KILAUEA, Kauai — A venture capital-focused experimental accelerator program has been launched here to help small companies that produce boutique food products like jams, chocolates, cocktail mixers and shave ice syrups take their visions to scale and expand throughout and beyond Hawaii.
The project, at Common Ground, a recently refocused for-profit organization here, acknowledges that high production costs in Hawaii make it impractical for the state to be competitive in at least some areas of the industrial farming, mass food marketplace.
But even if that’s the case, the new program at Common Ground contends, the market for so-called “value-added” products is one in which local farmers and processors have huge untapped market potential.
To test the theory, a team at Common Ground has launched a competition for such small value-added producers throughout Hawaii that will offer as much as $50,000 in cash and an equivalent amount in consulting services to companies, which will be winners of a first round of grant competition early next year. Applications can be submitted from now to Jan. 15.
“The idea is for these companies to be able to scale up and grow,” said Jen Luck, one of the people who organized the Common Ground Accelerator Program, whose website went live on Monday.
Eventually, said Luck, Common Ground may open a shared space that several small food companies could use as a production kitchen and packaging plant — addressing a need that some small operators say is a pivotal limitation on their abilities to reach markets beyond just one or two islands.
The effort has already attracted political support. “We applaud the Common Ground Accelerator program on its values-driven initiative to foster entrepreneurship and scale a healthy, stable and balanced economy for Kauai,” said Robbie Melton, director of the Kauai County Office of Economic Opportunity.
A History Of Promoting Business
Common Ground was first organized more than a decade ago when a wealthy mainland investor purchased the assets of what had been a large guava plantation in Kilauea. The enterprise lasted several years until financial problems and conflict with the surrounding community led to it being sold off to a new team with more of a venture capital focus. Its work in promoting value-added food producers is under the imprimatur CG Ventures, a Common Ground subsidiary.
A restaurant operated on the property for a while and, Luck said, the new ownership of Common Ground plans to reopen it, along with a store. The guava plantation left behind a large number of farm buildings that can be repurposed to new uses like a shared production and packaging plant.
“Taking these businesses to scale is one of the primary challenges we plan to address in the accelerator program,” Luck said. “Improving supply chains, developing a market for responsibly sourced Kauai products and ensuring small business owners have the necessary support and guidance to grow their businesses will be addressed.”
The competition, said Luck and Adam Watten, another Common Ground employee working on the project, is open to businesses anywhere in Hawaii, but will be most useful, perhaps, to small firms on Kauai since physical plant facilities that Common Ground may develop will be here.
Luck and Watten said they have already identified several potential applicants for the accelerator grants. Two of them are the Tiny Isle LLC in Kapaa, which makes chocolate and related products and Gida’s Kitchen in Lihue, which produces cocktail mixers, syrups and pepper pastes.
Gida Snyder, founder of Gida’s Kitchen, said taking what her company does to scale will, for example, permit her products to be available in stores where people who visit Kauai as tourists live.
Kauai is “a place where everyone would like to be,” she said, adding that many tourists want to “taste that product in their cold winter months.”
While tourists already stock up on souvenir products like macadamia nut candies when they head to the airport at the end of a vacation, small local producers have, so far, not been able to penetrate what could be ongoing markets where the visitors originate on the mainland, or even elsewhere in Hawaii.
Snyder said her company uses locally produced fruit to make its entire product line, which limits what the company can do because supply chains do not necessarily exist that would allow Kauai farmers to sustain continuous production.
“My objective is to continue doing what I’m doing with the integrity I would like to have to source from local producers,” she said. “If you aren’t resourceful and something’s not in season and you end up using a mainland import, then what’s the point?”
How To Scale Up?
At Tiny Isle, Roland Barker said “it is really shockingly expensive” to build a sustainable agricultural business in Hawaii because of high labor costs and limitations on volumes of crops that can be produced in the islands.
More than that, though, he said, individual local value-added product producers are not in a position to attract the attention of distribution, marketing and public relations services essential to building volume.
“That is the kind of thing that can be farmed out collectively,” he said. “You could have one or two people who could provide those services” to a number of individual small companies, “so the scaling up and the marketing kind of go hand in hand.”
At Tiny Isle, Barker and his partner, Lisa Parker, make small volumes of chocolate truffles and macadamia nut butters. The truffles are cut by hand in preparation pans and then individually wrapped by two part-time high school students.
Parker adds the individual labels — also by hand. They can produce 640 of the truffles at a time — enough to place small quantities in several niche stores, but Parker pointed out that meaningful distribution quantities start with multiple pallets full of goods — volumes that Tiny Isle is now incapable of producing.
“We’re not really trying to rake in a lot of money in this business,” Barker said.
Tiny Isle got its start with someone who made desserts for a Kapaa restaurant several years ago. Its products are well received, but expansion would require that it have marketing and sales representation on other islands. It would have to have equipment capable of mechanically wrapping its truffles and filling jars with its line of macadamia nut butters since, right now, each one is filled and labeled by hand. They can produce only a few boxes of 12 jars of each of the butters each week.
Expanding markets also brings the need “to know which hoops to jump through” in terms of regulatory requirements that may exist in other states and countries, Barker said.
Shipping is also a major challenge. If they produced twice as much as they do, Barker said, they’d probably have to hire someone to handle that and it’s very difficult for small food companies to get discounted shipping rates.
The small volumes they produce mean Tiny Isle’s prices are high. A 6.5-ounce jar of its macadamia nut butter retails for as much as $15.99.
Luck said Common Ground expects that each company that applies for an Accelerator grant “will have different needs and expectations. For those companies who are ready to move beyond Hawaii, identifying a distribution center will be a necessary step.
“We understand that developing sufficient raw materials is a key component of growing (such) companies in Hawaii,” she said. “Several of our advisers and mentors have backgrounds in developing sustainable supply chains. We look forward to leveraging this expertise and working with local producers on identifying innovative solutions to raw material challenges.”
Luck and Watten said that while shared use facilities have started to become common in some Hawaii industries, adapting such practices to agricultural enterprises has been slow to take root.
Barker said he is aware of only one so-called co-processor in the state and it is on Oahu.
Kauai and the other neighbor islands, said Luck and Watten, simply don’t have that kind of commercial infrastructure.
Common Ground, Luck and Watten said, hopes it can cross pollinate the work of a number of small value-added food companies, providing the benefits of economies of scale in production and marketing.
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