‘Misleading’ macadamia nut products prompt legislation in Hawaii

A kamaaina company that claims to be the biggest seller of chocolate-covered macadamia nuts has collided at the Legislature with local macadamia producers over whether Hawaii-branded products containing foreign macadamias should say so.

Growers and processors of local macadamia nuts sought help from lawmakers this year to enhance a state truth-in-labeling law applying to what has been Hawaii’s second-biggest agricultural crop by value.

The legislation, House Bill 1348, would require disclosing the origin of macadamia nuts in products sold in the state if packaging, including words or images, suggests that the nuts are from Hawaii.

Over 100 proponents of the bill, including numerous employees of macadamia farming and processing companies but also the state Department of Agriculture and the Hawaii Farm Bureau, have urged lawmakers to pass the measure.

But Honolulu-based Hawaiian Host Group — whose founders on Maui in 1950 are recognized as the first maker of chocolate-covered macadamia nuts that established what the company calls “Hawaii’s gift to the world” — may have derailed what it derided as defective legislation that would inflate the cost of doing business and lead to higher consumer prices.

Richard Cohen, manager of the Department of Agriculture’s measurement standards branch, told members of the House Judiciary and Hawaiian Affairs Committee at a March 1 hearing that dominant macadamia snack producers had pretty much used Hawaii macadamias in their products for decades, though in more recent years farmers have grown more concerned with increasing use of foreign macadamia nuts in Hawaii-branded products.

Jeffrey Clark, an executive with a firm that owns Hamakua Macadamia Nut Co. and Ka‘u Farms Management producing macadamias on Hawaii island, told the committee that a shift by the leading macadamia product maker to use mostly foreign nuts, often from Africa, has gotten so big recently that much of the local crop is going to waste and prompting farmers to get out of the business.

“We need to protect the industry, protect these farmers,” he said.

Proponents of the bill have not publicly singled out Hawaiian Host as the bill’s target. But the focus of HB 1348 undoubtedly is Hawaiian Host, which also owns snack maker Mauna Loa Macadamia Nut Co. and was acquired by investors who rescued the company from potential bankruptcy in 2021 as annual revenue plummeted around 30% to roughly $100 million due to the coronavirus pandemic’s impacts on Hawaii tourism.

Clark told the committee that farmers were the ones who established Hawaii macadamia nuts as a premium product, and that the industry’s biggest manufacturer is deceiving consumers by putting cheaper foreign macadamias “in a Hawaii bag” to obtain a premium price at a low cost while local farmers suffer from reduced demand and deflated prices.

Guy Ward, a small farmer in North Hilo, said in written testimony that this year he can’t sell his crop for more than 80 cents a pound, which isn’t enough for him to make harvesting worthwhile and compares with $1.20 per pound in past years.

“The portion of the consumer dollar that goes to the farmer is so small that being truthful about the origin of the product and offering a fair price to the farmer should not seriously damage the processor’s business,” Ward said.

Brad Nelson, director of the Macadamia Growers of Hawai‘i trade association, said in written testimony that millions of pounds of nuts have gone unharvested this season and that growers are facing millions of dollars in losses due to unsold or unharvested inventories.

According to the Hawaii Farm Bureau, Hawaii is the fifth-largest producer of macadamias in the world after Australia, South Africa, China and Kenya.

The most recent U.S. Department of Agriculture report, from 2021, said 620 Hawaii macadamia farms covering 17,000 acres produced 51 million pounds of product valued at $62.7 million.

In written testimony the Hawaii Farm Bureau said local macadamia farming is under great stress from economic and environmental pressures that include the use of foreign macadamias in products representing Hawaii.

“One of the greatest threats to the viability of macadamia farming in Hawaii is the misleading labeling of macadamia nut products,” said Brian Miyamoto, the organization’s executive director. “Currently, there is little to no regulation to prevent the use of Hawaiian names and images to market macadamia nuts grown outside of Hawaii.”

Under federal labeling law, a requirement to disclose the origin of macadamia nuts on food packaging applies only to unprocessed raw nuts, according to the state Department of Agriculture.

Opposition to HB 1348 has entirely or almost entirely come from Hawaiian Host and its employees.

The company, which makes its macadamia nut products in Hilo and Honolulu under the Hawaiian Host, Mauna Loa and KOHO brand names, said it supports the bill’s intent but not the bill itself, which it calls flawed and potentially unenforceable.

In testimony for the March 1 hearing, Hawaiian Host President and CEO Ed Schultz called the bill vague as to what constitutes images of the state. He questioned whether using generic images of things including plumeria, hibiscus, beaches, volcanoes or even macadamia nuts — none of which are endemic to Hawaii — could be grounds for having to disclose use of foreign macadamia nuts on a product label.

Schultz also argued against allowing existing company names and trademarks using words referencing Hawaii to be grounds for nut origin disclosure.

“It leaves a ton of inter­pretation, and conflicting interpretations, regarding what company names or images would be prohibited under these labeling requirements,” he said at the hearing.

In written testimony, Schultz submitted five pages of arguments against the bill with footnotes citing court rulings to support the company’s position, which includes allegations that the bill violates the U.S. Constitution by burdening interstate commerce in a discriminatory way that benefits Hawaii macadamia nut farmers.

Schultz also claims that the bill might conflict with trademark rights, saying that it “would effectively penalize our companies for the use of their names, significantly impairing our companies’ valuable intellectual property rights.”

The company also said it would be costly to amend labels, and that the bill provides no transition period for compliance.

“As is written, we believe the bill is defective,” Schultz said at the hearing.

Michelle Leon-Guerrero, the company’s chief administrative officer, suggested to the House Judiciary and Hawaiian Affairs Committee that it would be better to establish a working group that includes growers and processors to find a solution to the issue, and asked that the bill be deferred.

The committee voted 8-1 to advance the bill with an amendment eliminating a provision to let consumers file lawsuits over violations. As the bill stands, the state Department of Agriculture would be the one to enforce the law.

Prior to the March 1 hearing, the bill was passed by two other House committees — the Consumer Protection and Commerce Committee and the Agriculture and Food Systems Committee — before Hawaiian Host testified.

After the most recent hearing, the full House voted 50-1 on March 7 to send the bill to the Senate for consideration.

On March 13 two Senate committees scheduled a joint hearing for HB 1348 and two other crop-related bills on Friday. But on Thursday the macadamia labeling bill was scratched from the hearing.

Sen. Mike Gabbard (D, Ka­polei-Makakilo-Kalaeloa) chairs the Senate Agriculture and Environment Committee but deferred comment to Sen. Jarrett Keohokalole, chair of the Senate Committee on Commerce and Consumer Protection, as the lead chair on the bill’s committee referral.

Keohokalole (D, Kaneohe- Kailua) said he decided against hearing the bill given the strong contentions expressed in the recent House committee hearing.