HOT PROPERTY

Over the last decade, Sriracha chili sauce has gone from being a condiment at Asian restaurants to one of hottest sauces in the world – both literally and figuratively. A U.S. version of the Thai sauce made by Huy Fong Foods Inc. has spawned 70,000 likes on an unofficial Facebook fan page, fawning hashtags on Twitter and an acceptance from ethnic Asians to urban foodies alike. The Rosemead manufacturer ships a startling 20 million bottles annually, but here’s a little known fact: its primary ingredient – red jalapeño peppers – are all grown in the region by a local family farmer. Craig Underwood and his Underwood Ranches LP of Camarillo has been the sole supplier of peppers to Huy Fong for about 20 years. And last year he harvested some 100 million pounds of peppers grown on 1,700 acres in Ventura, Los Angeles and Kern counties. “This sauce has staying power. And we’ve never had more land than we have now,” said Underwood, 71, a fourth-generation owner of the company. “We’re totally dependent on what happens with Huy Fong Foods.” Sriracha, which is believed to have originated in the 1930s and takes its name from the Thai coastal city of Si Racha, is a simple sauce. It counts just chilies, sugar, salt, garlic, distilled vinegar and some preservatives as its ingredients. The chilies that are shipped to Huy Fong, founded in 1980 by Vietnamese immigrant David Tran, are ground up fresh, and after processing, packaged and shipped in what is becoming an iconic plastic bottle with a green top and rooster on the front. The sauce has found its way into restaurant menus, cookbooks and television shows. And if it’s not Heinz ketchup, it’s on equal footing for foodies with other condiments such as Tabasco, made by McIlhenny Co. of Avery Island, La., and Cholula Hot Sauce, produced by Salsas de Jalisco Cacu S.A. de C.V. in Mexico City. Indeed, Huy Fong has been on a wild growth spurt. It recorded more than $60 million in sales last year, but he declined to state growth from the previous year. “We keep growing,” he said, simply. “All I know is every year, we need to increase more and more the land and get more chilies.” About the only obstacle standing in the way of the sauces further growth – and Underwood Ranches’ continued prosperity – is a controversy over the smells emanating from Huy Fong’s Irwindale plant. Due to complaints by residents over smells they say come from the plant, the city filed a lawsuit and a Los Angeles County Superior Court judge has ordered no peppers can be ground up in the plant until the dispute is resolved. Grinding was completed for last year’s chilies about two months ago and the plant is now in the process of bottling and shipping product, so there is no immediate danger to Huy Fong. (See article page 37.) But grinding at the plant can’t remain in limbo forever, given that Underwood will start planting in March for delivery of this season’s chilies to Huy Fong as early as July. “Our peppers are not really a commodity that can be replaced,” said Jim Roberts, the farm’s chief operating officer. “If we don’t plant, they won’t get the best supplies.” Deep roots Underwood’s great grandfather started the farm in 1867 growing lima beans on about 40 acres. Over the decades, the farm has grown everything from cannery tomatoes for Hunt’s, a unit of ConAgra Foods Inc. of Omaha, Neb. to lemons for Sherman Oaks citrus marketing cooperative Sunkist Growers Inc. But like many in the agriculture industry, Underwood struggled through the 1980s. Prices for his various vegetable specialty crops fell, and Underwood said he had to sell more than half of his land and assets to pay back debt. But the farm has been on an upward trajectory since a local seed shop worker tipped them off in the late 1980s about Huy Fong, which was founded in Chinatown and moved to Rosemead in 1986. Underwood sent a letter to Tran, who was unhappy about his chilies that he was sourcing from Mexico at the time. Transit was lengthy and they would often soften by the time he received them. Tran told Underwood to grow chilies on about 50 acres and within five years Tran stopped getting chilies from anywhere else. “They are our sole supplier and grow a very good product,” Tran said. For the coming season, Underwood expects to plant peppers on about 2,100 acres, mostly in Ventura County. The 1,200 or so Ventura County acres are leased from a variety of entities, ranging from family trusts to the county. Underwood also grows his peppers on about 600 acres in Kern County and 250 in Los Angeles County, mostly in the Santa Clarita Valley. The journey for Underwood’s red jalapeño peppers from seed to sauce is a long one. The process starts in December, when Underwood has seeds planted in a nursery to help grow the pepper into a small plant. Those plants are then transferred to the fields from March through mid-June, with the farmers planting in Kern County first where it’s hotter and then moving west to Ventura County. They’ll return to Kern County in July to begin harvesting peppers, using about a dozen machines fabricated from a modified tomato harvester that is about 12 feet tall, more than 13 feet wide and some 30 feet long. The machine is dragged by a tractor. Within a month, peppers begin arriving in Irwindale for grinding, with the harvest finishing up in Ventura County in November. A month later, the cycle starts over. “We can’t do anything different. This freight train is running,” Roberts said. Revenue streams John Krist, chief executive of the Farm Bureau of Ventura County, a trade group in Ventura, said the relationship between Underwood and Huy Fong is unique in the local agricultural community. “There are a lot of models for farming, but it’s fairly unusual for the manufacturing of a product to require something we grow out here as its main ingredient,” he said. Still, peppers aren’t the only business for Underwood. His land also grows a number of other crops, including beats, turnips, fennel, Brussels sprouts and artichokes. Underwood sells his other harvests primarily to the restaurant industry, but said he does have some contracts with grocers such as Kroger Co. of Cincinnati and Costco Wholesale Corp. of Issaquah, Wash. Underwood also operates a more community-based business called Underwood Family Farms. The operation has locations open to the public in Somis and Moorpark, where families can host birthday parties for kids, go on educational farm tours or buy fresh produce at stands. But still, Underwood is happy to call himself a pepper farmer and said that business is, by far, his largest. The red peppers that make up the trendy sauce represent about 75 percent of his operations, which employ hundreds depending on the season. Total revenue hit about $30 million last year. “Up until about last year, we didn’t even know how popular this thing was,” joked Roberts, adding seriously: “They’re business is growing about 25 percent a year and we have to add land to keep up with that.” So how big can the business ultimately get? Nobody really knows whether the sauce’s current popularity is rooted in a fad or if it has staying power. Popular restaurant chains such as P.F. Chang’s China Bistro Inc. have featured the sauce on its menu. More recently Subway restaurants, a unit of Doctor’s Associates Inc. in Milford, Conn. has created sandwiches based on the sauce. There are Sriracha cookbooks, a Lay’s potato chip flavor and an independent film documentary on the sauce released last month. There was even an L.A. Sriracha Festival in downtown in October. Whatever the future holds, Underwood is happy to ride it all out as long as he can, assuming Irwindale and Huy Fong will resolve their issues about the factory. He already has money on the line, having invested in this year’s seeds and keeping the land clear for the crop. Underwood is routinely operating about nine months ahead of Huy Fong, so the chilies can be ready for shipment on time. “We’re already getting the bills,” said Underwood, his smile shrinking. “We hope for a future in this business, but nothing is guaranteed. If they went down, we’d have to make some major changes around here.” Too Spicy for Its Own Good? The uncertainty for Underwood Ranches stems from a massive facility Huy Fong constructed in Irwindale about two years ago. The city sued Huy Fong in October after several residents complained about pungent odors that led to some health concerns, including burning eyes and headaches. In November, L.A. County Superior Court judge Robert H. O’Brien ruled in favor of the city, ordering the company to shut down the part of its operations that produces odors, specifically grinding of the peppers, pending an overhaul of its filtration system. The judge agreed with the city that the smell was a “public nuisance.” The facility is still able to mix and bottle the product, which it is in the process of doing now for shipment. The legal action surprised some, as Irwindale worked hard to court the company when Huy Fong was seeking somewhere it could expand. It even offered a low-interest loan to entice the company to build its $40 million plant. The city said there is nothing more to the dispute than a bad odor, and has recommended the company install an advanced air filtration system that could cost up to $500,000. “We were coughing and gagging; it’s very, very bad,” said City Manager John Davidson. “The filtration system is totally under engineered and it needs to be corrected. But we like having them here and want to keep them in town.” The 23-acre Huy Fong compound at 4800 Azusa Canyon Road has more than 475,000 square feet of warehouse space, 150,000 square feet for production and 25,000 square feet of office space. In all, it totals about 655,000 square feet – a vast increase from Huy Fong’s two buildings that total 68,000 square feet in Rosemead, where the company still maintains its headquarters. David Tran, owner of Huy Fong, disagrees with the city’s assessment of his facility. He even goes a step further to accuse Irwindale of looking for a problem that doesn’t exist. “It seems like they’re just trying to cause trouble,” he said. “Everything is OK for 2014 because grinding is done. But next year, who knows.” Irwindale is a mostly industrial city, with the majority of its space occupied by rock quarries. The 10-square-mile municipality also houses a large MillerCoors LLC plant and has about 1,400 residents, according to the 2010 Census. But as a result of all the turmoil, other states – including according to some reports Texas and Pennsylvania – have made overtures to Huy Fong Foods about relocating its plant. Tran wouldn’t acknowledge directly any specific attempts from other states to poach the company, and said he would prefer his operation remain in Irwindale. However, he has not ruled out relocation, speaking with a combination of contempt and confusion. “We want to solve the problem in California first, he said. “But if we’re unable to solve it, we’ll shut down and move.” Craig Underwood, owner of Underwood Ranches, said he believes the two sides will ultimately resolve their differences. “It’s in neither party’s best interest to take this to the max,” he said. “The city couldn’t want that big of a business to shut down.” – Elliot Golan