Could new troubles fire up Sriracha maker’s move to Philly? p2

12/19/2013 | Real Estate Blog

Three years ago, Huy Fong Foods Inc. wanted to expand. A city not far from the company’s location made an offer that included favorable loan terms and tax abatement — the kind of offer that cities like Philadelphia make to growing companies that are looking to relocate or to expand. Huy Fong accepted the deal and was soon producing its world-renown Sriracha sauce at its new California plant.

In no time, it seemed, the city started to receive complaints from people who lived near the plant. The smells that go along with chili sauce production were making them ill — their eyes were watering; their throats were burning; they could barely go outdoors. The city had to do something about it.

Somewhere, someone in city hall must have been muttering, “Be careful what you wish for, for you will surely get it.”

The city did do something about it. This fall, it filed a lawsuit against Huy Fong and asked the court for an injunction. In late November, the court said the smells from the plant did rise to the level of a public nuisance and ordered a partial shutdown until a solution could be found.

In the meantime, Huy Fong founder and CEO David Tran had published an open letter to the city and its residents. The company also raised a banner over its front door that summarized its position: “No tear gas made here,” it read.

Huy Fong could work with city engineers on odor mitigation, but the tone of Tran’s open letter did not bode well for that public-private partnership. However the company goes about it, though, mitigation efforts could cost in both the short-run and the long-run. And, of course, chances are that any impact on the company’s costs will be passed on to consumers.

According to a company official, an injunction would mean the plant would not produce 200,000 bottles of Sriracha sauce every day. There was enough product on hand, though, that the shut-down would probably not result in a shortage.

That prediction came before the California Department of Public Health stepped in. Last week, regulators ordered Huy Fong to hold all three of its sauces — Sriracha, Chili Garlic and Sambal Oelek — for 30 days before shipping to distributors and wholesalers.

We’ll explain more in our next post.

Sources: 

Los Angeles Times, “Sriracha maker ordered to halt shipping until mid-January,” Frank Shyong, Dec. 11, 2013

Pasadena Star-News, “Defiant Sriracha CEO David Tran says ‘we don’t make tear gas,’ ruling could lead to 200,000 less bottles a day,” Sarah Favot, Nov. 27, 2013

Philadelphia Business Journal, “Sriracha plant to Philadelphia gaining momentum,” Jared Shelly, Dec. 2, 2013