Hawaii works hard for its money. We took a look at 12 different businesses—from Matson to L&L Drive-Inn to a downtown parking garage—to find out just what it takes to make a living in paradise.
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Kahala Shell Rapid Lube & Car Wash
How it works: Someone’s making a fortune off gasoline, but it’s not the dealers. The retail gas business is one of razor-thin margins and stiff competition. “Customers are being squeezed by rising gas prices at the pump, but we’re being squeezed by that at the same time,” says Bill Green, former owner and consultant to Kahala Shell. Although it pumps 150,000 gallons of gas a month, Kahala Shell relies on four additional revenue streams to survive: a car wash, a quick lube, a convenience store and a propane refilling station.
photo by Sergio GoesKahala Shell’s quick-lube facility helps beef up its profit margins
Convenience store sales, for example, bring a 24 percent profit margin—much better than the 1 percent to 4 percent margin on gasoline. “We try to give people as many reasons as possible to drive through here,” says Green.
The ups and downs: Gasoline is one of the most price-sensitive products out there. “It’s literally an hourly concern,” says Green. “Two or three times a day, we’ll check prices and see what’s going on. It’s like a meter: If you get out of competition, within two or three days you can see your volume slipping.”
Plastic costs: The convenience of paying at the pump isn’t free. Kahala Shell pays more than $10,000 a month in credit card fees.
Taxes: 52.1 cents of every gallon of gas goes directly to the government (18.4 cents to the federal government, 17 cents to the state, and 16.5 to the city and county of Honolulu).
Price of paradise: Hawaii’s gas stations generally need twice as many customers to match the pumping volume of a similar Mainland station. We just don’t drive as much.
University of Hawaii Athletic Department
How it works: College athletes may not get paid, but a lot of money changes hands to make a university athletic department run successfully.
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How it works: Large-scale agriculture in Hawaii may be on its last legs, but boutique farming is booming. Dean Okimoto caught the Hawaii Regional Cuisine revolution of the 1990s, which sparked a still-growing demand for gourmet, locally grown produce. “One of the biggest boons for agriculture has been this partnership with restaurants,” he says. Okimoto started growing salad mixes exclusively for Roy Yamaguchi in 1990; today, Nalo Farms supplies about 90 Oahu restaurants and 25 Neighbor Island restaurants with salad greens.
Cost: It costs Nalo Farms $1.80 a pound to bring a crop of greens to market, a figure that includes land preparation, water, irrigation lines, seed and labor costs. Delivery adds another 50 cents a pound.
High volume: Any one of the Roy’s restaurants will order about six to eight pounds of greens a day. All told, Nalo Farms sells about 10,000 pounds of greens a month on Oahu.
Turnover: One big plus of growing salad greens is their quick growth cycle: Okimoto is able to take a crop from seed to harvest in one month. In one year, one plot of land can produce eight separate crops.
Expanding the market: In addition to his main customer base of restaurants, Okimoto sells 25 percent of his output to local farmers’ markets, and is ramping up to sell his produce in supermarkets. “I’d like to have a 50-50 split between restaurants and retail locations,” he says. “The restaurants give us the best marketing exposure, but the farmers’ markets give us larger margins.”