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Alexander & Baldwin, Inc.

 


Address:
822 Bishop St.
P.O. Box 3440
Honolulu, Hawaii 96801-3440
U.S.A.

Telephone: (808) 525-6611
Fax: (808) 525-6652


Statistics:
Public Company
Incorporated: 1900 as Alexander & Baldwin, Ltd.
Employees: 3,709
Sales: $979.5 million
Stock Exchanges: NASDAQ
SICs: 4423 Deep Sea Domestic Transportation of Freight; 2061 Raw Cane Sugar; 7359 Equipment Rental & Leasing Nec; 6552 Subdividers & Developers Nec


Company History:

Alexander & Baldwin, Inc., one of the original 'Big Five' Hawaiian companies, is a diversified corporation with operations in ocean transportation, container leasing, food products, and property development and management. Ocean transportation, overseen by Matson Navigation Company, Inc., a wholly owned subsidiary, accounts for about 56 percent of the company's revenue. Through Matson, Alexander & Baldwin (A&B) is the leading carrier of containerized cargo and automobiles between Hawaii and the U.S. Pacific Coast and is the ninth largest lessor of marine shipping containers in the world. Matson's fleet provides services to several other Pacific islands as well. Another six percent of A&B's revenue is generated by its container leasing operation, conducted through Matson Leasing Company, Inc., a wholly owned subsidiary of Matson Navigation. A&B conducts its food products business through another wholly owned subsidiary, A&B-Hawaii, Inc. (ABHI), whose California and Hawaiian Sugar Company is the largest producer of raw sugar in Hawaii; ABHI also is the largest coffee grower in the United States. Food products contributed about 31 percent of A&B's revenue in 1993. A&B's fourth major business segment, property development and management, is also conducted by ABHI. In 1994, the company owned about 94,000 acres of land in Hawaii, the majority of it on the island of Maui. Property development and management provided about seven percent of the company's 1993 revenue.

Although A&B was not incorporated until 1900, the company was founded 30 years earlier by the two men whose names it bears, Samuel T. Alexander and Henry P. Baldwin, both sons of missionaries living in Hawaii. Longtime friends, the two men began working together in the mid-1860s, when Alexander hired the younger Baldwin as his assistant in managing a sugar plantation in Waihee on the island of Maui. In 1869, the pair purchased 12 acres of land in central Maui, and, the following year, with an additional 559 acres, they established their own plantation, which marketed sugar on the mainland through such exporting firms as Castle & Cooke. Alexander and Baldwin became in-laws that year when Baldwin married Emily Alexander, his partner's sister.

By 1876, the volume of sugar cane growing on the plantation had increased so much that the readily available supply of water could not support it. To address this problem, Alexander devised a sophisticated irrigation plan that involved the construction of a gigantic ditch through rain forest terrain. The resulting Hamakua ditch, 17 miles long and capable of carrying 60 million gallons of water a day from the waters of East Maui, was completed in 1878 and served as the model for many other such irrigation projects throughout Hawaii.

The partnership of Alexander and Baldwin was incorporated in 1883 under the name Paia Plantation. That year, Alexander resigned as manager of the neighboring Haiku Sugar Company, a position he had held since before the opening of Paia, and moved to California, leaving Baldwin to manage both plantations. Over the next few years, Paia acquired controlling interest in Haiku, as the partners continued to acquire land and expand their sugar production.

In 1894, A&B launched its own sugar agency, based in San Francisco. The agency was headed by Alexander's son, Wallace, and Joseph P. Cooke, son of Castle & Cooke co-founder Amos S. Cooke. In its first year of operation, the Alexander & Baldwin agency turned a profit of $2,670. By 1899, A&B was serving as agent for a formidable collection of companies, including the Paia and Haiku plantations, the Hawaiian Sugar Company, and the Hawaiian Commercial & Sugar Company (HC&S) and its subsidiary, Kahului Railroad Company.

By 1900, the company had outgrown its partnership structure, and a new corporation, Alexander & Baldwin, Ltd., was formed. The company's headquarters were in Honolulu, a branch office was maintained in San Francisco, and Baldwin served as president. That year, the corporation reported its first annual profit, of $150,000. A&B went into the insurance business the following year, establishing a division overseen by Alexander's son-in-law, John Waterhouse. By 1920, the division was acting as agent for several established insurance companies, including Home Insurance Company, German Alliance Insurance Association, and the Commonwealth Insurance Company, all based in New York. The insurance division thrived for several decades before it was sold off in 1967.

Another new entity, the Maui Agricultural Company (MA Co.), was founded in 1903, in order to offset the effects of the Organic Act, which limited the amount of land a new corporation could hold to 1,000 acres. In response, A&B formed five companies with less than 1,000 acres each. These five companies were then combined with the Paia and Haiku plantations to form MA Co. In MA Co. and HC&S, A&B now controlled the operations of two of Maui's most important plantations.

Samuel Alexander died in 1904. In 1906, Henry Baldwin was succeeded as manager of HC&S by his son Frank, and when Henry died five years later, Frank became HC&S president, a position he would retain until his death in 1960. Both MA Co. and HC&S prospered during the first part of the twentieth century. In 1908, the two companies jointly formed the East Maui Irrigation Company (EMI) to manage the extensive system of irrigation ditches that was in development. In 1917, MA Co. built a distillery for producing alcohol from molasses, the first such facility in the United States. HC&S completed several other major projects during this time, including the construction of the new Waihee ditch and the modernization of its power plant and other equipment. Another plantation, Kihei, was merged into HC&S during this period as well.

A&B's cargo shipping business was developed to complement its sugar operations. In 1909, the company became a minority shareholder in Matson Navigation Company, which had been handling most of A&B's shipping between Hawaii and San Francisco for years. A&B continued to increase its investment in Matson, and the company eventually became a wholly owned subsidiary of A&B in 1969.

Wallace Alexander served as CEO of A&B from 1918 to 1930. During this time, the company began marketing pineapples, EMI completed construction of the Wailoa ditch, its final major ditch project, and A&B's headquarters building in Honolulu was completed. The following year, John Waterhouse succeeded Wallace Alexander as company president.

The 1930s were a period of technological advancement in A&B's sugar operations. In 1932, the company completed construction on the Alexander Dam, one of the largest hydraulic fill earth dams in the world. The Alexander Dam, located at the company's McBryde plantation, cost over $360,000 to build and was the site of a 1930 mud slide that killed several people. Both HC&S and MA Co. switched from steam plows to tractors around this time, and HC&S began mechanical harvesting on a large scale in 1937.

A&B sold its Hawaiian Sugar Company plantation in 1941. Although this plantation remained productive and profitable, it was situated on leased land, and A&B was unable to negotiate favorable lease terms or a purchase agreement. In 1945, Waterhouse was replaced as president of A&B by J. Platt Cooke, who served for a year before turning over the office to Frank Baldwin. In 1948, the HC&S and MA Co. plantations merged, creating one large plantation operating under the HC&S name. The two plantations produced over 100,000 tons of sugar during the first year of the merger. Soon thereafter, the plantation began to phase out its railroad distribution system in favor of trucking.

At the end of the 1940s, A&B began to move into property development, forming Kahului Development Co., Ltd. as a subsidiary of HC&S. In response to the complaints of plantation employees regarding the inadequate housing available to them, Kahului Development built a new residential community, which was opened in 1950 and became known as Dream City. This development gradually evolved into the city of Kahului, Maui's most populous community.

A&B operated several general stores on plantations and railroad sites. In 1950, its stores and equipment manufacturing concerns, as well as the lumberyard and mill operations of the Kahului Railroad Company, were organized under the A&B Commercial Company. The following year, A&B opened the first A&B Super Market, as well as the Kahului Store, Maui's first complete department store.

The company made several technological strides in its sugar operations during the 1950s. In 1951, HC&S's two factories combined to produce a record 151,000 tons of sugar. Several improvements in machinery for weed control and harvesting were introduced during this time, and, in 1957, HC&S put the world's largest bagasse (cane residue) burning boiler into operation at its Paia sugar factory.

Up until the 1960s, A&B had remained essentially a sales agent that held substantial interest in the companies it represented. Its income came from agency fees and dividends on the stock it owned in its client companies. However, this began to change as A&B started turning many of its clients into subsidiaries. Much of this shift took place under C.C. Cadagan, who was named president of A&B in 1960, becoming the first chief executive from outside the founding families. In 1962, HC&S was merged into A&B, becoming a division of the company. HC&S's three subsidiaries, Kahului Railroad Company (KRR), East Maui Irrigation Company, and Kahului Development Company all became subsidiaries of A&B. A&B Commercial Company, which ran the HC&S plantation stores, was made a division. At the same time, the last word of the company's name was changed from Ltd. to Inc.

Using funds it had received from the liquidation of Honolulu Oil Corporation, a company in which it had initially invested in 1911, A&B acquired a 94 percent controlling interest in Matson Navigation Company in 1964. The following year, the company eliminated what remained of KRR's unprofitable railroad operations, and that subsidiary was later renamed Kahului Trucking & Storage, Inc. By the end of the decade, the company had terminated its pineapple business and had increased its holding in Matson to 100 percent. The McBryde and Kahuke plantations had become wholly owned subsidiaries as well.

The 1970s were a frustrating period of stalled expansion plans for A&B. In 1970, Allen Wilcox was named CEO, replacing Stanley Powell, Cadagan's successor four years earlier. Under Wilcox, A&B abandoned its plans to expand its Far East shipping operations, choosing instead to concentrate on its business closer to home, such as developing some of its Maui land for resort use. Another change in leadership took place in 1972, when Lawrence Pricher was named CEO. Under Pricher, the company launched another expansion push, which included investments in oil refiner Pacific Resources, Inc. and Teakwood Holdings Ltd. (a Hong Kong furniture company), the purchase of Rogers Brothers Co., (an Idaho potato business), and the formation of a consulting firm called A&B Agribusiness Corporation. None of these ventures proved particularly fruitful, and, at the same time, some earlier investments that also proved unprofitable were sold off, including Edward R. Bacon Company and Acme Fast Freight, Inc. With the price of sugar falling, and profits at Matson unimpressive, A&B's net income remained sluggish through the mid-1970s.

Yet another change in command took place in 1978, when Gilbert Cox left Amfac Inc., Hawaii's biggest sugar producer, to assume the presidency of A&B. Cox's strategy for growth involved selling off most of Pricher's small acquisitions, such as the potato company, and using the money for a major acquisition. In 1979, an agreement was reached under which A&B would acquire the 80 percent of Pacific Resources it did not already own. However, this deal fell through following opposition from a group of stockholders led by well-known investor Harry Weinberg.

The rapid succession of new presidents at A&B finally slowed in 1980 with the arrival of Robert Pfeiffer, formerly the CEO at Matson. An upward swing in sugar prices helped boost the company's profits that year, and, by 1983, sugar accounted for 21 percent of A&B's $395 million in sales. As the company again considered diversification, Harry Weinberg, Hawaii's largest individual landowner, increased his holding in A&B to 25 percent. In 1984, Weinberg forced a proxy battle for control of the company, arguing that A&B's land holdings were worth far more than its books indicated and that property development should be the company's top priority. Unlike most of his boardroom conflicts with large Hawaiian companies, however, this one ended with Weinberg and his associates forced off the A&B board of directors.

In January 1987, A&B got rid of its merchandising division, selling A&B Commercial Company to Monarch Building Supply, Inc., a Honolulu-based company. By this time, A&B had revenues of $655 million, the bulk of which was generated by Matson, which controlled about 75 percent of the container cargo shipping market between Hawaii and the West Coast. Between 1983 and 1987, profits more than doubled to $120 million, and about three-fourths of that total came from Matson. In the late 1980s, A&B sold off its remaining shares of Pacific Resources to Australia's Broken Hill Proprietary Company and began preparing to grow coffee through a joint venture between its McBryde subsidiary and Hills Brothers. A&B recorded net income of $199 million on revenue of $846 million in 1989. Two years later Pfeiffer passed the reins of the company to John C. Couch, who became president and CEO. Couch had served A&B for 15 years, initially with Matson Navigation Company.

A&B's revenues stagnated and net income slumped during the first part of the 1990s. With sales hovering around the $750 million mark from 1990 to 1992, company earnings dipped to under $19 million in 1992, the lowest level in over a decade. That figure included a $15.8 million charge to cover losses from Hurricane Iniki, which devastated Kauai in 1992. Nevertheless, A&B mounted a successful comeback the following year. The company reported major increases in both profit and revenue, up to $67 million and $979 million, respectively. Moreover, in June 1993, A&B's purchase of the 72 percent of California and Hawaiian Sugar Company that it did not already own helped bolster revenues and profits. As the global economy improved during the first half of 1994, A&B expected to see gains in its shipping and container leasing operations, as well as increased profits from real estate leasing. A&B was the last of Hawaii's Big Five companies to remain independent and based on the islands; its durability over more than a century of operation has proven that a mainland address is not a prerequisite for long-term success.

Principal Subsidiaries: A&B-Hawaii, Inc.; A&B Development Company; A&B Properties, Inc.; California and Hawaiian Sugar Company; East Maui Irrigation Company, Ltd.; Kahului Trucking & Storage, Inc.; Kauai Commercial Company, Inc.; Kukui'ula Development Company, Inc.; McBryde Sugar Company, Ltd.; South Shore Community Services, Inc.; South Shore Resources, Inc.; WDCI, Inc.; Matson Navigation Company, Inc.; Matson Intermodal System, Inc.; Matson Leasing Company, Inc.; Matson Services Company, Inc.; Matson Terminals, Inc.





Further Reading:


'Alexander & Baldwin: Cutting Sugar's Role with Big Acquisitions,' Business Week, February 12, 1979, pp. 88-91.
'Alexander & Baldwin: Will It Put Its Money Where Its Mouth Is?' Business Week, March 19, 1984, pp. 92-93.
Beauchamp, Marc, 'Hunkering Down Is No Strategy,' Forbes, October 31, 1988, pp. 54-62.
'Can Alexander & Baldwin Do It Again?' Financial World, May 15, 1981, pp. 27-28.
Christensen, Kathryn, 'After Years of Turmoil, a Hawaii Sugar Firm Returns to Stability,' Wall Street Journal, August 20, 1981 p. 1.
Cieply, Michael, 'East of Eden,' Forbes, January 31, 1983, pp. 34-36.
Davies, John, 'Coffee Replaces Sugar in Some Hawaiian Fields,' Journal of Commerce, July 9, 1990, p. 1A.
Garcia, Art, 'Spotlight on Alexander & Baldwin,' Journal of Commerce, April 7, 1980, p. 3.
'An Hawaiian Company Invests Its Sugar Profits,' Business Week, April 14, 1975, pp. 80-81.
Smith, Christopher, and Cynthia Green, 'A Seasoned Raider Loses His Touch,' Business Week, May 13, 1985, p. 31.
'A Sweet Stock from the Islands,' Fortune, November 25, 1985, pp. 161-68.
Wastler, Allen R., 'Accounting Changes, Iniki Fallout Depress Alexander & Baldwin Profit,' Journal of Commerce, February 3, 1993, p. 1B.
Zipser, Andy, 'When Its Ship Comes In,' Barron's, pp. 28-29.

Source: International Directory of Company Histories, Vol. 10. St. James Press, 1995.




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