- Special Projects
Stroll the aisles at the local supermarket, and you’ll find an assortment of products evoking a Hawaiian heritage: Hawaiian Sweet Maui Onion Rings, Wai Koko Kona Mocha Coconut Water and Kona Brewing Co.’s Longboard Lager, to name a few.
They certainly look local. The beer and onion rings feature stylized images of people catching waves in Waikiki, and the coconut water is emblazoned with tikis.
But they weren’t made in the islands.
The onion rings come from a New Jersey food giant that posted $3 billion in sales in 2016. The coconut water is a product of Thailand. And the beer is from Craft Brew Alliance, a publicly held Portland firm that brews and bottles it in Oregon, Washington, New Hampshire and Tennessee.
It’s a problem that kamaaina food manufacturers have long faced: how to compete with knockoffs while marketing authentic local products in a place where land, energy and labor costs are higher than on the mainland.
And there’s an equally thorny counterpoint: It’s difficult to grow a small company into a national brand while staying authentically local.
The issues bubbled over earlier this month when three California residents sued Craft Brew Alliance. In the class-action suit, filed in U.S. District Court in San Jose, the plaintiffs allege the Portland-based brewer has violated California and federal law by misleading consumers into thinking Kona Brewing beer was made in Hawaii.
A plaintiffs’ attorney and Kona Brewing spokeswoman both declined to comment about the suit.
Selling mainland beer packaged to look like a craft brew from Hawaii might seem like a cynical marketing ploy, but interviews with several business owners reveal a more complex situation.
“It’s a difficult thing,” said Sandi Shriver, operations manager of Kona Brewing’s brewery in Kona, which does produce the beer sold on tap in Hawaii. Bottling all of the company’s beer in Hawaii and shipping it to the mainland would be a lot more expensive, she said. “We didn’t want to do it just for the sake of saying we brew it all here.”
Kona Brewing is investing in a 30,000 square-foot facility that will have the capacity to brew up to 100,000 barrels per year. The facility will let Kona Brewing increase its production of draft beer and will include solar energy and waste water treatment systems and a new canning facility that will allow the company to expand its selection of canned beers.
In truth, beer companies can brew here and ship elsewhere. Maui Brewing Co. of Kihei, brews and cans its beer on Maui and distributes to 22 states and 10 countries, said Marsha Hansen, the firm’s marketing manager. Canning instead of bottling allows the company to ship more efficiently, plus the opaque can keeps out light that can affect the beer’s longevity, she said.
But for every Maui Brewing Co., there are many enterprises that struggle to expand from the islands while staying completely local.
Hawaiian Chip Co. is a case in point. The Kalihi-based firm employs 15 full-time workers and five part-timers making and packaging gourmet taro and sweet potato chips. The company also sells hot sauces under the Kilauea Fire brand.
Hawaiian Chip has a market footprint outside of Hawaii mainly because it sells the sauces to Teddy’s Bigger Burgers and Kua Aina burgers’ locations in Japan, said owner and general manager Jimmy Chan.
Now the company is finalizing a deal to sell about six tons of hot sauce to a Japanese retailer, and that’s pushing its local production capacity.
Chan makes much of his sauce in partnership with a company in Waialua. However, he also works with a producer in Oregon, known as a co-packer in industry parlance, to help fill demand for his sauce. But the Japanese Kua Aina burger joints want Hawaiian sauce that’s actually made in Hawaii, not Oregon, and will pay more for it.
So Chan is expanding his Kalihi facility, in part so he can produce more Hawaii-made sauce.
He has no plans to sell chips overseas, including the mainland, because that would mean setting up shop near the market.
“If we wanted to sell in Trader Joe’s, for example, that would be a massive investment,” Chan said. “And it’s just not worth the risk.”
Bona fide Hawaii producers face another challenge: the cost of doing business in the islands.
At the Safeway supermarket on Kapahulu Avenue at the edge of Waikiki, shoppers can find dozens of items carrying a tag that designates them as local, including items of dubious Hawaii origin. Safeway’s surfboard-shaped “Local” tag appeared recently on a display of Kona Brewery beer and under bags of Hawaiian brand potato chips and onion rings.
Hawaiian is actually owned by Pinnacle Foods of Parsippany, N.J., which also owns brands like Birdseye, Duncan Hines and Vlasic pickles. And although the product has little connection to the islands, it sits on shelves near real local products that sell at a much higher price.
Hawaiian’s snacks were recently selling for $3.49 a bag. That was less than half the $7.99 price tag on the same size bag of Ono Giant Shrimp Chips produced by Cortney Thai, who employs four workers making chips at her shop in Aiea.
“Of course if you make it here, the cost is going to be higher,” Thai said.
Pinnacle Foods did not return calls for comment.
In some cases, it’s simply not feasible to make a product in Hawaii, at any cost. That’s the case for Alan Joaquin, the Honolulu-based president and chief executive of GR3EN, which produces a kale-based organic energy drink called GR3EN Superfood Brew.
Joaquin couldn’t find a U.S. Food and Drug Administration-certified organic canning facility in Hawaii, so he set up shop with a co-packer in Portland. Joaquin designed the business so he can scale up as demand grows, but he admits it’s a challenge taking on behemoths like Monster and Red Bull.
“We’re definitely an underdog in a huge, $10 billion category of energy drinks,” he said. “We’re just a small company in the middle of the Pacific trying to do something crazy.”
But is it really a Hawaii product?
“We are created in Hawaii, but we’re actually brewed in Portland, Oregon,” Joachin said. “We’re a local company, and a Hawaiian corporation.”
Honolulu-based Shaka Tea also makes its product elsewhere. The company produces bottled cold teas from Hawaiian-grown mamaki, a plant found only in the islands. The mom-and-pop startup has financing thanks to an investor group that includes a former director for strategic ventures for PepsiCo.
But bottling in Hawaii wasn’t an option because there wasn’t a facility here that could do it, said Harrison Rice, who co-founded the company with his wife, Bella Hughes. So the tea is bottled in California using Hawaiian mamaki, then shipped back to Hawaii, where he said it is distributed by Paradise Beverages, which also distributes GR3EN.
“We are created in Hawaii, but we’re actually brewed in Portland, Oregon. We’re a local company, and a Hawaiian corporation.” — Alan Joaquin, GR3EN
Rice said it did not make financial sense to build a bottling facility here. Instead, Shaka Tea’s vision is to support Hawaii agriculture by using local produce for its tea. Too much Hawaiian agricultural land is going unused, he said, adding there’s no reason Hawaii agricultural products cannot be a staple in the American diet.
“To us, that’s where we’re starting from,” Rice said. “The core of our brand is Hawaii grown.”
Naeha Breeland, chief executive HawaiianOla Beverage Co., feels the same way.
HawaiianOla’s products include energy shots made from noni juice and organic sparkling drinks that combine Yerba mate with Hawaiian honey and flavors like turmeric and ginger. The company now buys Hawaii produce and ships to its Arizona co-packer, which processes and cans the product, then ships it back to Hawaii.
But that soon will change. HawaiianOla is working on a venture to build a facility to can its beverages, Breeland said. The goal is to have 100 percent local ingredients and be locally manufactured by 2020, she said. In the meantime, she said it would still be fair to call products like Shaka Tea and HawaiianOla “local.”
“I would say, ‘Yes, products made with Hawaiian ingredients are Hawaiian products,'” she said. “But canning or bottling is another level.”
In the shadow of the Koolau Mountains in Waimanalo, Dave and Shannon Yarber employ 10 people making Sky Kombucha, a bubbly fermented tea flavored with local ingredients like turmeric, mango, ginger, lilikoi, cucumber and mint.
Sky sells 18 flavors in bottles and 30 in kegs. Most are certified USDA organic, Yarber said. After starting out in Kokua Market, a food cooperative on King Street, Sky now sells at 30 locations on Oahu, including Safeway, Whole Foods and Down to Earth.
Dave Yarber said the costs of doing business in Hawaii are high, from land prices to utilities, providing health insurance for employees, and shipping. Sky has made it work because the profit margins for kombucha, which can sell for as much as $5 per bottle, are higher than for beverages like soda, which Yarber said Sky considered making before it realized the economics simply did not work.
It would be cheaper to make and bottle kombucha elsewhere, Yarber said. But Sky has no plan to expand beyond the islands.
“If we were going to sell the product on the mainland, I would probably manufacture on the mainland,” he said.
That’s not the goal. With two young children and a third on the way, Yarber wants a sustainable business that can contribute to the local economy and be around for his kids to take over some day.
“That’s my goal, dude: just to make a good solid company, to pay the bills, and we’ll grow over time,” he said.
State law prohibits producers and sellers from saying a product is made in Hawaii when it is not. The law says it’s illegal not only to specifically label an item “made in Hawaii,” but also to “by any other means” misrepresent the item as being from the state.
To be considered “made in Hawaii” under the law, a product must be manufactured in Hawaii and have at least 51 percent of its wholesale value added by manufacture or processing in the state.
In addition, federal law requires labels to state the commodity sold, the net quantity, and the name and place of business of the product’s manufacturer, packager or distributor.
Whether a product violates these laws law must be determined case by case, said Bill Pierpont, manager of the Department of Agriculture’s Measurement Standards Branch, which enforces the labeling laws. And the law is not airtight. A label “might be misleading, but that doesn’t necessarily mean it’s a violation of the law,” he said.
It’s not just the government that grapples with labeling. Asked about its “Local” label, Wendy Gutshall, a spokeswoman for Safeway, said items marked with the local tag “in our Hawaii stores are produced in Hawaii.”
What about the “local” tag on the Kona Brewing beer?
“It’s not our standard practice to have a local tag on Kona Beer, since this supplier is on the mainland and this particular store will update the signage on the display,” Gutshall said.
Richard Schnitzler, president of Hamakua Macadamia Nut Co., has been dealing with this issue for a long time. His company packages macadamia nuts as well as products like macadamia nut brittle and macadamia nut caramel corn. He buys his nuts from local suppliers on the Big Island, and sees how hard it is to police firms that imply nuts from Australia and elsewhere are from Hawaii.
“You’re asking the guy who’s been on a soapbox for years,” Schnitzler said. “At some point you just give up.”