Community Firewood Businesses: Logistics and profitability

Size: px

Start display at page:

Download "Community Firewood Businesses: Logistics and profitability"

Leo Bradley
7 years ago
Views:

1 Community Firewood Businesses: Logistics and profitability Introduction In this presentation I will not tell you how much profit you can make from your firewood business. What I will talk about is how soon you can expect to make a profit and what sort of business it could and should be. This talk comes out of work I have done on firewood projects for various community groups Dervaig on Mull, Lamancha, Falkland, Peebles and most recently Moffat, and also from running a small sawmilling and firewood businesss. I focus on the neglected subject of firewood logfuel, rather than chips or pellets, and firewood will be the focus of this talk. I am an independent consultant but I work with other consultants as needed, and have formed a loose group - with a small-scale woodland manager/harvesting contractor and two people who used to run Forest Fire in Edinurgh, selling, installing and maintaining woodstoves for over 30 years. We deliver modular projects for community groups hoping to set up firewood businesses looking at the resource, competition (or potential collaborators), different business models and most importantly bulding demand. So what is a firewood business? It can be any or all of these components of the wood chain: Growing trees and managing woodland Harvesting trees Transporting timber Breaking down timber into firewood Drying firewood Selling and delivering firewood If you want to set up a business to carry out all the stages from growing trees to delivering firewood to customers, you ll have to make a big capital investment, as shown by the outline figures in Table 1. You ll need to be very confident of your supply and market in order to invest such sums (which exclude running costs until the business starts to make a profit) and debt servicing may be crippling. So it may be better to service one step in the chain. Our work in Moffat showed that a business which only dried and delivered logs in bulk bags, buying timber from woodland owners and using contractors for all the transport, breaking down and handling to contractors, could start making a profit in 3 years. We assumed low rent, one part-time staff member and the main capital outlal being construction of a shed. We assumed minimal sales in the first year from timber delivered in dry, and thereafter annually increasing sales of dry logs. The delay between buying wet wood and selling dry firewood is an unavoidable problem for any firewood business unless you use a kiln, and kilned firewood is varied in quality.

This talk comes out of work I have done on firewood projects for various community groups Dervaig on Mull, Lamancha, Falkland, Peebles and most recently Moffat, and also from running a small

2 We also assumed that demand would grow from quite a low current demand, due to the small number of woodstoves intsalled in houses in the area. The project considered that they would get funding for an advisory service, which would progressively increase the number of installations, which would be reflected in increased demand. Part of our later projects was encouraging people to install woodburning stoves and boilers. We ran public meetings and demonstration events, and provided printed information with guidance on where to find out more. Two projects included advisory home visits and the Moffat project included architects drawings and costed recommendations for stove installations. All this was funded through the Climate Challenge Fund. And this is where community groups have an advantage over profit-driven businesses in that you can get funding to promote firewood use. Of course, not all of the new installations would buy firewood from the business, however. Some would buy from other suppliers while others would source from their own woods or those of their friends or contacts. Many would start drying their own wood. In fact at Lamancha we found that more than half of the woodburners got timber for firewood from their own woods or those of friends or neighbours. Now let s look at potential demand and competition Any new business has to find or create a gap in the market that it can make a profit out of filling. There are approximately 2.3M households in Scotland, of which about 1,000,000 are classed as rural. Just over half of these are not on the gas grid, so alternative heating (bottled gas, oil or electricity) will be very expensive. All of these 520,000 houses should be mainly heated by woodfuel, but our surveys suggest that slightly less than 10% of houses have a woodstove, and many are not used as a primary source of heat. An average household might use 4 cu m ie 4 tons of softwood per year, which means cumulative demand might already be 200,000 tons per year, and growing every year as more people turn to firewood for heating. We have found that there are lots of firewood suppliers everywhere in Scotland. The website I manage lists over 170 and the usewoodfuel website lists 86, but there will be many more. It is likely that there will be many businesses supplying firewood into your area, but a good number of them will supply mixed loads of uncertain amounts of often wet wood at high prices.

Part of our later projects was encouraging people to install woodburning stoves and boilers.

3 The vast majority of firewood suppliers deliver mainly within a 20mile radius, because the cost of transport is so high (mainly due to the cost of the driver s time and the bulkiness of wood). This makes it a very local market and each locality will have a different firewood market, offering different opportunities to people wanting to get into the business. Wet wood is the biggest problem for woodstove owners, and the main reason why stoves are removed. Of course, anyone can and should dry their own firewood, but many people have just not realised that a woodstove needs a different approach compared to a gas stove. So there is a definite premium, in price or customer loyalty, from supplying dry wood. And it s no surprise that the price differential between hardwood and softwood is so great. Slower-grown softwoods, expecially larch, can be as dense as some hardwoods, but with fastgrown spruce you re carting around a large amount of water or air in every cu m. Community groups usually want to collaborate rather than compete with existing legitimate businesses, and that can mean any or all of - finding a gap in the market to fill and making a profit - working to improve the quality of the firewood offered to the customer - working to increase local demand for firewood - helping existing businesses by making people aware of them and by using their services to help run your business Finally a couple of things you shouldn t forget. There s a buoyant market for kindling. Machines costing 5-10,000 can produce upwards of 10 cu m per day, which can retail for 150 per cu m.

Wet wood is the biggest problem for woodstove owners, and the main reason why stoves are removed.

4 Nick Marshall Community Firewood Businesses:Logistics and Profitability

5 Table 1 Major capital costs at various steps in the wood chain Step Growing trees and managing woodland Main capital items Land ( 3-4,000/ha x 100ha) ,000 Harvesting trees Mini-forwarder/tractor+crane trailer 30-50,000 Transporting timber Crane artic 40-60,000 Breaking down timber into firewood Firewood processor 6-8,000 Drying firewood Shed Telehandler 8-10, ,000 Selling and delivering firewood Crane truck 20-30,000

30-50,000 Transporting timber Crane artic 40-60,000 Breaking down timber into firewood Firewood processor

6 Summary of key points 1. Find out what your local supply of timber is and the current and potential demand 2. Find out the structure of the local firewood market to help identify gaps 3. Don t take on the entire wood chain, especially at the start 4. Take account of the lead time before you can start selling firewood 5. Know your competitors and work with them if possible. Use them as contractors and save having to invest and maintain equipment 6. Get other local firewood suppliers to improve the quality of their products 7. Get to know your customers, what they want and how satisfied they are with the firewood they get 8. Provide a quality product. The best firewood is dry hardwood. Avoid fast-grown softwoods unless there s no other option 9. Do things that normal businesses can t eg actions for which you can get funding such as promoting the use of woodfuel. Build the market. 10. Improve the local market by providing market information for customers 11. Improve public knowledge about firewood quality and heating with firewood. 12. Train people to dry their own firewood

Use them as contractors and save having to invest and maintain equipment 6. Get other local firewood suppliers to improve the quality of their products 7.

TECHNICAL APPENDIX Investment in the Forestry Sector

TECHNICAL APPENDIX Investment in the Forestry Sector Introduction The appendix relates solely to an application for funding under the Forestry priority within the RDPE Rural Economy Grant (REG). REG is