Kumar Plocher, the company founder and president, is an idealist, a deep ecologist, and passionately wants to change the world for the better. In September of 2001 he quit his promising, well-paying job with a high tech company in order to pursue a more appropriate occupation. Having learned about biodiesel in his time in Berkeley, he put in many hours of study and research and decided to start a biodiesel company. Mendocino County, with its organic farming and environmental attitudes would prove to be the ideal place to try to sell this new alternative fuel.
It was a long shot - not only a new business, but also a new kind of business. No one had tried to make a living distributing 100% biodiesel to end users - distribution of biodiesel had been limited to huge companies in the petrochemical industry making big deals with corporate farms in the Midwest and government entities required to use only a small percentage of the alternative fuel.
Kumar prepared a flyer with a survey on the back and left stacks of them at farm supply stores, food co-ops, and on bulletin boards. He also had to find a fuel supplier and gather up the equipment to get started.
When he got back enough positive responses to his flyer he decided to take the leap. He enlisted the help of Andrew Daunis, an acquaintance who had made some biodiesel on his own and had a commercial driver’s license. They named the company Yokayo Biofuels, after the Pomo Indian word “yokayo”, which means “deep valley”, and is the basis for the modern name, “Ukiah”. They took their first delivery of fuel, 2,800 gallons, in November 2001, and it cost them $1.37 per gallon. Their task was daunting- it took 8 weeks to sell it all, using a pickup truck with a 200 gallon tank on the back and a 12 gallon per minute pump. But they persisted, giving away samples and spreading the word, sort of like Johnny Appleseed. They appeared on local community radio, taking calls and spreading the word through the farming community. By March 2002 they had a commitment from Fetzer Vineyards to purchase 1,000 gallons of biodiesel, to use in their organic operations. The company’s infrastructure was growing, and so was its credibility.
By the end of 2002 they had over 100 regular delivery customers, ranging from diesel car owners who bought 200 gallons every few months, to Thanksgiving Coffee, who ran its entire fleet on biodiesel, using hundreds of gallons per month. Sales for the year 2002 were about 40,000 gallons.
The company moved twice that year, ending up at 150 Perry Street in Ukiah, across the street from the airport, just a few blocks from highway 101. It had acquired 2 new custom-outfitted delivery trucks with 1,000 gallons capacity each, and Kumar and Andrew began selling fuel to drive-up customers with a makeshift pumping setup. The wholesale cost of fuel had risen to $1.74 per gallon, but they figured they could become profitable if they could sell 12,000 gallons per month. Andrew left the company in mid-2002 to pursue other ventures, and Kumar hired Sunny Beaver to run the office, manage ordering and dispatching deliveries, and do the bookkeeping. A commercial driver was hired to handle the increasing business volume and Kumar’s father Steve Plocher, a Certified Public Accountant in San Rafael, became the company controller.
In 2003, growth continued. First quarter sales were 23,000 gallons, and the company had its first profitable quarter ever, with both January and March showing monthly profits. Second quarter sales were over 50,000 gallons, with new customers calling daily. In July the company purchased a 4,500-gallon commercial fuel truck, for picking up shipments of fuel, and for future deliveries to gas stations and large farms and fleets. By the end of 2003, monthly sales were around 15,000 gallons per month. But wholesale prices had risen to the point that being a middleman distributor was not financially feasible. Fuel cost had reached $1.94 per gallon. It became clear that the company must produce its own fuel to be a profitable enterprise.
From the fall of 2003 thru the spring of 2004 the company sought to raise funds for the construction of a biodiesel plant in the Ukiah area, through selling shares in the corporation via a private placement offering. It achieved about two thirds of the funding it was seeking, just over $300,000. Tom Brewer, Yokayo’s subcontracted chemical engineer, had designed a relatively small commercial production plant, we had leased a shop, and the company was ready to order equipment.
Then, following a detailed engineering report and zoning and planning discussions with the county, it was discovered that building the plant would entail more design issues and cost significantly more than had been anticipated. Meanwhile, the wholesale cost of fuel increased to $2.59 per gallon. More than ever, there was an imperative for Yokayo Biofuels to produce its own fuel (and hence reduce the company’s cost per gallon). What to do?
The company had already started its used restaurant fryer oil collection project in July, before the bad news had come from the engineers regarding the plant requirements. The restaurant oil collection business was becoming a huge success. It turned out that Sandy Turner was quite adept at convincing restaurant owners to switch over to Yokayo for their grease disposal. By the end of November 2004, Yokayo Biofuels, a fully-licensed “inedible kitchen grease hauler” and “collection center,” was collecting used fryer oil from over 200 restaurants in Mendocino, Sonoma, and Marin counties, which added up to about 10,000 gallons per month. With no plant, and oil starting to pile up in the storage tanks, the company was in quite a predicament.
In late 2004, Kumar began discussions with the operators of a large biodiesel plant in central California that was interested in making biodiesel from Yokayo’s used fryer oil. This was great news, a real breakthrough. Yokayo would truck the grease to them, they would process it into biodiesel, and then Yokayo would go get it and drop off more grease. And they would only charge $1 per gallon for the processing. The idea was almost as appealing as a Ukiah plant- great timing and a great solution.
But the central California plant had been designed to make biodiesel from only virgin soybean oil. They tried many times, but could not adjust the machines to make good biodiesel from Yokayo’s used fryer oil. The personnel at the plant were also unwilling to involve Kumar or Tom in trying to solve the problems, nor would they allow them to visit the plant. So in January 2005, we had to let go of that dream and continue the effort to create our own plant.
We were running out of funds and running out of time. The only hope was to find a workable location and build a small, low budget biodiesel plant, if that was possible (Tom’s original design seemed out of the question, requiring $400-500,000). We needed three critical ingredients: a plant site, a low cost plan for a biodiesel processor, and the money to make it happen. All three seemed like wishful thinking. The capital was running out and the game was coming to a close. But that didn’t happen.
Maria Alovert, better known as ‘Girl Mark’, “queen of homebrewing”, met with Kumar one evening in late January and laid out a plan for a low budget biodiesel plant, utilizing used steel tanks and off the shelf mixers. With her experience, which included mechanic work, plumbing construction, welding, and electrical wiring, she could do much of the work herself. The plant would start out making 200 gallons of biodiesel per day and be expandable to 1,000 gallons per day. Total cost should be under $50,000. Could this really happen? We had no choice but to run with it.
But we still needed money! A specific individual of means had been meeting with Kumar and Steve every six months or so, about biodiesel and how the company was doing, but he had not yet invested in the effort. He just happened to contact Kumar on January 31 to resume the ongoing conversation. Kumar rather emphatically shared with him the desperate status of Yokayo Biofuels. The investor promptly called Steve and pledged to invest $100,000 to make the plant happen. The first $25,000 arrived the next day.
We were making progress. But there was still no properly zoned site in which to legally make biodiesel.
On February 9, 2005, in one of our Friday morning management meetings, we were discussing a particular industrial shop we might rent, and all the fire sprinklers and various expenses it would take to make it work for a biodiesel plant. It was looking more and more expensive, when someone mentioned the old Georgia Pacific chemical plant that had drawn our interest almost exactly a year prior. It was a perfect site, as it had liquid containment, a network of racks for overhead plumbing, fire water cannons, compressed air, and buildings designed to hold industrial chemicals. A year prior, the new owner hadn’t been sure what he wanted to do with the property, and it wasn’t available. But maybe…
In that moment Kumar left the room and called the owner. Perfect timing. Amazingly, the owner had been thinking of Yokayo as well, and he had a corner of the property practically reserved for the company. All six members of our management team went over to the site and toured the facility. It was just what we needed, and the rent was affordable. We signed the lease on March 1, 2005, and Yokayo Biofuels began moving tanks and equipment to its new production site.
In May, after a couple months of acquiring tanks and equipment, Girl Mark began to build our plant. Bill Crolius, a member of Yokayo’s Board of Directors and a general contractor, committed to being the project manager and working with Mark to build the biodiesel plant. Things moved slowly for awhile, but by mid-September, the company was testing the quality of large batches of fuel with the first reactor that had been built. The results were consistently meeting the ASTM specification. Two years of research and development were starting to yield real world results.
At the end of December 2005 we finished assembling the elements of our biodiesel plant and by mid January of 2006 we were making regular batches of 180 gallons of top quality biodiesel. With the ability to do several batches per day, we were making about 5,000 gallons per month. We had stopped selling “other people’s biodiesel” in November 2005, having essentially shut down our distribution operation to focus resources on production (something that took a huge leap of faith on the part of our loyal customers and our shareholders). But with production picking up now, we began distributing fuel again in May 2006 - our own fuel! In July 2006 we built a new larger processor, capable of 1000-gallon batches. Production doubled to 10,000 gallons per month.
Between October 2006 and March 2007 we installed several significant pieces of new equipment that improved and increased our grease processing and biodiesel production capacities. By March we were producing 20,000 gallons per month of biodiesel. We were almost at the breakeven point, which had increased ever upward with all of our infrastructure growth. But a new wrinkle appeared.
Our landlord had been building up his lumber operation all around us, such that our little corner of the chemical plant was now surrounded by stacks of lumber and fork lifts hauling wood past our trucks and tanks all day long. There was sawdust everywhere, on our trucks and in our oil. His business was growing and we were growing. He offered us the opportunity to move to another industrial site he owns. Over an acre in size, with a large concrete building, a lot of extra covered space, offices, bathrooms, and 600 amps of 3 phase power, it turned out to be just what we needed.
We looked at it, liked it, and made the leap in July. We were closed for 10 days in the middle of July 2007 while we moved the plant, working long days, seven days a week. We opened up on schedule and started making fuel at the new location. In August 2007, we collected 30,000 gallons of restaurant oil from over 500 restaurants and produced 26,000 gallons of biodiesel. The dream was happening, and our future seemed a lot more secure.
In January 2008 we hired additional help and increased our production schedule to 7 days a week. Grease collection was growing and biodiesel sales were growing. In June a new Yokayo investor actually bought the Orr Springs site from our landlord and agreed to take additional shares in the company in lieu of cash rent. That proved to be really helpful to our budget, because after a boom summer where we sold biodiesel for $4.95 per gallon, fuel prices crashed and we had to lower our price way down just to move our product. Our financial struggle resumed. After a brief few months of profitability we had to lay off two persons and tighten expenses for a long period of low fuel prices.
This was the beginning of the recession. Besides low fuel prices, restaurants weren’t selling as many French fries as before, so although the number of restaurants continued to increase, we were getting less oil from them as a whole. But we found other oil collectors in the San Francisco area, and we were able to purchase extra waste oil at a reasonable price. Likewise, we also lost a lot of our retail customers, as they had to make the hard choice to buy cheaper fuel in the tight economy. So we expanded our wholesale fuel operations such that we were selling over half our fuel to Biofuel Oasis in Berkeley, a retail biodiesel station with thousands of customers.
2009 was a year of adaptation, learning and survival. We hired a full time chemical engineer and a part time mechanical engineer, both to make our daily operations more professional and to design a larger more efficient plant. Toward the end of the year we added a project manager to prepare proposals, plans, and budgets for the future plant. All our managers were getting better at running their departments and the staff was gaining more expertise at making biodiesel. By the end of the year we were making biodiesel every single day, except for holidays.
We expected the year 2010 to be our real breakout year, where we would achieve a level of profits such that we could qualify for a big SBA loan, to purchase new equipment for the big plant upgrade. But 2010 turned into our most difficult year ever, financially speaking. Congress failed to renew the $1.00 per gallon biodiesel tax incentive that we got from the IRS. For the previous four years, each month we would receive a check for about $30,000, and that was a large portion of our income. That stopped January 1, 2010.
How would we survive? We had to pull out all the stops if we were going to make it. Steve drew up budgets for various levels of production, fuel prices, and expenses that we had some control over. We pushed production to the max and managed to increase the size of our daily batches just by increasing the speed of our mixer. Our engineers helped a lot, and our project manager, Evan, helped us institute a new step to our biodiesel process that saved ingredients and yielded more fuel. Our shareholders came to our rescue more than once that year, with additional equity contributions and many loans, large and small. We had to string out many of our creditors and taxing agencies, knowing that we would get stronger and catch up with payments later. Toward the end of the year we actually appealed to a number of banks and leasing companies, to whom we made monthly payments, to get the payments waived for a while or reduced in amount. They were all very accommodating and we lowered our monthly cash disbursements by over $6,000 with just that program.
Then there were the Renewable Identification Numbers (RINs). The EPA created the Renewable Fuel Standard, which requires petroleum companies to include an ever-increasing percentage of alternative fuel in their gasoline and diesel. Companies like ours get credits for every gallon of biodiesel we sell or use. Early in 2010 those credits were worth about 14 cents each. However, as the biodiesel supply began to dwindle and the petroleum companies were having a harder and harder time fulfilling their quotas, that value rose. Toward the end of the year they were worth over 50 cents. We were making over $25,000 per month selling our RINs to petroleum companies. The first step to our continued survival was in place. The second would arrive with a flourish.
During our horrible 2010, we never stopped making fuel. In fact, we never stopped trying to make and sell more than we ever had before. This would become a very important distinguishing factor for Yokayo Biofuels when, on December 17th, after 12 months of failing to address the fate of the biodiesel industry, Congress reinstated the biodiesel tax incentive. The fact that they made it retroactive to January 1, 2010 meant that companies like Yokayo Biofuels would come out on top over all of the high-capacity big industry players who had either shut down or greatly diminished production. After getting nothing for 12 months, the IRS was going to owe us over $400,000.
On April 19th, 2011, the “rainbow check” arrived from the IRS, and as our bookkeeper, Sunny, walked to the bank to deposit it, a rare circumhorizontal arc “rainbow across the sky” appeared over Ukiah. The old debts would be paid, and the remainder would go into savings. Yokayo Biofuels was in the black.