Water, Water (and Revenue) Everywhere
Koyo USA Corp. makes a splash on the Top 250
Yutaka Ishiyama sits in a sleek, bright, white Waikiki storefront and sips room-temperature water from a tall glass. He gently smacks his lips, scrutinizing and savoring his beverage. He’s sitting at one of the tables at the MaHaLo Hawaii Deep Sea Water Showroom and, after drinking, he settles back into his chair and smiles. He is happy, but reserved, seemingly trying to contain his enthusiasm, like someone who has just figured out how to print his own money or someone who sells deep-sea drinking water for a living.
As good as 2005 sales were, they are just the beginning for Koyo. Last August, the company opened its second desalinating plant at its facility at the Big Island’s Natural Energy Laboratory of Hawaii Authority (NELHA), boosting its production capacity from 50,000 1.5-liter and 500-milliliter bottles a day to more than 300,000 bottles a day. The additional output enabled the company to finally meet the demands of its Japanese market, which has gulped down a vast majority of its water. Koyo’s water, labeled MaHaLo Hawaii Deep Sea, retails for $4.50 for the 1.5-liter bottle and $2 for the 500-milliliter bottle. In Japan, prices can reach upward of $6 a bottle.Ishiyama is the sales and marketing manager for Koyo USA Corp., and he does the latter, but, listening to him talk, it sounds as though he’s also doing the former. This year, Honolulu-based Koyo USA Corp. broke into Hawaii Business’ Top 250 with 2005 gross sales of $31 million, placing it at No. 210 on the list. It was a 33 percent increase over 2004’s sales of $21 million.
Shortly after cutting the ribbon on this second facility, Koyo officials hit the drawing board again and designed a third processing plant, one with the capacity to process approximately 1 million bottles of deep-sea drinking water a day. The $40-million facility, totally automated, opened its doors early in July. Altogether, Koyo has invested approximately $80 million in its 30-acre compound.
“Last year seems like a million years ago,” says Ishiyama. “Our second plant was the world’s biggest deep-water plant at the time, and it was great, satisfying all our needs in Japan. But when we looked further out, we felt that we had no choice. We had to build another one.”
In addition, deep-sea drinking water is the state’s fastest growing export. Its first-quarter value of $8.8 million represents a 725 percent increase from the first quarter of 2005, when Hawaii companies exported just $1.1 million worth of water.If you aren’t familiar with Hawaii’s desalinated deep-sea drinking water, you will be soon. In just three years, it has become Hawaii’s second-largest foreign export. According to Foreign Trade Zone, in the first quarter of 2006, bottled water exports, which are dominated by desalinated deep-sea drinking water, were valued at $8.8 million, behind only oil and jet fuel exports at $33.2 million and ahead of scrap iron at $8.3 million. Interestingly, chocolate candy was No. 5 at $4.7 million in exports, followed by coffee at $3.9 million.
The reason for all this fuss is the Islands sits at one of the last junctions of the Earth’s “Great Ocean Conveyer Belt,” very slow-moving currents that carry melted glacier ice from the Arctic, through the North Atlantic, around the Pacific and back again. Waiting in the middle of the Pacific are NELHA’s pipes, which pump the pristine liquid from 3,000 feet below the Kohala Coast’s calm, azure surface, delivering it to Koyo and three other water companies. Processors then remove most of the salt, but leave 60 to 70 minerals, which Koyo officials claim aid in digestion and the absorption of vitamins, among other things.
In the water world, Hawaii’s deep stuff is considered liquid gold. Not only is it the deepest water pumped in the world, it’s the oldest — 1,250 years old, give or take 50 years, according to scientists at the Lawrence Livermore National Laboratory. These are important factors for drinking-water aficionados, because depth and age equal purity. More than 1,000–– years ago, when this water was hovering near the surface there was little if any open-ocean pollution.
According NELHA chief executive officer Ron Baird, Kona’s four water bottlers received a total of 1,000 gallons of water a minute from his facility’s pipes. Users are currently charged $.60 per 1,000 gallons, with Koyo receiving the lion’s share of the water.
This summer, three new water companies have signed leases with NELHA and Baird anticipates that by year’s end he’ll be pumping water to all of them in addition to his four current tenets. “We will be pumping quite a bit more water over the next three years,” says Baird. “I’m not at liberty to discuss how much, but it will be a lot. But none of the companies will be pumping nearly as much as Koyo. They are well over 120 percent bigger than all the other companies put together, and, if 2008 and 2009 projections are correct, they will stay that way.”
As much water as the bottlers are taking out of the ocean, they still aren’t NELHA’s biggest water customers, not by a long shot. The research facility’s aquaculture operations use 14,000 gallons of water per minute. “Rest assured that we won’t be pumping the ocean dry any day soon,” says Baird. “I don’t think we’ll even come close. Maybe in another 1,000 years we’ll have to worry about supply.”
Markets, Markets Everywhere
Back in the Waikiki water showroom, Ishiyama’s enthusiasm is starting to bubble over. With the new plant on line, he can now pursue markets outside of Japan: Hawaii, the U.S. Mainland, Europe, Korea and Taiwan. Since late last year, MaHaLo water has been available in Hawaii at Koyo’s futuristic, 1,200-square-foot Waikiki showroom, the Neiman Marcus department store at Ala Moana Center as well as high-end hotels and spas throughout the state. There was also a trickle of Internet sales to the rest of the country and the world. But in late 2006, Ishiyama and Koyo will be opening up the floodgates so to speak.
“We won’t be producing 1 million bottles a day right off, but we won’t be short again. We plan on selling our water in Hawaii as well as to 48 states on the Mainland. Up until now, I haven’t been able to commit to a Mainland buyer, because we just didn’t have product. Now, we do,” says Ishiyama. “We’re also very encouraged by our response from Europe as well as Korea and Taiwan. I can’t really make projections for the rest of 2006, other than to say that we are very optimistic.”
Ishiyama will say that Koyo won’t be selling its water to mass retailers like supermarkets or big-box stores. Instead, he will likely concentrate on specialty stores, such as health food stores, where he can serve a health-conscious and younger market. But the marketing executive is also looking beyond just selling drinking water. Earlier this summer, Koyo began providing its water to Hawaii Sea Spirits, a Maui-based vodka company and Brew Moon, an Oahu beer brewer. In addition, later this year, Koyo will provide pure water to a pharmaceutical company for medicine production.
Business is good today. But will all Koyo’s new neighbors in Kona eventually flood the market?
“We need competitors. We need someone to grow up together and grow this market,” says Ishiyama. “In the soft-drink industry, Coke needed Pepsi. If there was only Coke, no one wins. I can’t speak for the rest of the water people, but I can say that there are 240 million people in this country and they are all thirsty and they all drink water.”
Ishiyama takes another sip of water and smiles. He loves the taste.