Business Wars — The Great Sriracha Feud | Showdown | 2

Podcast: Business Wars (Wondery)
Host: David Brown
Release Date: September 17, 2025

Episode Overview

This episode delves into the fiery split and subsequent legal and business battle between Huy Fong Foods, creators of the iconic Sriracha sauce, and their long-time jalapeño supplier, Underwood Ranches. Through dramatic recreations and industry analysis, the episode explores how a partnership that fueled the rise of America’s favorite hot sauce unraveled, leading to lawsuits, supply crises, a market-wide shortage, and a permanent shift in the hot sauce landscape.

Key Discussion Points & Insights

1. The Breakdown of a Vital Partnership

• The episode opens with the tense 2016 meeting between Donna Lam (COO of Huy Fong Foods) and Craig Underwood (Underwood Ranches), where Huy Fong demands a new payment structure that would force Underwood to sell at a loss ([00:02]–[04:20]).
  • Quote:
    • "You're asking us to operate at a loss." — Craig Underwood ([03:12])
  • Huy Fong proposes buying chilies through a new intermediary, "Chilico," at a lower price, further eroding trust.

2. Immediate Consequences for Underwood Ranches

• After refusing the deal, Underwood faces catastrophic financial consequences: leases, unprepped land, and the prospect of laying off half his staff ([07:13]–[10:40]).
  • Quote:
    • "We're going to have to lay off half our staff." — Underwood ([10:21])
• Underwood feels blindsided and believes Huy Fong abandoned the deal without fair warning.

3. Huy Fong’s Perspective and Strategic Moves

• Huy Fong, meanwhile, tries sourcing peppers from Mexico and using pepper mash, but quality and risk concerns persist.
• The company’s rationale: They’d protected Underwood from risk for years and feel betrayed by his refusal to negotiate ([11:00]–[13:00]).

4. Legal War: Lawsuits and Countersuits

• Huy Fong audits payments and sues Underwood for overpayment, while Underwood countersues for breach of contract, seeking $20 million in damages ([14:00]–[17:00]).
  • Quote:
    • "I was such a fool trusting them. I wonder how long they were planning this." — Craig Underwood ([16:22])

5. Underwood’s Reinvention & Entry into Sriracha Market

• With finances dwindling, Underwood pivots: growing new crops and launching his own sriracha sauce, touting his history as Huy Fong’s original pepper supplier ([18:20]–[20:30]).
• His sauce, though less garlicky, gains attention during the Sriracha shortage.

6. The Jury Sides with Underwood Ranches

• In 2019, a jury rules that Huy Fong breached its contract, awarding Underwood $23.3 million. Huy Fong appeals, but the verdict stands ([21:40]).
  • Quote:
    • "When the verdict came in, I had tears in my eyes." — Craig Underwood ([22:34])

7. Supply Chain Crisis and Sriracha Shortage

• Following the fallout, Huy Fong struggles to source enough quality peppers, leading to massive Sriracha shortages in 2022 and again in 2024 ([24:00]–[26:10]).
  • Scarcity spurs hoarding, price gouging, and pushes customers to look for alternatives.

8. Opportunity for Rivals: Rise of Tabasco’s Sriracha & Others

• McIlhenny Company (Tabasco) and others seize on the gap, launching marketing campaigns (e.g., "srirachashortage.com") and establishing Sriracha as a category, not just a brand ([28:19]–[30:30]).
  • Quote:
    • "Many people don't even know that any other company makes Sriracha." — Lee Susan, McIlhenny Co., ([28:34])
• Taste tests and social media challenges flood the internet as consumers seek out new favorites.

9. Return of Huy Fong Sriracha — and Brand Damage

• Sriracha finally returns to shelves after months, but customers complain that the flavor has changed, leading to further negative press ([32:42]–[34:00]).
  • Quote:
    • "There is zero spice to it, and I'm let down." — Disappointed customer ([33:24])

10. Long-Term Impact: Erosion of Trust and Market Dominance

• Loyal customers and farmers feel burned, and even after supply resumes, competitors—including Underwood and Tabasco—gain permanent footholds.
• By late 2023, McIlhenny’s Sriracha outsells Huy Fong’s in the U.S. ([38:30]).
• Negative word-of-mouth persists, while a new generation (Gen Z) discovers Sriracha through viral scarcity, suggesting both a challenge and an opportunity for the brand ([41:30]–[43:00]).

Notable Quotes & Memorable Moments

• On the supplier relationship crumbling:
  • "We had a deal. What changed?" — Craig Underwood ([03:35])
• On the pain of transition:
  • "I don't know how we're going to get through this." — Craig Underwood ([09:30])
• On what built Huy Fong’s strength:
  • "They were a category creator, and to such an extent that many people don't even know that any other company makes Sriracha." — Lee Susan, McIlhenny ([28:34])
• On consumer reaction to Sriracha’s return:
  • "Isn't it great? It's finally back. Our long national nightmare is over." — Hanley Su, restaurant owner ([37:03])
  • "'Oh, you don't want Sriracha?' 'No, I want the other stuff...Cholimex. Can I get that instead?'" — Customer & Hanley Su ([37:12])

Important Timestamps

• 00:02 — The pivotal 2016 negotiation & collapse of supplier relationship
• 07:13 — Underwood faces economic fallout, layoffs looming
• 14:00 — The lawsuits begin (Huy Fong vs. Underwood Ranches)
• 18:20 — Underwood reinvents, launches his own Sriracha sauce
• 21:40 — Underwood wins lawsuit, $23.3 million judgment
• 24:00 — Sriracha shortage hits, sparking national drama
• 28:19 — McIlhenny’s Tabasco strategizes to capitalize on Sriracha woes
• 32:42 — Huy Fong Sriracha returns, but customers notice changes
• 37:00 — Restaurant scene where customers prefer the new alternatives
• 38:30 — McIlhenny surpasses Huy Fong as top Sriracha brand

Analysis & Conclusions

• Scarcity’s Double-Edged Sword:
  The shortage turned Sriracha into a sensation, but also opened the door for mass defection as new sauces were discovered to be as good—or better.

• Brand Erosion and Trust:
  Huy Fong’s reputation suffered permanent damage—not from price, but from perceived betrayal of quality and relationships.

• The Power of Alternatives:
  The crisis reshaped not just business relationships, but consumer habits. Competitors like Tabasco and Underwood Ranches thrived, and new consumer favorites (like Cholimex) gained ground.

• Lessons in Resilience:
  Both Huy Fong and Underwood Ranches showed adaptability, but the cost of broken trust lingers. As the episode notes, “rebuilding trust is going to take more than restocking shelves. It'll require consistency, communication, and—okay, here we go—actual marketing.” ([42:50])

Tone and Style Notes

David Brown narrates with dramatic flair, using both historical fact and recreated dialogue for an engaging, almost cinematic listen. The episode keeps a brisk pace, but doesn’t shy from the profound emotion and stakes—making clear this isn’t just a business story, but one about trust, identity, and the high price of a broken partnership.

Final Thought

The days when “Sriracha” meant only one bottle with a green cap may be over. But as Brown wryly puts it in closing:
“Deep down, I still like to think no one can kill the rooster.” ([43:36])

For new listeners:
This episode provides a masterclass in how relationships, not just products, make or break iconic brands—and why in business, as in life, trust is everything.