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The Honolulu Advertiser
Posted on: Saturday, July 26, 2008

Pineapple could vanish from Hawaii

 •  Hundreds anxiously await fate

By Andrew Gomes
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Maui Land & Pineapple Co. workers, from left, Quirino Villaluz, Feliciano Hildalgo and Senon Aquino wait to hear if they are among the 274 people whose jobs will be lost.

CHRISTIE WILSON | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser

Maui Land & Pineapple, based in Kahului, is one of Maui's largest private employers. The pineapple division will suffer the bulk of the 274 layoffs — 204 people.

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Layoffs by Maui Land & Pineapple Co. may have put Hawai'i one step away from the complete loss of what was once the state's single biggest cash crop.

ML&P's pineapple production will drop by half, from about 2,000 acres to around 1,000 acres. Of the 274 jobs being cut, 204 are in the company's pineapple division of 441 employees.

And if the drastic reduction doesn't turn around the money-losing operation, then what's left of pineapple production in Hawai'i could disappear.

"If we can't make it work, we'll have to leave the business," said Wes Nohara, general manager of agricultural operations for the Kahului-based company. "It's a daunting task and a huge undertaking to salvage what we have. I'm not throwing in the towel. We've been here a long time and we're going to do everything we can to make it work."

Some of the financial pressure to cut jobs is because ML&P is rooted in two other Hawai'i industries under stress — real estate development and tourism.

The company is the developer of Kapalua Resort, and has heavily invested in redeveloping parts of the resort. But the pineapple business in Hawai'i for years has been shrinking and claiming jobs.

Two years ago, Del Monte Fresh Produce quit farming pineapple on O'ahu, laid off 551 employees and ended operations in Hawai'i that had existed for more than a century.

ML&P hasn't avoided such pressure. A decade ago the company employed 1,480 people in pineapple production and farmed about 6,000 acres.

High land and labor costs have made Hawai'i pineapple growers less competitive with producers in Costa Rica, Mexico, Ecuador and other countries.

ML&P thought it had a plan to ensure the viability of its pineapple business when it quit canning the fruit — a move that eliminated 120 jobs last year in favor of concentrating on the higher premium fresh pineapple market with its Maui Gold brand.

As part of the plan, the company began shifting growing operations from Hali'imaile in UpCountry Maui to Honolua in West Maui. The move, which is still in progress, was envisioned to take advantage of better growing conditions, shorter growing cycles and lower operating costs in Honolua and free up land in Hali'imaile for development.

But skyrocketing oil prices made it more costly to transport pineapples from Honolua to a processing facility in Kahului. Higher fertilizer demand in Honolua also became more costly.

Doug MacCluer, a former Maui Pineapple vice president and agronomist who retired in 2002 after 39 years with the company, called the move a big mistake.

"This didn't have to happen," he said of the layoffs. "They chose to sell off the best farm land they had."

Nohara said the relocation plan turned out to be unfortunate but that soaring oil prices couldn't have been anticipated. "In hindsight I'd say we made some bad decisions," he said.

DIVERSIFYING CROPS

The strategy now with downsized pineapple is to primarily serve local markets and a "handful" of Mainland accounts.

Nohara also said more efforts are being made to further diversify crops beyond 200 acres of organic farming that include pineapples, vegetables and free-range chickens. There are also plans to plant 500 to 600 acres in koa as a forestry crop that could be harvested in about 30 years.

Another potential large-scale crop is plants for ethanol production, which ML&P is exploring through a partnership with other large landowners, including Kamehameha Schools and Grove Farm.

Reducing pineapple production is forecast to save ML&P $11 million in annual operating costs minus a one-time cost of $3 million for employee severance costs.

Operating losses in agriculture last year totaled $26.6 million for the company, up from a loss of $18.6 million a year earlier.

Real estate development and resort operations helped the company achieve a net profit of $8 million last year and $7.2 million in 2006.

During the first quarter of this year, ML&P reported a net loss of $740,000, largely driven by an agriculture operating loss of $5.6 million. Resort operations posted a $2.3 million operating loss, while real estate development had an operating profit of $8.2 million, which was down from $29.1 million a year earlier.

MULTIPLE CHALLENGES

Paul Brewbaker, chief economist at Bank of Hawaii, said many Hawai'i companies are having more trouble staying in the black because of the state's economic slowdown, but that ML&P faced challenges on multiple fronts.

"It's going to be difficult for somebody in that part of the economy to thrive right now," he said.

Brewbaker said Maui and the Big Island have suffered the biggest reductions in airlift from the Mainland because of the shutdowns of Aloha Airlines and ATA airline earlier this year.

ML&P and its partners recently renovated the Ritz-Carlton Kapalua hotel at a cost of $160 million, which in part was financed by selling 107 suites in the 463-unit hotel as condominiums to individual buyers.

The company also is developing a luxury time-share project with partners on the site of the former Kapalua Bay Hotel. Several other Maui Land & Pine real estate development projects are planned, though most are still subject to permitting.

Staff writer Christie Wilson contributed to this report.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.