Royal Hawaiian Orchards LP suffered a $3.7 million loss last year as dry weather, insect damage and efforts to expand sales of its fledgling brand of packaged snack foods took a toll on Hawaii’s biggest macadamia nut grower.

The loss reported Friday in an earnings announcement and annual report was the biggest in seven years for the Hilo-based company and compared with a $499,000 loss in 2012.

Most of the loss was incurred early last year, as Royal Hawaiian’s fourth-quarter loss totaled $674,000 compared with a $10,000 profit in the same quarter the year before.

Much of the 2013 full-year loss was due to a poor harvest that ranked as the second lowest in 20 years for the company formerly known as ML Macadamia Orchards.

Royal Hawaiian said it produced 21.7 million pounds of mac nuts last year, down 21 percent from 27.5 million pounds the year before.

The company said inadequate rainfall in its Kau orchard during a period when nuts were in a key development stage was a major factor in the decline. Another factor was an insect native to Australia called the macadamia felted coccid, which damaged 500,000 pounds of nuts last year.

Higher prices for mac nuts benefited Royal Hawaiian revenue, but the company reserved much of its harvest from sale to build inventory for a new retail line of flavored nuts and clusters of dried fruit and nuts.

Historically, Royal Hawaiian sold all its nuts in bulk, but in late 2012 the company introduced a line of packaged snacks in a strategy to avoid raw-nut price fluctuations and capitalize on higher profit margins through retail sales.

Last year nut sales for Royal Hawaiian plunged 45 percent to $9.9 million from $18 million the year before. The drop was primarily due to a 5.8 million pound decline due to the poor harvest and 6.1 million pounds reserved for snack products.

Royal Hawaiian increased snack sales to $2.1 million last year from $91,000 the year before but also incurred $1.9 million in costs for those sales last year. The costs included $189,000 paid to retailers as "slotting fees" to carry the product and $150,000 in discounts.

"While this inventory build and investment in retail shelf space will negatively impact near-term financial performance, the (company) believes that the benefits it will enjoy from its branded business will more than offset these short-term costs," Royal Hawaiian said in a statement.

Royal Hawaiian expects to increase the number of U.S. retailers carrying its packaged snacks from about 3,000 last year to 10,000 by the end of this year.

To help finance the retail sales growth, Royal Hawaiian raised $8.9 million selling stock in the company in February.

Shares of Royal Hawaiian stock, which are lightly traded on the over-the-counter market, stood unchanged at $2.84 on Friday after the earnings announcement. That compares with 52-week high and low prices of $3.67 on April 4 and $2.25 on Dec. 19.