Friday, December 13, 2013
California's Attack on Huy Fong Foods Sriracha Chili Sauce
California is mugging Sriracha Hot Chile Sauce David Tran represents the best of America. The 68 year old immigrant from Vietnam came to America as the land of opportunity. Like millions of immigrants before him, he created a product Americans wanted and with it hundreds of jobs. California’s recent treatment of him illustrates the anti-business climate of California, its ability to persecute, and sometimes drive entrepreneurs either out of business or out of the state. David Tran is surviving for now, but the lawyers are probably making more money than him. His product is Sricarha Hot Chile Sauce, which is manufactured by his company, Huh Fong Foods. He started making a sauce in a bucket in 1980. It soon became popular. Expansion rapidly followed. His clear plastic bottles with red hot chili sauce with a green wrapper and a rooster on the bottle are found in restaurants around America. It’s found in Subway, Traders Joe, and Lay potato chips. Sales reached $60 million in 2012. The success outgrew his production facilities in Rosemead, California. The neighboring community of Irwindale approached him three years ago with an irresistible offer. It offered a ten year loan with only interest paid during the decade with a balloon payment at the end. Huh Fong Foods would also pay Irwindale $250,000 per year. The new facility would be 200,000 square feet compared to Rosemead’s 68,000 square feet. The loan has since been refinanced with an outside bank. Irwindale has a population of 1,446 with a high unemployment rate. The city is mainly known for the active and abandoned quarries within its boundaries. Irwindale welcomed the plant. The new plant cost $40 million to build. It employs 200 full time employees and 600 seasonal workers. The plant produces strong odors, most of which are removed by a carbon based filtration system. Tang is quoted as saying “If it doesn’t smell, it doesn’t sell.” David claims the secret to his sauce is that it’s processed fresh. The jalapeno peppers are harvested and processed on the same day, with production running for roughly 90 days from August to November. About 100 million pounds of jalapeno are processed during the three month period. The ground peppers are mixed with garlic, salt, sugar, and vinegar to produce 200,000 bottles daily. The first complaint about the odors came from the son of a city councilman. The complaint could be legitimate, but it raises suspicions of a shakedown. No complaints had been made about the Rosemead facility. Huy Fong Foods said several inspectors from the South Coast Air Quality Management District had inspected the Irwindale facility on three separate occasions, and issued no citations. Conversely, Irwindale said its inspectors found air quality issues at the plant. About 30 residents also complained of varied symptoms, which include burning eyes, sore throats, heartburn, and nose bleeds. A father said the odors aggravated his son’s asthma, which were alleviated when he moved his outdoor activities indoors. The city and several residents filed suit against Huy Fong Foods on October 21, alleging the plant constituted a public nuisance. The judge denied a temporary restraining order against the plant, but issued a preliminary injunction after the processing season ended. Judge Robert H. O’Brien held for the plaintiffs even though he held the relationship between the emissions (odors) and the resulting health complaints lacked “credible scientific evidence linking the health problems to the plant.” He wrote though that the odors could be reasonably "be inferred to be emanating from the facility.” Round II came a few days ago: the incredibly arbitrary, bureaucratic inane regulatory state. The California Department of Public Health ordered the company to delay shipping three of its products, Sriracha, Chili Garlic, and Sambal Oelek, for 30 days. The Department tightened the health guidelines for the products after observing the processing plant. The Department wants to “ensure an effective treatment of microorganisms present in the product.” The Department is concerned that ground, unheated chili is added to the sauce. Anita Gore, spokesperson for the agency say “Holding products for a period of time at a specified pH level is one method of controlling those microorganisms.” Three decades of no health complaints pale compared to the dictates of an anonymous bureaucrat. By that reasoning, we should not eat uncooked carrots, apples, oranges, lemons, peaches, pears, plums, garlic, onions, lettuce, cabbage, tomatoes, mushrooms, or grapes. Sushi, spices and Asian herbal products and medicines should also be highly suspect David Tran’s business is surviving for now; his lawyers are thriving, but he is no longer California Dreaming.