Nalo Farms to restructure for survival

A Hawaii pioneer in diversified agriculture plans to largely exit the industry after a painful misstep that put at risk the company that created Nalo Greens.

Dean Okimoto of Nalo Farms in Waimanalo has made a difficult decision to sell his prime farm site, 2.5 acres passed to him by his parents, and transfer a lease on 14 acres of nearby state land to his leading farmworkers to keep Nalo Farms operating with him as a minority partner.

The move is somewhat of a semiretirement and is being done to stabilize a company that supplies 70 to 80 local restaurants as well as grocery stores and other outlets.

“I’ll still have an interest in the farm,” said Okimoto, who is 63 and complains a little about a bad back. “My passion is still agriculture, so I want to have some say in it and the farm.”

Okimoto has listed his farm site for sale at $1.3 million with commercial real estate brokerage firm CBRE. Sale proceeds would pay off debt, which was pinching Nalo Farms and stemmed from a more than $1 million investment in complying early with federal farm food safety requirements.

If Okimoto succeeds, it will be the second time the third-generation Hawaii farmer restructures his business in the face of potential ruin.

Both Okimoto’s father and grandfather were farmers in Manoa, and the farm later took root in Waimanalo. Okimoto took over that farm in 1983 when he was 29. At that time basil was the main crop, and Nalo Farms exported 10,000 to 12,000 pounds a month to the mainland.

A crisis hit in 1989 when a wilt-causing disease started wiping out the crop. Okimoto was motivated to quit.

Instead of giving up, he took the advice of a then-new Hawaii restaurateur, Roy Yamaguchi, who opened Roy’s in Hawaii Kai only a year earlier and had met Okimoto through friends.

“Roy told me to try and grow greens,” Okimoto said in a 2001 Honolulu Advertiser interview. “No matter what it was, no matter the quality, he said he would buy it.”

Nalo Farms began growing an assortment of lettuces and other leafy vegetables that became the company’s trademarked Nalo Greens mix.

Okimoto expanded sales of his baby greens to more restaurants and also began to handle marketing and distribution for other small Hawaii farmers trying to get their crops into the hands of local chefs.

Linking up with Yamaguchi and other prominent Island Regional Cuisine chefs led to “phenomenal” experiences including participation in events where guests paid $1,000 each to dine, recalled Okimoto, who has been described as a celebrity farmer. He also got into consulting and served as president of the Hawaii Farm Bureau Federation.

Around 2008 Okimoto leased the 14-acre state property and more than quadrupled his farm production capacity. Around the same time, he decided to invest in equipment and procedures to meet proposed federal food safety standards required for major farms to sell crops to retailers.

Okimoto anticipated that the federal rules, which have been changing and still are not mandatory, would be in place by 2010 and that his investment would give him an advantage. Instead, it became a liability.

“I shot myself in the foot,” he said. “I didn’t realize how costly it would be.”

There was a benefit for Nalo Farms in that national grocery chains including Whole Foods were requiring farms to comply with the shifting federal standards. But they also required farms to pay for a mainland auditor to verify compliance annually, which presented an extra cost for Okimoto while he was trying to manage imposing debt.

About two years ago Nalo Farms ceased supplying Whole Foods because of the audit costs, and that cut into sales and forced a staff reduction. The company still supplies Foodland, Don Quijote and Tamura’s supermarkets as well as 70 to 80 restaurants.

Nalo Farms’ annual revenue, Okimoto said, is close to $1 million, but debt is a problem. Okimoto contemplated filing for bankruptcy, but he said he didn’t want that to be another blemish on agriculture in Hawaii, where big names in the business have folded in recent years, including pork producer Shinsato Farm, tomato and banana grower Hamakua Springs and the last sugar plantation in the state, Hawaiian Commercial &Sugar Co.

Okimoto said he’s not sure his survival plan will work, but added that he won’t be forced into any fire sale of his family farm site, which excludes a neighboring property where his mother and brother live and plan to grow tomatoes in greenhouses using Japanese technology.

“Basically, we’re trying to start again,” he said.