Challenges of Building an Agriculture-Based Business

Macadamia nut trees

Building a brand based on local agriculture in Hawaii is harder than it looks.

Building a brand, and building a business, are things we know something about. Scott, our “Big Kahuna”, is an inventor and serial entrepreneur who has had both successes and challenges throughout his long career. Lili, our “Marketing Guru”, has spent most of her adult life in the advertising, marketing and market research businesses. And Megan, our resident artist, is also an expert in logistics. We are marketers and business folks — not farmers. So when we purchased 75 acres of very neglected rainforest on the Big Island of Hawaii, we had no intention of creating a farm, or a farm-based enterprise.

We won’t go into the history of reclaiming the farm and creating the Hawaii’s Local Buzz brand — that’s a story for another day. Instead, we want to focus on an unanticipated obstacle to growing our fledgling brand — a scarcity of raw materials.

The Hawaii’s Local Buzz brand and product lines are inextricably linked to agricultural products grown in the Ka’u district on the Big Island of Hawaii. When we created our brand, we knew that it would take some marketing smarts and some creativity to grow the business, especially if we wanted to grow beyond the confines of the state of Hawaii and into the broader US market. We figured we had what it takes to do that.

We have unique, delicious products that people love. A taste is all it takes to make a sale. In marketing, we have a tendency to think that if we have a differentiated brand and a unique, high-quality product, all we really need to be successful are marketing smarts, manufacturing expertise, and the ability to raise the capital needed for expansion. For most types of businesses, that’s essentially true.

If you’re making clothing, or toys, or household goods, you can focus your efforts on creating demand. Meeting that demand, as long as you can figure out a way to manufacture your products efficiently, shouldn’t be an insurmountable obstacle. Ran out of cotton cloth? Buy some more or find an additional supplier. Need more plastic? Not a problem. If you’re making bread or cakes or breakfast cereal, you don’t have to worry about running out of flour or sugar or baking soda. You can always buy more.

But availability of agricultural products, especially if place of origin is important, can be way more limited than you’d imagine. We’d assumed from the beginning that the biggest hurdle for us would be having sufficient cash-flow to acquire enough raw materials (i.e., macadamia nuts in the husk) to meet the growing demand for our value-added products. But then the reality of a business based on the agricultural production of a small island brought us up short. We learned quickly that the total available supply of Hawaiian macadamia nuts is surprisingly limited, and that scarcity has been exacerbated by two factors — one short term, and one long term.

The eruption of the Kilauea volcano in May of 2018, followed by several hurricane-level wind storms in the winter, reduced the available crop of Hawaiian macadamia nuts by 40% vs. year ago. First, the volcanic ash-fall burned many of the blossoms that should have produced nuts, and then many of the remaining blossoms were blown off the trees by the storms. That’s a short-term, but very real, problem for those of us relying on that crop to meet the growing demand for our products this year.

Bee pollinating mac nut blossoms

With luck, next year should see a bumper crop of macadamia nuts. However, we are also experiencing the consolidation of macadamia nut production into the hands of a few, exceptionally well-funded, companies who are buying up as many of the existing orchards here on the Big Island as they can. Unlike the previous owners of these orchards, these large companies are not selling their nuts to companies like ours. Instead, they are either selling macadamia nuts by the container-load to China, or they are using the nuts they grow to create and market value-added brands of their own.

That leaves small artisan producers of value-added products out in the cold, with no viable alternatives for sourcing macadamia nuts — and we expect this consolidation trend to continue. We are not able to grow enough nuts to meet our needs, and without the ability to purchase them from other growers, we cannot sustain, much less grow, our existing business. Planting new macadamia nut orchards is not a practical solution, given that it takes six to eight years for new macadamia nut trees to produce a crop, during which time the trees need to be tended, pruned, fertilized, etc. — all of which costs a great deal of money.

In the short term, we are doing everything in our power to access what remains of the independent macadamia nut orchards here on the Big Island, but in many cases, the large agribusiness companies have beaten us to the punch. Our company must either diversify our product line by adding products that are less dependent on Hawaiian agricultural production, or risk having to shut our business down.

We’ve chosen to expand our product lines, but it hasn’t been an easy decision. The signature products that our customers believe are head and shoulders above the competition are our eight varieties of dehydrated macadamia nuts — super-crunchy, with a flavor and texture very different from the roasted nuts sold by the large macadamia nut brands. We’ll continue to produce them, of course, but we need to grow other parts of our business and reduce our reliance on macadamia nuts, which are currently 50% of our revenue.

The challenge now is to create products that have a similar perceived competitive advantage and are not reliant on ever-increasing amounts of Hawaiian macadamia nuts. We added a line of shortbread cookies in 2015 that we think are the best cookies we’ve ever tasted, and we’re working on extending our cookie line into new recipes and flavor varieties. Scott, who develops and perfects all of our recipes, is working on those now.

We’ve just introduced several new varieties of chocolate barks, including our amazing new Tropical Fruit bark, that we believe are unique and are good enough to bear our brand name. We plan to continue innovating, creating new products that we hope will become an increasingly important part of our total sales.

Without this scarcity of raw materials, our brand would have continued to deliver double-digit growth, maybe indefinitely. While we prefer to look forward and celebrate our new successes, we’d be lying if we said we did not regret having to shift our focus away from our very best products. We won’t waste too much of our energies on regrets, though. Never give up… never surrender! (Thank-you Capt. Taggart.)

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