Mahalo for supporting Honolulu Star-Advertiser. Enjoy this free story!
Hawaii’s largest macadamia nut farm has sued an affiliate of Hawaiian Host Group over unpaid nut deliveries two months after investors saved the local candy and snack maker from potential bankruptcy.
Hawaiian Macadamia Nut Orchards LP filed a lawsuit in state court on Hawaii island earlier this month contending that Hawaiian Host sister company Mauna Loa Macadamia Nut Corp. owes the farming company $322,643 for nuts delivered last year.
Hawaiian Host and Mauna Loa encountered severe financial difficulties last year after sales took a nearly 30% dive because of lost business in Hawaii’s tourism industry, which has been eviscerated by coronavirus safety travel restrictions.
The candy and snack manufacturers informed vendors in August that tourism accounted for 65% of its business, and it sought to settle past-due invoices at a discount — paying 75 cents on $1 — so that it could secure new investment capital and satisfy unpaid accounts. The company also let vendors know that bankruptcy was its other option.
In January that financial stress appeared to have been relieved when local and mainland investors bought Hawaiian Host and Mauna Loa in a deal that Hawaiian Host said would lead to improved facilities, new products and expanded online sales.
Hawaiian Macadamia, according to the lawsuit, twice deferred overdue payments for 16 nut deliveries made between mid-February and early April 2020, but expected it would be paid after the January sale.
Despite being sent a payment demand letter Feb. 12, Mauna Loa failed to pay, according to the complaint filed by the Cades Schutte law firm.
Brad Nelson, president of Hawaiian Macadamia’s general partner, added that the debt listed in the lawsuit is only a small fraction of debts the farm is trying to collect from Mauna Loa.
“It’s much, much, much larger,” he said of the total debt.
Nelson said he can’t disclose the total because of contractual issues, but said it puts Hawaiian Macadamia and its roughly 180 employees at risk.
Mauna Loa, in a response filed in court Thursday by law firm Sullivan Meheula Lee, said it doesn’t dispute the $322,643 debt but that the continuing coronavirus pandemic and government orders restricting tourism have hurt the company’s ability to pay the sum and other accounts payable, therefore excusing a more timely payment.
Mauna Loa’s response also said it intends to pay Hawaiian Macadamia’s debt after Gov. David Ige opens the state to vaccinated visitors, who today are still subject to passing COVID-19 tests, and after Mauna Loa has used excess nut inventory acquired during the pandemic.
“Defendant is excused from its obligations on the grounds of “force majeure,” impossibility, impracticality, and/or frustration of purpose,” the response said.
Mauna Loa representatives did not respond to requests for comment.
Ed Schultz, Hawaiian Host president, said in January that annual revenue of the holding company dropped from around $140 million before the pandemic and that this year sales are expected to be around $100 million.
The Honolulu-based company, which was founded in 1960 and bought rival Mauna Loa in 2015, received a $5 million to $10 million forgivable federal Paycheck Protection Program loan in April, and in June sold its Honolulu production facility site for $30 million while maintaining operations under a land lease. The company also closed a production facility in California last year.
Hilo-based Hawaiian Macadamia farms 5,100 acres of mac nut orchards on Hawaii island and has had its own challenges in recent years.
The company was long known as ML Macadamia Orchards LP and historically sold all its crop raw in bulk primarily to Mauna Loa. Then in 2012 the company was renamed Royal Hawaiian Orchards LP and began making packaged snacks in a strategy to earn a bigger return while using its own nuts and reducing sales to Mauna Loa.
In 2018 the company exited the snack manufacturing and retailing scene by selling the Royal Hawaiian brand to another Hawaii mac nut producer and snack maker, MacFarms LLC, and resumed selling wholesale nuts to Mauna Loa as Hawaiian Macadamia.
80