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Nov 24, 2003

Turning Hawaii's Beloved Mauna Loa Nut Brand from a Money-Loser into a Profit Center

SUMMARY: No summary available.
When a private equity firm purchased Mauna Loa Nut Holdings in 2001, new SVP Marketing Ramona Cappello knew she and her team had four years at the most to deliver impressive profits before the company was put back on the market.

But when she looked at the overall business, she found the cost of goods at 70% of sales, a corporate culture with "a plantation- owner mentality," and no packaging or brand consistency.

Cappello faced enormous stakes: "If you're in a big company and you miss your goal, maybe you miss your bonus or lose your job. In a small company like Mauna Loa, you miss payroll."

But while the stakes may be different in small vs. large companies, Cappello knew that tactics for setting and reaching goals remained the same.

Cappello told us the steps she took -- most of them *before* even creating a finalized strategic plan -- to generate short-term cash flow that ultimately tripled business on the mainland and made Mauna Loa profitable for the first time in recent history.

-> Step #1. Understand your operating environment

You need to know the goals of the owners or managers, and have an understanding of the corporate culture within the company in order to know where your challenges lie, Cappello says.

"We had four different divisions all headed by presidents who were discouraged from talking with each other -- the previous owners viewed that as a way to generate competition," she explains. "We came in and asked them to think, to be accountable and take ownership, and it was very hard because they hadn't been allowed to do that in 20 years."

Cappello also found that the sales and marketing teams identified more with their customers than with the company.

As Cappello began to implement changes, she met constant resistance: "How am I going to get my bonus, how am I going to meet my numbers?"

She told employees, "It's not 'me,' it's 'we.' We're going to have so much more fun by really marketing this brand."

-> Step #2. Analyze your customers and your product offerings

In Hawaii, Mauna Loa's sales and marketing team divided sales channels into tourist or resident. They assumed that macadamias bought in the Costco stores were automatically resident purchases, since Costco is a membership club.

But Cappello discovered that tour operators actually provide shuttle trips to Costco, and that many tourists go there to purchase gifts for home. "When we asked the account what they were selling, they were all gift packs," she says.

Residents do purchase gift packs during holidays, Cappello knew, so she monitored sales to see if a pattern emerged around certain dates.

"There wasn't a pattern to sales," she says. Gift pack sales stayed consistent throughout the year, "so we knew it wasn't resident to resident. We had to change our views of the account and what the product mix should be. We put in more gift-like items, and sales are up 40%."

-> Step #3. Integrate your plans with Operations

Cappello and her team needed to make the business healthy as quickly as possible. So, she dramatically reduced inventory (both on finished goods and ingredients), changed co-packers, and overhauled internal operations and manufacturing.

One major change: Cappello slashed the variety of products.

"We made macadamias in five different places, and every one printed the package differently, every product tasted a little different. If you tasted it in Hawaii and loved it, you might come home and they'd be totally different," she says.

She decided to retrench to producing on one great-tasting product with eight packaging variations -- boxes, bags, gift packs, etc.

Cappello told the operations head he could still make the macadamias in five places if he wanted to drive himself crazy. "Sure enough, now they're all made in one place," she says.

-> Step # 4. Justify -- or jettison -- marketing efforts

Much of the Company's marketing budget had been allocated to on- pack coupons through tourist-based channels.

"Why are we rewarding consumers for buying something they'd buy anyway?" Cappello asked. The answer? Because the accounts like it, and because Mauna Loa had been doing it for 20 years.

To the dismay of sales employees, who told her that sales would drop by 70%, Cappello decided to get rid of coupons in favor of different marketing tactics.

She reminded her team that as the number one gift from Hawaii, Mauna Loa nuts were as important to their accounts as the accounts were important to Mauna Loa.

Instead of one-size-fits-all coupons, she implemented account-specific marketing.

Cappello worked with the ABC chain -- the Company's biggest customer by far, representing 10% of total sales -- to reorganize their marketing efforts. She pulled their coupons and instead came up with tastings and other events.

The chain's commercials air in hotel rooms on CNN -- now, half of the ad is devoted to Mauna Loa, with the following tagline: "Paradise is within reach at local ABC stores."

"Instead of taping coupons to boxes, we're driving people into the ABC stores to see the range of products that they can only get in Hawaii," Cappello says.

Sales have increased by 10%.

-> Step #5. Strategic plan

While improving cash flow, Cappello and the Executive Team also focused on coming up with a common agenda and creating a strategic plan.

"Every month for two days we sat down to write the plan and to massage the plan," she says. "It took about five months before we presented it to our ownership."

When they began the process, the team was made up of the heads of operations, marketing, sales, and finance.

"Now there are three of us, because one member of the Exec Team was not operating as a team player," she says. "In writing the strategic plan we realized that this executive had his own agenda, and didn't want to cooperate with the rest of the team."

Communication between team members is critical, says Cappello. In fact, they now work so well together that the ownership doesn't want to bring in a new team member or promote a fourth member.

"We've slashed costs and inefficiencies out of the budget, invested in new products and marketing, and our sales are through the roof," Cappello says.
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