Castle & Cooke, Inc. – Then & Now
Castle & Cooke, Inc.
Castle & Cooke, Inc. was incorporated in Hawai‘i on October 10, 1995, to be the successor to the real estate and resort business of Dole Food Company, Inc. The Company is engaged in three principal businesses: residential real estate, commercial real estate and resorts. In addition to Hawai‘i, the Company’s residential real estate operations are located in California, Arizona and Florida. Castle & Cooke also develops commercial properties in California, North Carolina, Georgia, Arizona, Florida and Hawai’i, and has resort operations on the island of Lana’i – the sixth largest of the Hawaiian Islands.
Castle & Cooke Hawaii, a division of Castle & Cooke, Inc. was founded in 1851 and is one of the nation’s oldest and most respected developers that’s built around three guiding principles: investing in Hawai’i, creating communities, and delivering dreams. Its residential real estate operations in Hawai’i are headed by Castle & Cooke Homes Hawaii, Inc., the premier developer of master-planned communities and builder of quality, fee simple homes. Current real estate developments include communities in the Villages of Kapolei and the future community of Koa Ridge.
Castle & Cooke also develops and manages commercial offices, retail and industrial properties in Hawai’i. The development of the Mililani Technology Park complements the residential real estate operations of Castle & Cooke Homes Hawaii. Castle & Cooke owns and operates Dole Cannery, a facility with almost 700,000 square feet of commercial property, and Dole Plantation, one of the most popular tourist attractions on O’ahu.
Castle & Cooke Resorts, LLC is the resort community development division of Castle & Cooke. The Company owns approximately 98 percent of the Island of Lana’i and has developed luxury hotels, such as the Four Seasons Resort Lana’i, The Lodge at Koele and the Four Seasons Resort Lana’i at Manele Bay, as well as championship golf courses and luxury residential Communities.
On June 2, 1851, Samuel Northrup Castle and Amos Starr Cooke began their humble business partnership by operating a general store. The entrepreneurial spirit and vision of the two founders of this company sparked the creation of a worldwide leader in the food, transportation and real estate industries.
To understand Castle & Cooke today, one needs to chronicle the business career and philosophy of its owner, David H. Murdock. A self-made man, he spent his formative years in the Midwest and commenced his business career as a builder in Arizona. Taking advantage of the post-war housing boom in Phoenix, he progressed from single-family residential to high-rise commercial real estate development and ownership and related services. When the Arizona real estate market collapsed in the sixties, he moved to California.
Headquartered in Los Angeles since 1968, Mr. Murdock’s businesses and investments have continually grown and prospered. Mr. Murdock, a creative thinker and innovative leader, is the first to credit his team for the success the company enjoys today. While still a builder of significant size, the company’s major growth can be attributed to the acquisition of publicly traded companies. The Murdock team has acquired many private companies and taken numerous publicly traded companies private, including FCA Industries, Pacific Holding Corporation, International Mining Corporation, Pato Consolidated Mining, Cannon Mills, Continental Group, Flexi-Van Leasing, Castle & Cooke, and Dole Food Company.
Mr. Murdock’s approach is to acquire undervalued assets, often in ordinary industries, retain knowledgeable management and find creative ways to operate and utilize assets more effectively.
He often uses the expression, “The impossible just takes a little longer.” The diversified group of companies operates autonomously, under specified guidelines, and management is encouraged to be entrepreneurial. His work ethic, integrity, curiosity, energy, belief in quality and desire to grow and improve, set the example for all to follow. Mr. Murdock and his management team at Castle & Cooke continue to focus on growth and are constantly searching for opportunities to acquire quality assets or businesses to meet this important goal.
The companies and projects shown on the following pages are a sampling of the Castle & Cooke portfolio and attest to the efforts, dedication and ingenuity of a management team and thousands of hard-working employees who actively manage, operate and enhance the value of the company daily.
In 1837 Samuel Northrup Castle and Amos Starr Cooke landed on Hawaii, then known as the Sandwich Islands, as part of the Seventh Reinforcement of the American Board of Commissioners for Foreign Missions, to begin their lives as lay missionaries. Castle’s assignment was to order, unload, and distribute supplies for the mission depository. Cooke’s job was to teach the “natives”–he taught the children of the royal families who then ruled the various islands for many years. Over the years Castle, who felt Cooke’s accounting abilities would help the depository, kept trying to convince his friend to join him. Cooke firmly declined until 1849, when his schooling of the royal children was complete. He needed to make a living since monetary support from Missions headquarters had been discontinued. That year Castle suggested to Cooke that they set up a partnership to take over the operation of the depository as a private enterprise. Money could be made by trading with the community at large, while mission posts could be supplied at cost. They took up the matter with the Mission Board in Boston, which, after two years, decided to release the partners from the mission and pay each a yearly salary of $500. On June 2, 1851, their partnership began, and a sign reading “Kakela me Kuke” (“Castle & Cooke”) was installed at the entrance to the Honolulu depository.
Business began with a bang. In their first year in business, profits came to nearly $2,000. In 1853 a branch store was opened downtown, to be closer to the considerable action the California Gold Rush brought. Also in 1853, Castle and Cooke purchased their first ship, the Morning Star to ship produce to California. By 1856, the partners elected to sell the depository, located on the outskirts of Honolulu, to concentrate on their burgeoning downtown business. In 1858 Castle and Cooke first ventured out of the mercantile business to make an investment in the new sugar industry. In the late 1860s they branched into the shipping business, handling shoreside business for a number of transpacific schooners and several inter-island vessels. Despite these diversifications, however, the mercantile portion of the business continued to provide the bulk of the profits.
As time went on, Joe Atherton, Cooke’s son-in-law, handled more and more of the day-to-day business while Castle devoted most of his time to public affairs. On July 14, 1894, 10 days after the Republic of Hawaii was proclaimed, Samuel Castle died at the age of 86. On December 28, 1894, the Castle & Cooke partnership was incorporated and Joe Atherton was elected president. At this time the company was just coming out of a financial slump caused by its 1889 investment in a sugar development called Ewa Plantation on the island of Oahu. To provide the huge amount of money needed to fund the project, Castle & Cooke had sold a large part of its holdings, including its valuable interests in the Haiku and Paia sugar plantations on Maui. The company continued to believe in the profitability of the Ewa Plantation and the risk paid off. By 1898, its production totaled 18,284 tons of sugar; in 1925 it reached 50,000. To add to the abundance, when Congress annexed Hawaii in August 1898, sugar prices rose.
Also in 1898, the original merchandise business was sold. Diversification did not stop, however. In the ensuing years Castle & Cooke involved itself in an (unsuccessful) automobile company, the Hawaiian Fertilizer Company, and a big but short venture into the sugar refinery business with the Honolulu Sugar Refining Company. Although C & C had been in the shipping business for 50 years, a 1907 agreement with William Matson to be the agent for his Matson Navigation Company greatly increased the business in this area. The agreement endured for 56 years, most of them profitable.
In 1916 Edward Davies Tenney, a Castle nephew, became chairman of Castle & Cooke and a year later president of Matson Navigation upon William Matson’s death. He held these posts for more than 30 years, until his death in 1934. Tenney became chairman just as the United States was entering World War I. Hawaii was a long way from the war zone; the only real effect of the war was to drive up the price of sugar, increasing Castle & Cooke’s profits. Within a few months after the war, Tenney began to act on his prewar decision to diversify. He acquired for the company an assortment of stocks and bonds, including shares in the Bank of California, Pennsylvania Railroad, California Telephone and Light, Poulsen Wireless, Santa Cruz Portland Cement, and Sterling Oil & Development.
His next big project was the company’s entrance into the travel business. In 1925 a group of entrepreneurs decided that the travelers on their luxury cruise lines needed a glamorous place to stay during their trip to Hawaii. As president of the Territorial Hotel Company (almost half of the directors worked for Castle & Cooke) Tenney oversaw the building of the $2 million Royal Hawaiian. In the long run the hotel was a flop, but news of its glamour ranged far. The company’s growth continued when Matson bought the Los Angeles Steamship Company to ward off its taking over his luxury steamship trade. Castle & Cooke, along with Matson Navigation, was now the largest steamship system in the Pacific.
The Great Depression and World War II
The Depression was less severe in Hawaii than on the mainland. Although Castle & Cooke never missed a dividend payment, the year-end bonus in 1931 included a warning that it probably would not be repeated. In April 1932, salaries and pensions were cut. By the time Alexander G. Budge became president in 1935, Castle & Cooke was already making a rapid recovery, in large part due to its 1932 purchase from Jim Dole of a 21 percent interest in his Hawaiian Pineapple Company. The Waialua Agricultural Company (part of Castle & Cooke) had already acquired a one-third share of Hawaiian Pineapple in a 1922 lease agreement. The purchase caused hard feelings between Dole and Castle & Cooke. After the reorganization, Dole was made chairman of the board, but was immediately sent on a “well-earned rest” from which he was never recalled. When he finally returned in 1933 he found his office moved to a storeroom.
World War II had a much more immediate effect on Castle & Cooke than the first war had. The military requisitioned most of the canned fruit that Hawaiian Pineapple and other companies produced, the cannery was blacked out completely, and chunks of acreage were converted to potatoes and other vegetables to help feed the military and local populations. Equipment and manpower were also commandeered; the labor force was cut in half, and key officials were given wartime jobs. Even so, sugar plantations stayed at close to normal production levels and with careful planning, enough vessels were made available to carry some crops to the mainland.
Growth in the Postwar Era
As life returned to normal after VJ day in 1945, the question of statehood for Hawaii resurfaced. During and just before the war, divs had appeared in the mainland press criticizing what were termed feudal practices in Hawaii, especially by the Big Five companies there, which included Castle & Cooke. Many in Hawaii, especially heads of the bigger corporations, felt that this problem was hindering Hawaii’s acceptance into statehood. The heads of 15 Hawaiian companies employed a New York public relations firm to make a study of the island’s industry and social structure and tell them what to do. The report recommended that the leading island companies divest themselves of stock in rivals and foster real competition. Budge had already done this, limiting himself to positions on the boards only of the seven companies in which Castle & Cooke held a large financial stake. The company also disposed of holdings in agencies that were its competitors; Matson followed suit and several big estates were broken up and distributed among the heirs.
The labor movement also picked up again after the war, and Castle & Cooke’s operations were involved in several disputes. In late 1946 the International Longshoremen’s and Warehousemen’s Union (ILWU) led a strike of 28,000 workers on 33 sugar plantations. The strike lasted 79 days; all over the islands irrigated cane dried and lost its sugar-bearing juice, resulting in a loss of some $20 million of sugar. Then in April 1949 the union called out 2,000 longshoremen, cutting off all of Hawaii’s supplies completely: nothing could come into the islands and nothing could be shipped to the mainland. This remarkable strike lasted 179 days and in the end the union lost its major demands, but it gained rank and file solidarity. During the strike, no goods could travel on the Pacific coast, but cargoes could and did use Gulf and Atlantic docks, giving
Hawaii’s economy links to the Atlantic coast for the first time in almost a century.
As the Hawaiian Pineapple Company suffered losses due to another strike in 1952, Budge kept pushing for diversification to end the firm’s dependence on sugar and pineapple. In 1946 Hawaiian Tuna Packers had been purchased for this reason, and in 1948 Castle & Cooke organized the Royal Hawaiian Macadamia Nut Company as well. Throughout its history, Castle & Cooke had only owned real estate indirectly, as an investor in agricultural businesses. In 1958 that changed: Helemano Company, Ltd. was merged into Castle & Cooke, adding 27,000 acres of land to its holdings.
Finally, in 1959, Hawaii became a state. Also in 1959, Malcolm MacNaughton became the president of C & C. He believed that an entirely new corporate structure was needed to promote the company’s growth.
Through the years, Hawaiian Pineapple had been run independently, but in the late 1950s frictions reached a point of no return. Henry White, who had run the company for many years, had made some decisions about diversification that Budge had strongly disagreed with. As Hawaiian’s profits fell, White was moved out of his position and in 1961 the company was merged into Castle & Cooke, adding another 15,000 acres to C & C’s holdings.
The same year, Columbia River Packers (renamed Bumble Bee Seafoods, Inc.) was merged into Castle & Cooke, making the company an important player in the food industry, along with its shipping, stevedoring, and merchandising businesses.
By this time, Castle & Cooke owned 155,000 acres of land in Hawaii and a ranch in California. To manage and develop this property, Oceanic Properties was formed as a wholly owned subsidiary. The subsidiary’s projects have included new towns, golf courses, apartment and medical buildings, and downtown development worldwide. International development became a reality when Dole Philippines was organized in 1963 to farm 18,000 acres on the island of Mindanao. The decision to farm abroad was made when management felt that costs, especially labor, were too high.
Castle & Cooke then turned to bananas. With cash from the sale of Matson (in 1964) and Honolulu Oil, Castle & Cooke purchased a 55 percent share of Standard Fruit and Steamship Company of New Orleans; the rest of the stock was purchased in 1968. By 1973 Donald J. Kirchoff, C & C’s executive vice president on the project, had made Castle & Cooke the U.S. leader in the banana market.