A very spicy lawsuit between the company and its supplier has contributed to the change in taste of the well-loved Sriracha sauce.

Any hot sauce lover out there has tried the ever-so-popular Huy Fong Foods’ Sriracha Hot Sauce. But did you know that a green-capped bottle of this famous sauce will now cost you up to around $52 (approximately PHP 3,000) on Amazon? That’s a huge jump for a bottle of hot sauce that previously cost just under $5 or $10 (approximately PHP 285 or PHP 570). 

In fact, it was so hard to find the Huy Fong Foods Sriracha Hot Sauce that people started talking about a possible Sriracha shortage. Many alternatives also started popping up on grocery shelves, but many loyal patrons have said that nothing compares to Huy Hong’s version. 

Apparently, not even itself. 

Fans of the beloved hot sauce have complained that it no longer tastes like it once did. And there is a reason for all this. For one thing, it all started with a very spicy lawsuit that put a bitter end to the decades-long relationship between Huy Fong Foods and its pepper supplier. And this may very well change the well-loved legacy brand. Here’s what happened.

The Company: Huy Fong Foods

Huy Fong Foods traces its origin back to Vietnam where founder David Tran began making hot sauces using peppers grown on the farm of his older brother. Reports note that even after leaving Vietnam due to the Sino-Vietnamese War in February 1980, Tran continued making his sauces in California.

Eventually, Tran started his own company, which he named after the boat he boarded to escape the war. Tran has since expanded beyond sriracha to include other sauces like the chili garlic sauce among the company’s products.

To date, Huy Fong is one of the leaders in the Asian hot sauce market with $150 million (around PHP 8.36 billion) in revenue as of 2022. And while the 43-year-old company’s success has attracted interested businessmen and investors through the years, the company remains run by the family—with William, Tran’s son, serving as president and his daughter Yassie as its vice president.

The Supplier: Underwood Ranches

Underwood Ranches and Huy Fong have had a long-standing relationship. As a family farm based in Ventura County, California, it has supplied jalapeño chili peppers to the hot sauce company for over 30 years.

Established in 1867, the family farm is currently owned by Craig Underwood. And while it has grown many different crops, its specialty lies in its chili peppers—thus making it the “leading US jalapeño pepper grower that powered the sriracha revolution.”

The partnership between the two—sparked by the senior Tran—had been so successful that, at one point, 75% of Underwood Ranches’ income came from Huy Fong. Thus, to keep up with demand, Underwood produced 100 million pounds of peppers every year on 1,750 acres of land, with the hot sauce company as its primary customer.

The Lawsuit Between Huy Fong Foods and Underwood Ranches

Things began to go south in 2017—no thanks to a legal battle between the two. Huy Fong claimed it overpaid Underwood Ranches for its peppers from the 2016 season. The company then filed a lawsuit against its supplier, claiming that Underwood Ranches did not pay back the money they owed. 

“We had been investing in the next year’s crop and crop beyond. So, we felt that was really our money,” Underwood said in an interview with CNBC. “But [Huy Fong founder David Tran] decided to sue us for that.”

Underwood Ranches then countersued, claiming that the allegations against them were false. The pepper supplier likewise accused Huy Fong of breach of contract. According to reports, Huy Fong began contracting new farmers despite already having an agreement with Underwood, as Huy Fong terminated the relationship without notice in 2016.

The result? The farm lost 80% of its revenue and was forced to lay off 50% of its employees.

In 2019, two years after the legal dispute began, the court sided with Underwood Ranches, which meant that Craig Underwood won a $23 million judgment, but had to also pay David Tran back the $1.5 million that Huy Fong says they overpaid.

Even so, the damage was done. “As a small business, it simply lacked the funds to maintain its operations and pay additional legal fees during a lengthy appeal which was not without risk.  Although it had won a trial verdict, it might not collect its recovery for up to two more years,” notes a statement from Buford Capital—the company that provided legal finance to help Underwood Ranches during the appeal.

The Sriracha Shortage

The souring of the relationship between Huy Fong and Underwood Ranches ended what was once a longtime partnership. It therefore comes as no surprise that Underwood stopped supplying their peppers to Huy Fong.

Because of this, Huy Fong had to source their peppers elsewhere. Per CNBC, their peppers are now sourced from farms located in New Mexico, California, and even in Mexico. And with this, the brand even faced supply chain issues—such as a shortage from 2020 to 2022.

“Currently, due to weather conditions affecting the quality of chili peppers, we now face a more severe shortage of chili,” Huy Fong Foods noted in a statement addressed to customers last 2022. “Unfortunately, this is out of our control and without this essential ingredient, we are unable to produce any of our products: Chili Garlic, Sambal Oelek, and Sriracha Hot Chili Sauce.”

The Change in Taste of the Well-loved Sriracha Sauce

Whether it was the end of its relationship with Underwood Ranches or the fact that Huy Fong Foods is now sourcing its peppers from various suppliers, the change in such a crucial ingredient meant that the taste of Huy Fong’s iconic sriracha was no longer the same.

In a video by popular food TikToker Sovanna (@sovannascooking), she compares the old and new Sriracha sauce. “So the result based on my taste, the older version tastes better than the newer version,” she says in her video after tasting the two. Moreover, she notes the distinct change in color, with the older version having a bright red color and smooth texture, while the newer formulation showed a bright orange and grainy texture.

Since then, the video has amassed over 460,000 views, with viewers commenting things like “The older version is still not as good as the original version. Sriracha needs to stop burning its bridges with their chili providers.”

“It sounds like the processing plant felt they could get cheaper jalapeños on the fresh open market,” says Stephanie Walker, an extension vegetable specialist at New Mexico State University. “And in some years, if jalapeños are in abundant supply, you might get away with that. But in years that jalapeños and other fresh crops are in short supply, it’s impossible.”

And ironically, Craig Underwood himself has been making his own sriracha using the very peppers grown in Underwood Ranches. And it has been going swimmingly for the business owner. “We’ve had a huge demand for our product from Huy Fong’s former customers, as well as people out in the street who are looking for sriracha,” he said.

The Lesson to be Learned

The deterioration of Huy Fong Foods and Underwood Ranches’ relationship and how it eventually affected the former’s product should be a lesson to entrepreneurs everywhere. And that is to cultivate a healthy relationship between the business and its suppliers—even more so for longtime and trusted people.

What’s more, cheap alternatives are not the way to go, as changing the raw materials used for a product will affect the product’s quality. In the case of Huy Fong, losing its original pepper supplier meant its popular sriracha would no longer taste the same. 

Unfortunately, despite finding new suppliers, the new taste has disappointed many of their customers to this day. 

Beyond profits and making a sale, it is important to note that building and maintaining relationships are just as important. It can take one instance to break a carefully built relationship, which can severely affect relationships with suppliers and even customers moving forward. What’s more, it can spread like wildfire within the industry, which can lead to a negative snowball effect when done wrong.

Simply put, businesses and suppliers should ensure that their relationship is built on trust, honesty, and transparency. This allows both parties to grow and prosper together while avoiding costly lawsuits and business risks.