Hawaii’s Vertically Integrated Small Businesses
Here are three Hawaii small businesses that do it all
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“Fish you can’t get anywhere else”
Colin Nakagawa, chief chef and fish catcher at the
The fish at Hilo’s Seaside Restaurant travel only a few feet from the main fishpond to the kitchen to the patrons’ tables. Controlling all steps in the process to guarantee fresh taste has been the family business’s signature since Seiichi and Matsuno Nakagawa opened the Seaside Club in 1921.
Colin Nakagawa, grandson of the founders, is currently the chief chef and fish gatherer, working alongside his parents, Susumu and Ellen Nakagawa. Colin feeds the fish in the family’s fishpond two or three times a day, catches them for dinner and cleans them.
“You don’t need to do too much” to raise the fish, he says. “The fish practically take care of themselves.”
The quality of the fish starts with the water. “The water levels in the pond fluctuate constantly depending on the tide,” he says. “The water is always being changed over so it’s never stagnant, and that goes into the quality of the fish.”
Photo: Courtesy Sharon Beauchan
Colin gets the fingerlings, the baby fish, from his 30 acres of natural fishponds, where the fish feed off the ponds’ natural elements. Using a net, Colin guides more mature fish through gates into separate holding pens.
The different species of fish can take anywhere from four to six years to grow into market size and the restaurant goes through about 200 fish a week. Colin says it’s difficult to meet customer preferences, especially the high demand for mullet, also known locally as ama ama.
“The pond has a lot of predators for the fingerlings,” he says. “Ulua eat fingerlings and they can do a lot of damage to the pond. The heron likes to eat fish and it can eat a lot of small baby fish.”
At dinnertime, Colin catches the fish and puts them on ice with water and rock salt to kill them. Then, he takes them to the fryer and grill for a tasty finish. Ninety years ago, Colin’s grandparents only had mullet and chicken on the menu of the original Seaside Club, but the menu has grown over the years and today it includes aholehole, golden tilapia, rainbow trout and more.
“We have a strong local following,” Colin said. “We have fish you can’t get anywhere else and even if you did, it wouldn’t taste the same because of our water, which is always changing and never stagnant.”
Trio of golden tilapia
1790 Kalanianaole Avenue
Pros and Cons of Vertical Integration
In agriculture, to be vertically integrated means to grow, harvest, process and sell your product to the public all within the same company. If done well, it can be a successful business model.
“The logic is that if you can vertically integrate positively, you’ll get the profit from each step of the way,” says John Butler, associate dean at Shidler College of Business at the University of Hawaii at Manoa.
But, Butler says, there are sometimes disadvantages to being vertically integrated. “People bite off more than they can chew,” he says. “Quite often, when people think they can make the profit, they underestimate the skill to make it successfully. Most companies don’t internalize because they can’t do it as well or cheaply as someone else could.”
Honolulu sommelier John Fujimoto understands the pros and cons of vertical integration in the winemaking business.
“Being able to grow your own grapes is, I think, very important in quality,” Fujimoto says. “When you buy grapes you don’t get that opportunity to say the grapes are worthwhile or not. You don’t know what’s been done to them.”
“It’s good to see [Tedeschi] doing their own growing and doing everything themselves, and that it’s 100 percent made in Hawaii.”
He estimates that only 25 to 40 percent of American vineyards are vertically integrated. On the other hand, Fujimoto says, “You do spread yourself thin. You’re not an expert in everything,” he says.
The costs of vertical integration in the wine industry are huge. “The machinery used for the wine making, the cheapest is in the range of $25,000 to $50,000. And it’s about $100,000 for really good bottling machines,” Fujimoto says.
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