Airlines and hotels can provide a lucrative market for Hawaiʻi entrepreneurs, but making inroads with large brands and scaling up production isn't easy.
Not long ago, Jason Brand's Kō Hana Agricole Rum company was buying bottles for its ready-to-drink daiquiris by the pallet. Now he has to buy them by the container load.
The difference: partnerships Kō Hana has forged with two tourism giants, Hawaiian Airlines and Japan Airlines, which offer the company's locally made, pre-mixed libations to passengers flying to and from Hawaiʻi.
The benefits are not only a big, steady stream of revenue and exposure to new customers, Brand says, but also the credibility that comes from working with major airlines.
"We can now say, 'As seen on Hawaiian Airlines,'" he said.
Kō Hana's story provides a roadmap for local companies trying to tap into a market potentially paved with gold for companies that can navigate it. The business-to-business channel can offer smaller local brands captive audiences among the 250,000 tourists -- equal to almost a fifth of the state's resident population -- who are in Hawaiʻi on any given day.
That includes some 9 million annual airplane passengers and guests in Hawaiʻi's 44,000 hotel rooms, where properties give away thousands of amenities like bars of soap and chocolate every day.
Despite success stories like Brand's, and apparent opportunities for more, many residents don't like the tourism industry -- something government officials and tourism executives have been trying to address with strategic efforts to mitigate tourism's negative side effects through a regenerative model intended to spin off more benefits to the local economy and environment.
The most recent "Resident Sentiment Survey" conducted by the state Department of Business, Economic Development and Tourism shows an overarching feeling that tourism creates more social and economic woes than benefits.
At least 70% of respondents said they believe tourism contributes to the state's high cost of living and damages the environment. Some 67% believed their "island is run for tourists at the expense of local people."
Tourism executives, meanwhile, point to growing demand for local products.
"There's a lot of opportunity," said Jerry Gibson, president of the Hawaiʻi Hotel Alliance and general manager of the Waikīkī Marriott Resort and Spa. "If there's something better available locally, hotels would rather use it."
It's not self-serving hype, says Jalene Kanani Bell, the Native Hawaiian founder and chief executive of NOHO HOME, which makes products like bedding, pillows and rugs with Hawaiian designs.
To be sure, she said, local executives often face national corporate red tape, like brand standards, budgets or simply statements like, "you know, this is the way we do things."
"But definitely," she said, "I would say I've seen a marked improvement in Hawaiʻi hospitality leadership in trying to create demand" for Hawaiʻi-made products.
Brand agrees, but says that being local isn't enough to replace a national brand.
"You've got to be equal or better" on quality and price, he said. Being Hawaiʻi-made, he said, "is kind of the tie-breaker."
The problem for many small businesses is that their owners focus on retail and online business channels, never considering how to tap into potentially lucrative business-to-business deals.
All of this can pose a challenge for small companies, says Max Mukai, director of business development for the Hawaiian Council. Formerly known as the Council for Native Hawaiian Advancement, the council promotes Native Hawaiian entrepreneurs through several channels: an online marketplace; Nā Mea Hawaiʻi, a brick-and-mortar store in Ward Centre; and Bishop Museum's Shop Pacifica gift shop, which the Hawaiian council began operating in June.
The council also helps small businesses grow through its KūHana business accelerator program, which Mukai also runs.
A challenge for small companies trying to work with big hotels involves volume -- and investment in equipment and labor needed for a mom-and-pop outfit to grow into a medium-sized company. The council started as a federally funded financial institution for Native Hawaiians, and still provides capital for businesses, Mukai said.
But the council saw the magnitude of the roadblocks to the business-to-business channel firsthand, Mukai said, when the council tried to cut a deal with Avendra, a major supplier to hotels and restaurants.
Avendra was willing to source from the council's Native Hawaiian entrepreneurs, Mukai said. But the wholesaler wanted enormous supplies that the startups couldn't deliver without massive investment. KūHana helps companies grow from A to B, he said. A deal with Avendra would mean going from A to M, or Z, overnight.
"Not everyone we work with is looking for those kinds of deals," Mukai said.
"It's a different channel of business, and it's done a different way," Bell said. Even experienced small business owners need to learn how to navigate that channel, she said.
A good place to start, she said, is with a business accelerator, such as KūHana or Hawaiʻi FoundHer. Bell participated in an accelerator program run by Mana Up, which operates a website, a brick-and-mortar House of Mana Up, and regular pop-ups in places like New York, Tokyo and Los Angeles. Mana Up helped NOHO HOME land a deal designing blankets and amenity kits for Hawaiian Airlines, a longtime Mana Up supporter.
The accelerators can help business owners determine if they're ready, said Meli James, Mana Up's co-founder. Companies not prepared to scale up to meet an avalanche of demand should think twice about taking the plunge, she said. A small business might have a natural impulse to leap at an offer from a big buyer, she said. But that can be bad for everyone -- the small business, the buyer and small businesses in general -- if the small business can't deliver.
Sometimes, James said, "the worst thing is getting a 'Yes.'"
Kō Hana Agricole Rum was ready when the opportunity to work with Hawaiian Airlines came along.
"Not only were we ready," Brand says. "We were looking for it."
Founded in 2014 by Brand and his partner Robert Dawson, Kō Hana markets itself as a true Hawaiʻi farm-to-bottle booze. The star is heirloom sugar cane descended from the canoe plants brought to Hawaiʻi by Polynesian settlers. The company highlights this Hawaiʻi-grown cane, or kō, not just in its rum, but also in its story, shared on tours of its distillery in Kunia and on its website.
One kō variety, manulele, was traditionally used in Native Hawaiian medicine and "love sorcery," giving Kō Hana at least one apparent marketing edge over ordinary rum.
When Kō Hana branched out from selling high-end spirits into the ready-to-drink cocktail business in 2022, one of its biggest challenges wasn't scaling up, but fighting for space on store shelves against national brands like On the Rocks.
On The Rocks' owner, Suntory Global Spirits, is still a dominant player in the space, ranked third internationally according to a recent report by Grand View Research. So it was a coup when Kō Hana replaced On The Rocks on Hawaiian Airlines flights in 2023.
Meanwhile, Brand was getting attention in Japan through Mana Up pop-ups at Tokyo's Haneda Airport. Brand credits Central Pacific Bank's chairman emeritus, Paul Yonamine, known for building business ties between Hawaiʻi and Japan, with helping him get on board Japan Airlines.
Nozomi Heenan, who worked in international banking at CPB, describes a long, trust-building process to get Kō Hana onto JAL flights. First, she said, there were the airport pop-ups. Then JAL started serving Kō Hana in its passenger lounge, until, finally, the airline started serving the cocktails as free amenities on flights to Hawaiʻi.
A key beyond quality, she said, was Kō Hana's story about its heirloom sugar cane and a distillery that Japanese tourists can visit.
For Brand, the airline deals have changed everything. He can order and ship in higher volumes of packaging, enabling him to reduce those costs by 50%. That means he can lower prices to compete with brands like On The Rocks, making up for lower profit margins with higher volume.
The scaled-up production and lower costs, in turn, has given Kō Hana the ability to work with big wholesalers outside of Hawaiʻi. Kō Hana is now sold at 17 Costco locations in California, Brand said. He credits Hawaiian Airlines with the company's trajectory.
"The linchpin," he said, "was a large local company believing in us."