KILAUEA, Kauai — Two prototype recipients of a new kind of venture capital grant focused on small Hawaii producers of value-added food products have started down a long road to revolutionize Hawaii agriculture by emphasizing things like supply chains and sustainability.
So far, one of the winners of the unusual venture capital awards, Kapaa-based Tiny Isle, has decided to stay in business instead of selling the company during such a difficult time because of COVID-19.
The other, Lihue-based Slow Island Food & Beverage Co., has changed its name and emphasizes the health benefits of food products that contain turmeric and ingredients like lilikoi, passionfruit and ginger. The company was previously known as Gida’s Kitchen.
The winners know they cannot avoid, and so will have to confront head-on, the reality that taking a food business to scale in Hawaii entails accepting higher costs and less reliable supplies of key ingredients.
The two small companies have one symbolic thing in common. They both know that assured, uninterrupted supplies of commercial quantities of macadamia nuts are almost impossible to obtain on Kauai. There are no commercial growers on the island and, historically, price and availability have fluctuated wildly.
The nuts are staples in products both companies make and the owners know that success may hinge on things like building relationships with farmers at a level of detail that requires knowing on what island and in what month the nuts, and other ingredients, will be harvested.
The two companies are winners of an initial competition for small injections of venture capital from Common Ground in Kilauea, which is controlled by venture capital experts who see themselves not as a philanthropy but an investor in, essentially, taking Hawaii back to the days when agricultural sectors like sugar, pineapple and even taro and guava reigned.
Common Ground occupies land previously owned by the largest guava plantation in the state. The property was sold about 10 years ago to an owner who had a financial services background but failed to find an operating niche. It was then resold to the current owners, who are led by an investment manager whose company is based in New York and Hong Kong.
The launch of what Common Ground calls its Accelerator Program was described in Civil Beat last November. Tiny Isle and Slow Island were chosen from among 37 applicants from all over the state who competed for the first found of grants. Each award brings with it venture capital cash and technical and business support valued at about $50,000.
“We cast a very wide net and it was a good cross section of the community,” said Adam Watten, who manages the program.
For Common Ground itself, the exercise had to be conducted at the worst possible time since the organization was itself “pumping the brakes” on its own expansion plans because of the cratering of the economy in the midst of COVID-19.
Common Ground abandoned a plan to reopen a restaurant that had operated at the site and has delayed plans to commit more of its acreage to direct food production, though actual on-site agriculture remains one of its top priorities.
For Gida Snyder, owner of Slow Island, starting the process of taking her business to scale has started with the step of producing and shipping one batch of 50 boxes of her turmeric orange passionfruit wellness elixir. Each bottle is packed with a turmeric infused salt and curry paste. Her product line also includes mac nut-based foods.
She has upped her game by placing products on an ongoing basis at two health food stores and has identified outlets on the mainland for the first time.
“It’s kind of exciting,” she said. “I don’t think turmeric is a craze. It’s been around for 4,000 years.”
Slow Island’s products, she said, are “meant to convey a celebration of the island … the laid-backness, if that’s a word.”
The Common Ground funding infusion, she said, will allow her business and what she calls “our farm partners” to go to scale and discover new ways to take their businesses to scale in sync. “It allows us, and them, to plan,” she said.
Tiny Isle is having its own moment with macadamia nuts, from which it makes a high-end butter. The little company is also continuing to make chocolates.
But even when Civil Beat visited with Tiny Isle last year, business was so limited that Lisa Parker and Roland Barker, the owners, were considering selling the business. Then COVID-19 hit and sales plummeted to almost nothing. It almost killed the company.
The Common Ground cash and support infusion has altered the landscape, Parker said. Of particular value, she and Barker said, is that Common Ground’s assistance includes taking an equity stake in the business, so the more capable funder has a direct stake in whether the little company makes it.
She said she’s learned one critical lesson already, after only one conference call with Common Ground’s key financial managers. “It’s very important to know who the money guy is,” she said.
A key part of Tiny Isle’s strategy, Parker and Barker said, is to move their product line away from the primarily tourist market and redirect it to health food and other sellers whose primary base is retail customers.
“It’s a different focus for us,” Barker said. Under their previous business model, he said, “you don’t realize how much of our sales depend on tourism, until the tourism stops.”
Brian Halwell, a consultant working with the Common Ground program, said it “is just kicking off. And part of the process is mapping out the path to success for these companies — how do they expand their production, gain new customers, change their product lines or otherwise grow and thrive?”
He said experts working with Common Ground are scrutinizing Slow Island and Tiny Isle closely to identify how their best products can be enhanced, including those “which were most popular pre-COVID and which are strong during COVID. We’re looking at their supply chains in Hawaii.”
In the case of these particular companies, he said, it largely comes down to mac nuts.
He said the situation raises questions: “Are there sources we should look at and do they make the most sense as these companies try out recipes and packaging issues? What does a package look like? How do you price it? Do we have the equipment on Kauai or in Hawaii to make this well at scale?”
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