By HUNTER BISHOP
By HUNTER BISHOP
Tribune-Herald staff writer
The state’s largest macadamia nut grower has new ownership and a new name, and shortly it will announce a new line of retail products.
ML Macadamia Orchards LP was acquired by an investment firm headed by Fred Ebrahimi, former co-owner and CEO of the privately owned software company Quark. Ebrahimi’s Wyoming-based investment firm Crescent River LLC, purchased Leap Tide Capital Management and now owns slightly more than 50 percent of the outstanding limited partner shares.
ML Macadamia Orchards LP also changed its brand name to Royal Hawaiian Orchards LP and, according to the publicly traded company’s filings with the federal Securities and Exchange Commission, intends to “build a line of macadamia-based foods” to be sold under the company’s new brand.
The plunge into retail sales will be a major departure for the company, said Royal Hawaiian Orchards President and CEO Dennis Simonis. Since 2010, the previously named ML Macadamia Orchards has sold all of its mac nuts wholesale to the Mauna Loa Macadamia Nut Corporation. Mauna Loa makes a variety of mac nut and chocolate based products at its processing plant and visitors center in Keaau, which are sold at retail outlets under the Mauna Loa brand.
But Royal Hawaiian Orchards plans to begin canceling its contracts with Mauna Loa at the end of this year and seek processors to manufacture its own line of mac nut products for retail sales.
Simonis declined to discuss the company’s new direction in a phone call on Friday but said the new product line would be introduced at a press conference in Honolulu on Nov. 9. Simonis confirmed the ownership change but said management of the company remains intact.
Mauna Loa has been a subsidiary of the Pennsylvania-based chocolate giant The Hershey Co. since 2004 and claims it’s the world’s largest processor of macadamia nuts.
By canceling its contracts with Mauna Loa, Royal Hawaiian will have to find new buyers for about 6.5 million pounds of nuts in 2013, about 13 million pounds in 2014 and about 19.5 million pounds in 2015. A provision in the contracts however requires Mauna Loa to continue processing the nuts for two years if Royal Hawaiian Orchards does not find an alternative buyer for its nuts. Currently Royal Hawaiian Orchards does not have the capacity to dry or process the nuts it produces, but is already testing retail macadamia nut products in Europe and Asia, according to documents filed with the SEC.
David Rietow, listed as president of the Hawaii Macadamia Nut Association on the HMNA website, did not return calls requesting comment on the industry changes. HMNA is an organization of growers and processors including Mauna Loa and Royal Hawaiian Orchards. Simonis is listed on the site as the HMNA treasurer; Mauna Loa’s Charles Young is listed as vice president. The contact for Young led to the voice mail for Tom Solas, however, who also did not return requests for comment left for him on Friday.
Jack Suyderhoud, a professor of economics at the University of Hawaii’s Shidler College of Business, said Royal Hawaiian Orchard’s strategy of “vertical integration” has been in the planning stages for several years. The company hopes to build its own processing capacity to augment its production capability, which should help it smooth over any fluctuations in mac nut prices. Suyderhould became familiar with the company several years ago when it was involved in anti-trust litigation involving producers and processors of macadamia nuts.
The former ML Macadamia Orchards LP, founded in 1986, is believed to be the world’s largest grower of macadamia nuts at about 25 million pounds per year. Hawaii produces about one-quarter of the world’s supply and is second largest producer behind Australia.
According to its website and SEC filings, Royal Hawaiian Orchards now owns or leases approximately 5,070 acres of macadamia nut orchards on the Island of Hawaii, and more than 600 individual farmers are involved in macadamia nut production on the island.
ML Macadamia Orchards reported a net loss of $797,000 for the second quarter of 2012 on revenues of $745,000, with losses attributed to higher general and administrative expenses, including legal fees. A year earlier, the company reported a net profit of $66,000 for the second quarter of 2011.
For the first six months of 2012, revenues were $4.3 million with a net loss $805,000. For the first six months of 2011, revenues were $2.9 million with a net profit of $115,000.
The company’s shares reached their highest price in six months, $4 a share, at the close of business on Sept. 28, the day Ebrahimi’s firm acquired the company. Shares of Royal Hawaiian Orchards LP (NNUTU) closed at $3.92 on Oct. 25.
Email Hunter Bishop hbishop@hawaiitribune-herald.com.