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Thursday, August 7, 2008
Death of a Bakery
By Andrew Walden @ 3:24 PM :: 3656 Views

by Andrew Walden

For thirteen years, Jim O’Keefe has delivered fresh-baked specialty breads to retail customers, restaurants and hotels on the Big Island. But the pressures which give Hawai`i a reputation as the nations’ worst business environment have taken their toll. Friday August 1 was the last day for O’Keefe’s Hilo store, the giant ovens, and the 26 employees of the Big Island’s largest baker.

A bakery driver looked hopeful but was disappointed to find that a reporter inquiring on July 31 was not a prospective buyer. “We’ve had some inquiries, but just can’t keep the doors open any longer. We’re just out of money,” said O’Keefe.

If no buyer comes through, O’Keefe says he will have to sell off equipment at the rented store on Kino`ole Street. There are major advantages to buying a business whole. “Bread is a low-risk item as far as the environment is concerned”, says O’Keefe. In spite of that, O’Keefe notes that a Kamuela bakery’s capital had to sit idle for three years awaiting permits from the county building department.

Since 2005 O’Keefe’s bill for Hawai`i’s most-expensive-in-the-nation-electricity has increased 227% to $5,000 per month. The monthly fuel bill to power delivery wagons and baking ovens has kept pace. In six years the bakery’s employees have lost only one day of work due to injury, but the Hawai`i legislature, dominated by trial attorneys, has refused to adopt workers comp reforms which would cut employers costs and improve services to injured employees. “We were facing a $17,000 workers compensation insurance renewal”, said O’Keefe. He describes calculating a truth-in-payroll mock paycheck and discovering 33% of payroll expenses went to cover government mandated requirements, not reflected in employees’ take-home pay.

Hawai`i’s highest-in-the nation fuel taxes have contributed to the squeeze, and the push to produce ethanol has driven wheat prices from 11.50 to 28.00 for a 50lb bag and organic wheat is at $53.00.

Meanwhile rising fuel prices squeezed airlines and forced the shutdown of ATA and Aloha Airlines. The resulting sharp reduction in tourist traffic has reduced demand for bread in hotels and restaurants. Some have quit giving free bred with meals. Says O’Keefe: “We’ve had two price increases. Every time we raise our prices, wholesale demand drops.”

The State General Fund got its slice of O’Keefe’s business right up to the end and politicians keep burbling vacuously about sustainability and supporting agriculture. But for several Big Island farmers, the closure means the loss of a major customers. O’Keefe points to Mountain View’s Mahiwai Farms which sold lettuce and cucumbers, “they’ve built greenhouses to supply us.” Hawai`i Honey Farms in Pahoa is another big supplier as are several others who provide olelo berries, poi, sweet potatoes, goat cheese, tomatoes, sprouts and tofu to round out an O’Keefe’s menu often named “Best of East Hawai`i.”

O’Keefe already is fielding calls from other Hilo employers with job offers. He explains, “We do have some really good staff here. It has taken us years to find some top notch folks. Our vendors are offering jobs. I hope we can get most of our people placed.”

Ironically, the closure has produced a big surge in business. Says O’Keefe: “Our customers are stocking up and putting bread in freezers. Some have come in for training on how to make bread in their own restaurant or hotel kitchens. This will be our best week ever. Our production is 3 or 4 times the usual.”

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