End of year update

Posted on Dec 29, 2023

Hi all,

As 2023 comes to a wrap, I want to share some detailed updates from us at Kamanu Composites. We're on the move again. Though it's less exciting than our last shop move three years ago. We are consolidating our shop to about half the space over the next four to six weeks. We've had a wild run since 2020, and I've led us a little too close to the rocks, to the point that we're no longer financially viable without substantial changes. It's a decision I've delayed making as long as possible. But, at this point, it's our best path forward and will enable our long-term sustainability. If you don't read further, please know that Noio production will not be interrupted. We are more confident than ever that it's the best canoe in the world and is the ONLY OC1 model exclusively made in Hawai'i.

More on the Noio further in this letter, but first, I want to say I am incredibly proud of our canoe-building team. They've delivered continually over a pretty chaotic few years. In 2020, we went from a company-wide layoff to a scrappy startup making face shields during the lockdowns. That led to a large contract where we employed 90+ people, producing 20,000+ face shields daily while continuing canoe production. It was a little bonkers. And it was a massive deal for us.

In 2021, we had significant working capital for the first time, and we faced three options:

Close the business with a windfall: Sad but financially savvy.
Sell new equipment from the face-shield project and return to our original operation: We'd spent a decade losing money or barely breaking even, and going back to that was not a viable option.
Scale up: a risky way to spend life-changing money, but also the only path with the possibility of keeping local canoe building alive and providing a living wage for our team. YOLO! The choice was easy.

It's been almost three years since then. We have done a lot but haven't achieved the growth we set out for. Reflecting, I can attribute a lot to my failures. We didn't execute fast enough. We overextended ourselves on rent and labor costs. But also, there is the reality that outrigger canoes are a surprisingly small market. Of the type we paddle in Hawaii, some 80% are made in China, and we make up the bulk remaining percentage. We are climbing in market share, but manufacturing is still excruciatingly difficult. In Hawai'i, it's nearly impossible. We face high rent, electricity, insurance, materials, and labor costs. The odds are stacked against us.

I've always believed that we could innovate our way around it. To some extent, we have. The Noio has had an exceptional first season and continues to win over paddlers. We regularly deliver customer boats in the 16-17 lb weight range. We've made tremendous gains in quality and labor productivity. We've gone from about 10-12% market share in 2022 to almost 20% this year. Hawai'i, perhaps more than anywhere in the world, supports local. But with a few missteps, and now, with an industry-wide drop in canoe sales this year vs last, we don't believe we can sustainably sell 8-10 canoes a week that we need to for our current space to work. There are also several more capital-intensive step functions in manufacturing capability required before we could ever compete on price.

In hindsight, this decision should have been made eighteen months ago. But I was holding on to those hopes and dreams of growth. I've always believed in what we do. Our team gets to bring the coolest things into the world. By spending the vast majority of our revenue locally, we contribute to Hawai'i's economy. As witnessed by the pandemic, local manufacturing adds resilience to our islands. It's an endlessly challenging creative pursuit, skill, art, and application of technology. With the limited amount of craftsmanship like this happening in Hawaii, I feel it's vitally important that we continue. And, to be honest, I will be devastated if nearly 100% of OC-1s are made in China.

While our path is full of ups, downs, and big curves— my goal is the same as we started with in 2007: to build the world's best canoes in Hawai'i and create a lasting company that has a positive impact on the world.

Downsizing does mean a couple of steps back on diversification and max production capacity, but we save significant amounts on rent, insurance, and utilities, and most importantly we can achieve financial sustainability. By applying all our gains and improvements over the last three years in a smaller more focused shop, I fully believe our best is yet to come.

A few final and somewhat disconnected thoughts for anyone interested:

I suspect those of you reading this are already some of our most dedicated supporters, and we probably don't say it enough– but thank you. Ultimately, we can only do what we do with your support.

We are open to financial and business development partnerships. Unfortunately, our business model doesn't make for a wise investment, and there aren't a lot of composite products that make sense to build in Hawai'i. But if you're passionate about ensuring that outrigger canoes are built in Hawai'i, and you have capital or good ideas, then I'd love to talk.
We're keeping critical assets like the autoclave and most CNC manufacturing equipment in the move. We are selling an Onsrud 145M CNC and UR10 5-axis robot. Let us know if you're interested.
My software as a service project (GrugNotes.com – ai notes, wiki, and knowledge base) accounts for about 1/2000 of Kamanu Composites revenue! It's absurd but potentially a source of diversification outside of manufacturing. It’s free to sign up if you’d like more updates about it, and if you use note-taking software, please consider one that helps support local canoe-building! :)
We have canoes in stock. Our average lead time has been around eight months for most of our existence, so we need to spread the word: the best doesn't mean the longest wait! If you or anyone you know is looking for a canoe, we regularly have stock canoes and custom lead times are one to three months.
Marketing is something we will focus on in the New Year. We operate with nearly zero marketing budget, but we also realize an entire generation doesn't know our story. We'll share a little more on official social channels @kamanucomposites on Instagram – and I'll share more video content on YouTube. As a company, we have continuously operated quietly, somewhat guarding techniques, designs, etc. But times change, and so much of the exciting work we do is within the walls of our shop. I hope to share more of it.
Retail and office will remain open for most of January—more updates to follow.

Thanks for reading and being the best customers and supporters of our dreams to build.

Aloha and Happy New Year to you all,

Keizo Gates
Co-founder & CEO
Kamanu Composites, LLC
We Build Canoes