Friday, September 17, 2010

Turning a family recipe into a business

Arobind Velagapudi wasn’t impressed with the bland Indian sauces he found in grocery stores. So he set out to do better.

“I always wanted to do something with food because I loved cooking,” said Velagapudi, an engineer by training who relocated from India to San Diego in 1998. “I thought I could make a better product.”

His Spicy Nothings sauces, slow-cooked and preserved with lime juice or vinegar, are now selling briskly in more than 400 stores around the country.

Velagapudi is part of the specialty food industry that is growing each year even in a tough economy, and San Diego County has plenty of creative entrepreneurs striving for their share of the $50 billion U.S. retail market. Dozens of small, local businesses including Spicy Nothings are selling their products on a national scale, along with a number of tiny companies available only in local outlets.

Velagapudi’s products illustrate one quality that many San Diego-area products have in common: intense flavor.

The proximity of the U.S.-Mexico border and a diverse population of immigrants from Europe and the Middle East have resulted in a variety of eye-popping tastes. From salsa to hot sauce, hummus and spicy barbecue sauce, these food products often feature fresh chilis, spices, onions or garlic.

“It’s a full-time job,” Velagapudi said. “Lots of people keep their day job and try to do something on the side. Believe me, it’s not possible. If you’re trying to do something on this scale, you need to be completely involved in it.”

Velagapudi determined he would need a minimum of $250,000 to set up a small warehouse with equipment and hire three or four employees.

“You could have a company that has its own brand, producing its own product from 9 a.m. to 3 p.m., then producing another product in the evening for someone else,” he said.

Velagapudi started producing his sauces using a copacker in Oregon, but said he fired the company when the owner sent along some samples with an “improved” recipe. “I could easily taste the cheap oil in there; I could tell he used precooked onions and tomato paste instead of fresh tomatoes,” he said. After that, he said, he no longer trusted the copacker’s commitment to quality.

He is now using a copacker in Phoenix. Entrepreneurs who decide to outsource production say it frees their time for marketing.

Velagapudi, for example, does his own product demonstrations at Costco. He cold-calls distributors and stores each day and sends them samples of his spinach curry sauce. After just two years, his company is breaking even and he’s optimistic about the future
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