Business World

Free Ukers Guide!
Festival Kawi
Coffee Tea Business Mag
When Coffee Speaks
Tea & Coffee's Business Classifieds!
Free Ukers Guide!


Kona Rises Above Scandal
by Timothy J. Castle
photos by Current Events on Hawaii's Big Island

Coffee and Hawaii have had an on-again, off-again love affair for over 175 years. Right now, that affair is very much on. It is reminiscent of the scene in the movie Sleeper, where Woody Allen is told that, in the distant future, they have discovered that steak and ice cream are actually good for you. Similarly, Hawaiian coffee growers are being told that the seemingly disastrous Kona Kai scandal, and the advent of large, well-capitalized coffee farms on the islands of Molokai, Kauai and Maui have actually been good for them. The scandal, some revisionists argue, neither destroyed the consumers’ confidence or interest in Hawaiian coffees, nor have the big new farms driven the small farmers of Kona out of business. Not that there still isn’t a lot of work to do.

Necessity has been the mother of Hawaii’s recent re-invention of itself vis-a-vis coffee. Hawaii has been non-competitive in the production of its two traditional and famous crops-sugar and pineapples. Ironically, though, these two crops, which can be grown more cheaply in countries with lower labor costs, are being slowly replaced by another crop even more notorious for being dependent on cheap labor-coffee. Even more strange, the first thing any Hawaiian coffee grower will tell you is how much higher Hawaiian labor costs are when compared to any other coffee-producing origin. But the explanation is simple: there is a demonstrated willingness on the part of consumers to pay extra for Hawaiian coffee, at least Hawaiian coffee from the Kona coast, but there is no willingness, it seems, to pay a big premium for a Hawaiian pineapple or pound of sugar.

There are those who would say that in the case of coffee, however, the rich soil and soft trade winds bring to the coffee produced on Hawaii’s islands a unique and special taste profile. This profile has already been established in coffee from the Kona Coast of Oahu as one of the world’s most highly prized (i.e. expensive coffees). So expensive, someone even made a very good, if illegal and brief, living selling very nice Panamanian coffees fraudulently labeled as Kona. If the coffees from the Kona Coast can be so highly prized, then why can’t those from say, Molokai, Kauai and Maui achieve the same reputation and price? They’re all Hawaiian islands, after all.

One of the problems is that just as the new farms were coming on line, the Kona coffee scandal necessitated a retrenchment, and even some Kona coffee producers wondered if they could weather the storm that ensued. To make matters worse, the lawsuit on the part of Kona coffee growers filed against the perpetrator, Kona Kai, and the roasters that were unwittingly buying Kona Kai’s fraudulent product created even more distrust. (Michael Norton, who has pleaded guilty to charges relating to the Kona Kai fraud, was to be sentenced in October, but this was subsequently rescheduled.)

Even though one company, whose principals are interviewed herein, takes the position that the Kona Kai scandal actually catalyzed some improvements statewide for Hawaiian coffee, the immediate and lingering effects were and have been mistrust of the product and lingering resentment to some of those that produce it. To combat this, the State Department of Agriculture in Hawaii made certification of all coffee produced in the state mandatory and has also established trademarks for each of the island’s coffees. Before the scandal, certification was optional.

While many coffee farmers agree that the kind of soil and climate that are found in the Hawaiian islands are ideal for coffee, the idea that the market is willing to pay nearly the same price for twice as much Hawaiian coffee as was produced 10 years ago has already been soundly disproved. Yet, conversely, it has also been demonstrated that the allure of Kona coffee is not yet transferable to the other coffees of Hawaii, either from the perspective of the cupping room or the marketer’s office. If Kona could double what it produces, at the same average quality, it might have been a different story, price-wise. And this is not to say the new coffees of the other islands are not as good. But even given that they are, it will take a lot more marketing to help the average consumer accept it and be willing to pay for it. Because one thing is clear: in the marketplace today, the consumer is not guided strictly by objective and well-informed notions of quality when it comes to their purchases of coffee (in either a beverage or whole bean form).

It is popular now, but often inappropriate, to view every issue in the coffee industry against some alleged trends in the popularity of specialty coffee. First of all, these “trends,” to the extent they exist in the first place, affect only very specific sectors of the market. There is a lot of coffee business going on in the world today that looks a lot like it did 40 years ago, and it easily represents well over 90% of the world’s consumption (the problem of what “specialty coffee” really is makes the estimation of this percentage increasingly difficult). That so much of the coffee business is bumping along indistinguishably from the way it did decades ago makes it all the more tempting to look to the one area of the industry going through daily doses of upheaval, change and even controversy on a daily basis.

Yet, in considering the coffees of Hawaii, there really is no more fair and accurate basis for measuring their success or failure than by standards applicable to the specialty sector. Whether the coffee, in fact, tastes good is a valid question, and whether the work being done will lead to coffee that tastes even better, is one that is also fair game. The coffee, after all, is being sold for multiples of the market rather than a differential under the banner of being some of the world’s best. The answer to the first question is pretty well known already-sometimes, certain Hawaiian coffees can taste very good indeed. The answer to the second question is less often considered, overlooked really, but far more exciting-some of the work being done in Hawaii on coffee could change the way coffee is grown throughout the world. While the coffees themselves may not be there yet, the people and the science, the farmers and the agricultural practices are truly first class.

The drop in perceived value from rare and romantically sourced specialty coffee to ordinary, low-grown, but exceptionally clean coffee is a vast one. Many people in the business of growing coffee in the state of Hawaii would not bother to argue that the premium asked for these coffees is justified on the basis of quality. Rather, they will say, though not for attribution, “Look, Hawaii is a beautiful and romantic tourist destination. If people can buy a piece of that in the form of coffee and imagine that they will re-experience that in their morning cup of coffee when they return home, then I have sold them something valuable and authentic, regardless of what some ‘expert’ says about the way the coffee actually tastes.”

The biggest stumbling block has been, it seems, getting coffee to taste as good when grown at near sea level as it does when grown at 5,000 ft. The theory is that the further away from the equator you go, the lower in altitude you can grow your coffee and still produce a crop comparable in quality to that grown at mile-high elevations in Central America. The best farmers of Kona have produced some great tasting coffees, with wisps of acidity and complexity against a backdrop of clean, pure, and simple neutral coffee aroma and flavor. Indeed, it is not easy to find clean, low-grown and low acid washed Arabicas. Coffees like this, though, are much prized in certain markets, notably Japan and Korea. It could be that the worldwide standard for what is an excellent coffee and what that sort of coffee is worth will be redefined again and again as new markets for coffee open and mature.

All of this is to say that, as an industry, it would behoove us to not accept that a coffee is intrinsically better just because it costs more to produce, or because more is asked for it. Yet, neither should it be assumed that a particular coffee project does not (and will not) produce coffee which will provide some people with a very positive experience simply because it does not match the ideals established by those in the business. The popularity of low-acid, neutral coffees in Japan and Korea serves as a case in point.

It is now roughly five years since the Kona Kai scandal and 10-15 years since the introduction of coffee farming to the islands of Molokai, Maui and Kauai. In an effort to assess where the business of growing coffee in Hawaii is at this point, we talked to some of the people who were there then and who are, it seems-more than ever-here now.

John T. Hays,

Coffees of Hawaii, Inc.

One of Hawaii’s new coffee pioneers, John T. Hays, has worked hard to establish coffee as a crop for the state of Hawaii, rather than one reserved exclusively for the Kona Coast. Hays was a founder of Molokai-based Coffees of Hawaii, Inc., and helped initiate experiments, now famous in the specialty trade, regarding the taste performance of various coffee hybrids and varietals when grown in identical conditions. Interestingly, Hays was the first to be accredited by the Department of State, in 1988, as a delegate to International Coffee Organization in London for the U.S. producing sector-a duty which he still performs along with being a charter member of the ICO’s Permanent Expert Panel, one of two U.S. members, from September 1995 until today.

Coffees of Hawaii, Inc., got started in 1984 when Howard Stevenson, then the president of the Bank of Hawaii, decided to back John Hays and his partners. “Pineapple and sugarcane are going down the tubes,” Hays quotes Stevenson as saying back then. Hays then related that the bank president continued, “Bank of Hawaii will back you and I am very enthusiastic. I want to make coffee the new crop of Hawaii.” Hays then started Coffees of Hawaii in late 1984. “We started looking for hybrids that would grow into low, compact trees because we knew that the farm would have to mechanically harvest the crop to be economical,” he remembers.

Hays’ perspective extends well beyond his own area, though, and he can offer a more “global” view of Hawaiian coffee production than perhaps anyone else. “Kona coffee has been grown since 1827. During the 1890s, coffee was the biggest Hawaiian crop, with 15,000 acres in 1900. In 1893 Hawaii became the Republic of Hawaii and in 1898 it became property of the U.S. So, in considering where to locate this new coffee operation, Hays surveyed not only the islands but the history of the Hawaiian Islands as well. “We looked at all of the eight major islands-of those, seven will support coffee. (There’s no ground water on Kahoolawe).”

Hays described the evolution of the windbreak employed at Coffees of Hawaii that more or less exemplifies the kind of learning process necessary to succeed in growing coffee in a new environment. It also reflects the determination necessary to stay in the business, particularly in Hawaii.

“It was traditional in Hawaii for Ironwood trees to be used for shade and for providing windbreak,” Hays noted, “but the needles are toxic to coffee.” Not being able to instantly create tall shade trees in the time frame needed, “The farm management worked to develop a three-tiered windbreak system starting with Sorghum and Sudan grass which grows quickly and becomes a very good windbreak. Next, Willy Willy trees were planted which grow fast and can protect 10 rows of coffee. Finally, Norfolk pines were planted, and these can provide windbreak for a much larger area. Norfolk pines are cleaner than ironwood and their needles are non-toxic.”

Hays describes the coffee coming out the Coffees of Hawaii operation on Molokai as “similar to Maui coffee: very mild, good aroma, good body and low acidity. Acidity,” Hays explained, “is a function of elevation and latitude.” He says this meaning that, because of Hawaii’s relative distance from the equator, that finer, more acidic coffee may be produced at a lower elevation than would be possible in Central America. Adding to the elegance of the cup, Hays noted that a full fermentation is done at the operation in Molokai, as is generally done in Kona, but no where else in the state.

Dan Kuhn,
Coffees of Hawaii, Inc.

Dan Kuhn, who is described by John T. Hays as “the most competent field operations man in Hawaii today” is also the president and chief operating officer of Coffees of Hawaii, Inc.

Kuhn’s initial comments reflected the concerns of someone in charge of day-to-day operations, “People say I can buy a good Kenyan for a buck and why should I pay several dollars for a coffee from Hawaii. Production costs in Hawaii are substantially higher, our average labor costs are $8.50 per hour plus overhead-no other coffee-producing origin pays this kind of labor cost except, possibly, Australia. All of our supplies, such as fertilizers, have to be shipped in, and land is also expensive. So, there’s no point to growing coffee in Hawaii unless you can produce premium coffee at a premium price. If you look at the timeline, all the new coffee projects outside of Kona are now eight to ten years of age. We’ve all spent a lot of money and a lot of time creating the physical infrastructure. Now everyone is trying to develop a market for estate brand coffees for each of the different islands. As I’ve just said, you can’t produce coffee in Hawaii for world market pricing. But you can sell your own estate coffee roasted or green. Or you can team up with Kona and do a 10% Kona blend. The problem is that the big roasters use 10% Kona and the rest is other stuff. We have not slashed our prices just to get it out the door. Unfortunately, in retrospect, maybe the Kauai should not have started out with approximately 3,500 acres in production. This, combined with our acreage in Molokai of 500 and Oahu’s approximately 100 and Maui’s 500-you take all that and add it to the farms on Kona, 700 different farms with over 2,500 acres total, and that’s a lot of premium coffee to market.” The quantity, approximately 8.1 million pounds total, according to the Hawaii Agricultural Statistics Service, is obviously not a factor in terms of worldwide production but it has come to Hawaii very quickly-almost twice the amount produced four years ago, and some farms have been more successful than others in holding their price.

But, as Kuhn pointed out, quantity is not the whole story, Kuhn underlined that he did not believe that a Hawaiian coffee could rest on simply being Hawaiian. Neither did he, as some farmers in Kona are wont to do, proclaim that his was the best coffee in the world. One of the additional benefits of the entry of other islands into the Hawaiian coffee business is that all producers on the islands have had to take a more objective look at the cupping qualities of their coffee. The scandal, too, forced a reassessment of what the coffees from Kona really should or could taste like-and what they taste like now. It also proved to be an object lesson for the newer farms on the other islands; if they did not develop coffees of high quality and unique flavor profiles then all their marketing efforts would be built on the shifting sands. Each island’s coffee farms, the good ones at least, are working to apply the best farming practices to their crops, while also recognizing that their efforts are very much a work in progress.

Dan Kuhn, for his part, is simply minding the details of producing the best coffee his farm can produce: he lets others be the judge of his efforts. “I feel that fermentation adds acidity and complexity, so we do full sun drying and fermentation like Kona. Consequently, our Malulani Estate coffee holds true to the profile of a washed coffee. We developed the capacity for full patio drying. We’re in a dry, windy area, so that makes it a good place for sun drying, but we do have movable roofs that we can pull out over the coffee at night and in the event of rain.”

Because the Coffees of Hawaii, Inc. operation machine picks it coffees, as do the farms on Kauai and Maui, a certain amount of overripe cherries are always found in the pickings. Kuhn removes these prior to pulping, however, and he does not want any of this coffee in his Malulani estate. “Our Muleskinner brand, is made from the overripe cherries, we don’t want to use these in our washed coffee so we don’t pulp them…instead, we dry them in the cherry. It is a heartier cup with more sugars from the dry process technique we use, with higher body and lower acidity. This is not what we call our premier coffee, but we have a lot of people liking our Muleskinner brand.”

With regard to the specifics of this year, Kuhn continued, “Growing wise, this year, all of Hawaii was very dry, Kona has had some good rains lately, which is important since they are the only island with generally unirrigated coffee farms.”

Kuhn concluded with a brief summary of his farm’s production, “We produce about 650,000 pounds of green. We roast 30% ourselves and this goes out to supermarkets, specialty stores and mail-order. The remaining 70% goes out green. We have four types: our flagship Maulani Estate in a medium roast; the Muleskinner in a darker roast; our one flavored coffee, Island Princess, which is a combo of two coffees plus Tongan vanilla; and a reasonably dark roast. Finally, we have our Molokai style Espresso which is also a blend of the Malulani and the Muleskinner with a well-developed espresso roast on it.

Chela Lopez Kuhn, the director of sales and marketing for Coffees of Hawaii, Inc., pointed out that there is a movement afoot on the part of some farmers to change the law stipulating that any coffee labeled as a blend of Kona, or Maui, Molokai of Kauai coffee contain at least 10% of that coffee. Proponents of the change want the law to stipulate that the minimum be 30%, thus requiring not only greater use of the coffee but also making that blend component more noticeable in the taste of the coffee. “We had some visitors from Japan recently,” Lopez-Kuhn noted, “and they had several observations, one of which was that their fellow countrymen visit Hawaii, pick up either flavored or a K blend, take it home and say Hawaiian coffee is not good, not realizing it has little or no Hawaiian coffee in it. They stated that Hawaii could avoid this ‘bad’ image by changing the 10% Kona and 10% other Hawaiian coffees, to at least 30% or 50%. Japan laws require that a bag of coffee state the exact percentages of coffee contained in the package, and at least 30% of the content such as Kona, be required to name it a “ famous origin coffee”.

Continued on next page...

Theta Ridge Coffee


Tea & Coffee Trade Journal is published monthly by Lockwood Publications, Inc., 3743 Crescent St., 2nd Floor, Long Island City, NY 11101 U.S.A., Tel: (212) 391-2060. Fax: (1)(212) 827-0945. HTML production and Copyright © 2000 - 2013 by Keys Technologies and Tea & Coffee Trade Journal.

Terms and Conditions of Website Use.         Privacy Policy.

HTML Copyright © 2000 by Keys Technologies and Tea & Coffee Trade Journal. All rights reserved.