Sriracha hot sauce: why fight looked bad for California city

Irwindale, Calif., was about to put a stop to Sriracha production over concerns about chili fumes seeping from the hot sauce factory and irritating residents. But the city council on Wednesday voted to dismiss the matter.

Nick Ut/AP/File
Sriracha hot sauce is produced at the Huy Fong Foods factory in Irwindale, Calif., Oct. 29, 2013.

The Irwindale, Calif., City Council on Wednesday cooled off its at-times piquant fight with the maker of Sriracha hot sauce.

The fight between the California city and a Vietnamese entrepreneur named David Tran had become national news largely because the sauce is a cult sensation in the United States. The city was about to put a stop to production over concerns about chili fumes seeping from the hot sauce factory and irritating nearby residents.

The city council both filed a lawsuit over the matter and declared a month ago that the plant was a “public nuisance.” On Wednesday, the council voted to drop the lawsuit and rescind the declaration.

The situation had become a commentary on the California business climate more broadly, officials beyond Irwindale said. That was evident as officials from Democratic Gov. Jerry Brown’s Office of Business and Economic Development got involved and helped broker Wednesday’s deal.

The scrutiny by city officials on a classic up-by-your-bootstraps entrepreneurial success was sending the wrong message about California’s business climate, Los Angeles County economic development official Bob Machuca told The Pasadena Star-News. Solving the Sriracha problem “is what we needed to do a long time ago.” Now, he said, the message is that California is “open for business.”

The victory for Mr. Tran, who first created Sriracha in a five-gallon barrel after emigrating from Vietnam more than three decades ago, is a major one: It removes uncertainty about his expansion plans at the same time as McIlhenny, a Louisiana company, is introducing a Tabasco Sriracha to compete.

Sriracha comes from the name of a town in Thailand (Tran picked it because it was also the name of the ship he emigrated on), and as such is not copyrightable.

His ordeal also included a separate move by California health regulators last December to stop production for a month to make sure the sauce was safe, despite no one ever complaining about it. Regulators did not find problems during the stoppage.

In all, Tran’s experience has become a cautionary tale for entrepreneurs going to market with unorthodox products that become popular.

“What’s doubly troubling for Tran is that he opened his new Irwindale factory precisely because demand for his Sriracha sauce had increased so dramatically,” Kate Pickert writes in Time. “But that decision has only invited more business complications and an opening for others to capture market share.”

Yet Wednesday night’s decision in Irwindale also highlights a natural corrective to the American marketplace: Other cities, mainly in California and Texas, actively courted Tran, with Oroville, Calif., even offering the company “streamlined permitting” to get up and running. Texas, for one, is in heavy competition with California over economic development projects.

“Thank you so much for saving Irwindale because we were headed in the wrong direction,” resident Fred Barbosa told the Star-News after the vote.

The Sriracha troubles began during the annual August chili grinding last year, when residents complained of noxious chili fumes.

After a February public hearing where residents recounted the effects of the fumes, the city council last month voted unanimously to declare the site a public nuisance, which opened the door to possibly squelching the world’s supply of Sriracha.

The gist of the conflict seemed to be this: The city said that Tran was uncooperative in addressing the problem, thus putting him in breach of contract. Tran’s lawyer said the company thought it was doing what the city wanted. The relationship has been fraught with protests and complaints, with Tran exclaiming last month at a city council meeting: “Why do you hate me, why do you want to shut me down?”

Wednesday’s vote came after Tran assured council members that he had installed a stronger kind of filter that should fix the problem. “At the commencement of this year’s chile harvest season, if the air filtration system does not perform well, then Huy Fong Foods will make the necessary changes in order to better the system right away,” Tran wrote in a letter to the council.

“I believe he stands by his word,” Mayor Mark Breceda told reporters. “I will say that I believe that not always lawsuits are good for any business or any community. It’s not only hurtful but expensive. I don’t believe at this point that it was the right way to go, but certain things had to be done.”

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