home of Puerto Rico. He is a man looking to act on the best decisions for everyone. I had a chance to speak with Roberto while visiting Destileria Serralles about his operation and what has changed since we chatted last year:
Chris: You are the sixth-generation distiller at Destileria Serralles, maker of Don Q Rums (one of my favorites by the way). What other products do you make?
Roberto: Palo Viejo, BlackBeard Spiced Rum, local brands: Ron Llave and Granado (all aged rum). For the local market, cane-based Nikolai Vodka, cane-based Calvert Gin, an entire line of liqueurs.
C: You left Puerto Rico and pursued a degree in environmental science at the University of Oregon. What brought you back to the rum business?
R: Dad called and said the company needed help finding a solution for treating our wastewater, which at the time was around 300,000 gallons of high organic content water. I started as a consultant on the project and after I finished my dissertation, I moved back to Puerto Rico full time.
C: Congratulations on receiving the 5-Star Diamond Award! What was that like for you and your family?
R: Ecstatic!! Very rewarding and fulfilling. It’s great to be recognized as a leader.
C: Your father, Felix Serralles, was also honored with a Lifetime Achievement Award.
R: He was genuinely shocked and at a loss for words (which is unusual). It was a surprise for him and he was emotionally taken. His speech captured the whole element of family (once you are in you never get out!) and his recognition of Silvia Santiago (Senior Vice President of Manufacturing) as integral to the creation of Gran Anejo was a nice touch.
C: We spoke last year about all the sustainability efforts you have created for your family’s distillery. Is there anyone else who is working on or is operating a sustainable distillery?
R: A lot are trying….
C: Are others looking to you for advice on how to make their operations more sustainable?
R: Yes, I get a lot of calls.
C: Things have a changed a little since we spoke. What is happening now and what are you working on for the future?
R: Since last time we talked, we have expanded our reused water filtration system and we have expanded our industrial composting operations. These are two critical components of our industrial ecology perspective since the treated water will now be used for any service requirements at the distillery (except for production of rum per se) and for any type of irrigation since it will be colorless.
In the past, the treated water, though clean, still had some color and this limited the types of irrigations that could be used. Expanding the composting operation will allow us to divert more biomass from ending at our scare landfill spaces on the island. Next frontier on the path towards sustainability is looking at reducing our footprint with packaging materials. We are researching the introduction of recycled content in our packaging and POS materials. We’re aiming for that to hit the market in late 2012.
C: Outside of developing a completely sustainable distillery, does Don Q do other things to give back to the community?
R: We have supported numerous philanthropic entities in Puerto Rico over the last one and a half centuries. The main focus of our philanthropic giving revolves around health and education for underprivileged families in the Ponce region (Centro San Francisco y Centro Sister Isolina Ferre, being the two entities we support the most). We support the arts in Ponce. I am in the board of trustees of the Museo de Arte de Ponce and we support numerous environmental initiatives on the island. This list is by no means exhaustive as we do a great deal of giving on a yearly basis.
C: How many people do you employ in Puerto Rico?
R: 600 direct, 900 indirect
C: Recently, you invited me to visit the DonQ Rum distillery and I was most impressed with the operation. What was it like growing up around there?
R: It was a great place to grow up – my brothers, sister and I had a lot of great hiding spots as children.
C: In Puerto Rico, everywhere I turn I see the Don Q logo, and DonQ rum is the most popular rum sold here. In fact, Don Q Gold was the rum used originally in the Pina Colada. What is happening to increase your presence in the U.S.?
R: We built an organization Serralles USA and currently have around 15 employees. We have grown our volume from 40,000 cases in 2008 to 200,000 in 2011.
C: What is the Rum Excise Tax Cover –Over?
R: There’s a federal excise tax of $13.25 for every proof gallon and there are two proof gallons per case. The amount of the excise tax collected by the U.S. Treasury is “covered-over” to the treasury of Puerto Rico and the U.S. Virgin Islands in the same proportion as the volumes of rum shipped to the USA from the two territories.
C: Last year Diageo, the owners of Captain Morgan Rum, struck a deal to move their operation to the U.S. Virgin Islands. How does that affect you?
R: It’s a big blow to our capacity and profits… 75% of capacity and 90% of profits.
C: How did they (Diageo) pull this off?
R: 46% of the total cover over was the offer from the USVI; $60 million per year.
C: How did the U.S. Congress allow this to happen?
R: Charlie Rangel was “committed to the USVI”; he turned a blind eye to this issue when he was running the Ways & Means Committee.
C: Do you know of any other examples of this?
R: Not at this scale.
C: How much does Puerto Rico receive from that tax annually? And how much of that is attributed to sales of Captain Morgan?
R: Puerto Rico receives $400 million of which $120 million is Captain Morgan.
C: It's almost seems that the U.S. government, by not addressing this, is allowing taxes to be used not to their original intent. Not to mention U.S. tax dollars are being given to a British-based business. How is that legal?
R: Their rationale is that this part of an economic development program to bring about 50 jobs in the USVI. The program is too loose – lacking in structure.
C: With the taxes gained by Puerto Rico from the sale of rum moving away, how will this affect budget of Puerto Rico? What about the people?
R: This is a massive hit to Puerto Rico’s social programs. The money from the excise tax cover-over program supports funding for schools, hospitals, roads, beaches and parks.
Roberto, thank you for taking time to speak with me. I am most impressed with Don Q and all that your company does not only for people but also for the world and all of our future. Salud!