Food Processors Prospering While Farming Falters

In 1970, its first year of business, El Metate Mexican Food Products Inc. of Santa Ana sold $250,000 worth of corn and flour tortillas.

Last year, thanks largely to Southern California’s growing Latino population, the company sold $3 million worth of tortillas.

El Metate, which is projecting a 15% sales gain this year, is just one of the many specialty food processors prospering in Orange County despite the rapid decline of farming in the area.

State, county and industry officials said growth in the county’s ethnic population and an increasingly adventurous dining public eager to sample other cuisines means that the number of specialty food processors probably will continue to grow even as traditional processing operations shrink and consolidate.

Also spurring the growth is the huge and affluent marketplace Orange County offers to would-be purveyors of foods--plain and exotic--and the growing demand for convenience food that is also nutritious.

In all, Orange County has 177 food-processing companies, two more than in 1980. By far the largest is Hunt-Wesson Foods Inc. in Fullerton, a unit of Chicago-based Beatrice Foods Co. Hunt-Wesson employs 300 to 1,600 workers in Fullerton, depending on the season, and makes vegetable oil and a variety of tomato products.

At the other end of the spectrum is Oh Bok Foods in Garden Grove, which has six employees and a single product: tofu. The molded soybean curd has found a new following among health food aficionados--and owner Young Park is reaping the benefits.

The county’s large and growing Southeast Asian community, now imports substantial amounts of pickled beans, fish and mushrooms. But new processors are likely to open in Orange County to handle those items, predicted Ozzie Schmidt, district supervisor for the food and drug branch of the state Department of Health Services.

“Ethnic food (production) is certainly increasing,” said Schmidt.

Park, who bought the 3-year-old company in 1983 when it began to falter because of the area’s stiff competition, now supplies tofu to Korean markets and restaurants as well as vegetarian outlets such as Loma Linda Foods in Riverside.

Park said he hopes to branch out into other types of Asian foods and plans soon to introduce a burger-like patty made of soybeans.

A greater emphasis on nutrition and convenience is the biggest trend in the industry, for processors of all types of foods, industry specialists say.

Although Orange County once was a major agricultural area, most of the raw foodstuffs that become the tomato purees, chili sauces, tortillas, English muffins, orange drinks, chewing gums and other locally processed products are no longer home grown. Orange County fields, for example, provide Hunt-Wesson with only a small portion of the tomatoes it processes. Most come from growers as far north as Fresno and as far east as Yuma, Ariz.

Growers Bought Out

But the processors are here because it is cost-efficient to keep food-processing operations closer to the large urban markets than to the rural fields.

Some companies even purchase nearby grower companies to have a direct source of food for processing.

Richard Morales, vice chairman of the board at Alex Foods Inc., a Mexican food maker in Anaheim, said his company recently bought a small San Bernardino produce company to supply vegetables for its salad-making operations. The new acquisition joins a family that also includes Pinata Foods and Alex Brands Inc., both of Anaheim.

Morales said the companies have seen steady growth since World War II, primarily because of the growing popularity of Mexican foods among Anglos. The recent influx of Latino immigrants has added a new boost to the firms’ growth, he said.

The privately owned group of companies, founded in 1907 by Morales’ father, employs a total of 600 workers. “The growth has been astronomical,” Morales said, noting a string of 10% annual increases in recent years. “I don’t think it’ll stop.”

Big Operators Fewer

But while small specialty food processors are expected to increase their presence in Orange County, the larger, more traditional processing operations are shrinking due to mergers and other efficiency-aimed moves.

“There has been a dramatic consolidation over the last 10 years,” said Bill Blodgett, a spokesman for Hunt-Wesson in Fullerton.

The dairy industry offers a good example of that trend. In the 1930s, Orange County was home to dozens of dairies and dairy-processing operations. What is now the City of Cypress was called Dairy Valley. Today there is not a single dairy farm in the county and only a few companies still process milk products. Meat processors also have closed or moved as housing tracts and commercial development encroached on grazing lands.

High labor and land costs in Orange County also have helped reduce the number of traditional food processors because of the relatively low-profit margins in the industry, according to Jack Hingst, owner of H & H Sales Co., an Orange-based industrial food brokerage. Equipment and marketing expenses also make starting a food-processing concern an expensive proposition.

Because of relatively low commodity prices, 1986 looks favorable for food processors, said Romayne Chamberlain, news editor of Food Processing, a Chicago-based industry publication.

No Price Rises Expected

Commodity prices fell almost 20% in 1985, said Fred Cannon, an economist with Bank of America in San Francisco. Cannon and other agricultural economists say increases in commodity prices are unlikely in 1986, and that means food prices on store shelves should remain stable.

Restrictive state environmental laws and high property taxes also discourage large food processors from locating in the county or expanding existing operations, said Mike McGrath, marketing director for All American Gourmet Co. in Orange.

McGrath said that while All American maintains its headquarters in Orange, all its processing facilities are in Pittsburgh and Atlanta, cities with lower labor costs and land prices.

High labor costs are the biggest factor discouraging large food processors from locating in the county, McGrath said. According to the latest figures compiled by the state Employment Development Department, about 38% of the food-processing workers in the county are union members whose pay and benefits are usually higher than those of non-union workers. Small, family-run processors, however, are largely immune to such problems as labor costs and labor strife.

Jobs Total 9,500

In October, the department counted 9,500 workers in Orange County food processing, up slightly from the 1984 average of 9,100 but below the 1981 peak of 9,800 workers. That makes the industry a relatively small player in the county manufacturing profile, which tallied a total of 231,000 jobs in October. Typically, food-processing employment grows about 15% in the spring and early summer, EDD figures indicate.

Orange County has another problem that affects food processors--air quality.

Hunt-Wesson said it discontinued spinach processing in Fullerton in the mid-1970s when it discovered that smog damaged the leaves.

Despite the expense and difficulty of getting new products on grocery shelves, new food ideas keep coming.

Hunt-Wesson says people frequently write the company with something like: “My Aunt Millie’s recipe for barbecue sauce is absolutely marvelous and they say I should market it.”

Blodgett’s response: “I tell them we have 150 people in research whose job it is to create new foods.”