A&B attempts new strategy for its Hawaiian DuraGreen unit
Pacific Business News (Honolulu) - by Prabha Natarajan Pacific Business News
Hawaiian DuraGreen, the sugar residue-to-particle board business of Alexander & Baldwin Inc., is re-evaluating its product and marketing strategies.
The unit is "performing rather poorly" says W. Allen Doane, president and chief executive officer of A&B in a presentation to analysts last month, adding that A&B is evaluating the investment.
Through Hawaiian DuraGreen, A&B hoped to increase the value of its sugar business. HC&S, a division of A&B-Hawaii Inc., the food products and property management subsidiary of A&B, would supply the cane fiber from its sugar-processing operations.
The $10 million facility was scheduled to start production last fall. But due to problems in setting up the equipment, the factory didn't get going until January of this year, says Steve Holoday, president of Hawaiian DuraGreen.
The project, launched in 1999, used technology developed by Compak Systems, based in the United Kingdom. The automated facility in Puunene on Maui was expected to make 15 million board feet in 2001, worth $8 million to $10 million annually.
However, due to "tremendous pressures in forest product prices," Holoday says the company is scaling down its production.
"We think we have a superior product; no one else in the market is stepping up to pay for it," Holoday says.
The intended market for Hawaiian DuraGreen was the West Coast. The company says it couldn't make any margins on shipping the product and selling it at the prevailing low rates.
In the late 1990s, there was a renewed interest in panel products from agricultural fibers. Canadian and U.S. entrepreneurs and governments invested in alternate "green" boards as environmentalists pitched for alternatives to burning residual fibers on fields. However, competition is fierce.
"We find that we can't compete with our low-cost, medium-density fiber product," Holoday says.
Now the company focuses only on the Hawaii market. One of the principal buyers is Plywoods Hawaii, and the company also takes bulk orders from others.
Holoday says this way the company breaks even.
The slow ramp-up period for the venture forced the company to cut down its production and its staff by half. Now Hawaiian DuraGreen employs 15 people.
The company hopes to have a new marketing plan and product line in place soon.
The focus is on developing three specialty products that are still in the research and development stage. One product is expected to be unique and for specialty use, and the other two are variations of high-density, high-strength boards.
Hawaiian DuraGreen expects the products to be in the market in two to three months, Holoday says.
Also, the company retained Donald Lengel, a mainland ag fiber expert, as a consultant since last month. Lengel will work on identifying niche markets for the product.
At a recent forest products conference, Lengel, who has more than 40 years of experience in the agri-fiber panel industry, noted the "litany of failure" of such enterprises. He cites design, economic and marketing errors as reasons. He sees similarities between the dot-com failures and panel board debacle.
Asked why Hawaiian Draggers would retain someone known for his criticism of the industry, Holoday says: "We went and got the most negative guy out there. If we can convince him of our product, then we can convince anybody."
Reach Prabha Natarajan by e-mail at pnatarajan@bizjournals.com or by phone at 955-8041.
Latest News |
