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Sriracha shortage: Meet Craig Underwood, the chili pepper farming millionaire

In the 1980s, Craig Underwood was a fourth-generation California farmer, struggling with the region’s changing agricultural landscape, when he stepped up to fill a need in the market: red jalapeno peppers.

The call came from David Tran, a Cantonese refugee from Vietnam who had arrived in the Golden State a few years earlier. He had developed a sauce aimed at lovers of the Southeast Asian flavor profile, called sriracha, but needed a supplier.

In 1988, a seed supplier told Underwood that Tran needed a pepper fix, and Underwood decided to write to Tran with a simple question: “Do you want me to grow some peppers?”

Tran hired the farmer to farm 50 acres and the couple began a partnership that was “very unusual in the processing business,” as Underwood described it in a 2013 documentary about the duo. As long as Tran sold salsa, she said, “we have to grow it for them.”

Within a few years, Underwood had become Tran’s exclusive supplier of pepper, expanding his farm by thousands of acres to grow in the process. The duo developed a personal relationship and business agreement that lasted almost 30 years. Then came sudden fallout and a lawsuit that cost both men millions, along with a lot of anger and hurt feelings. FortuneIndrani Sen reported.

Underwood’s farm, called Underwood Ranches and located in Ventura County, California, grew to become one of the nation’s leading producers of jalapenos. During his partnership with Tran, Underwood rented and purchased land to grow from about 400 acres to about 3,000 acres to grow enough peppers for Tran’s breakneck business, Huy Fong Foods, which made $131 million in sales in 2020.

Tran and UnderwoodThe years of success together.

Tran and Underwood met each other’s families, watched their respective children grow up, and even met to discuss the succession of their partnership. In 2013, when the city of Irwindale filed lawsuits against Tran’s factory alleging that the smell of the peppers gave neighbors headaches, Underwood testified on her behalf at a city council meeting.

The sauce business flourished. In 2012, Tran built a 650,000-square-foot factory less than two hours from Underwood’s headquarters in Ventura County. Huy Fong remained an independent company, turning down offers from large food corporations to buy or invest and never spending a cent on advertising. Regardless, the brand spread like wildfire, and other brands and fans created products like mugs, earrings, and clothing, all as a tribute to salsa’s success in pop culture.

But it all ended in a bitter conversation. The two men have different accounts of what exactly happened in November 2016, but it was an afternoon’s argument over prices that broke up the couple’s relationship forever.

The consequences and the consequences

The schism cost both men millions. Tran’s factory in Irwindale has operated sporadically and at a fraction of its capacity. Underwood, having purchased and leased thousands of acres of land to supply Huy Fong’s pepper needs, faced financial ruin. He took out loans and laid off 45 workers while trying to “figure out what the hell is going on.” FortuneIndrani Sen reported.

Then came the lawsuits. In 2017, Huy Fong Foods sued to recover $1.4 million it overpaid for the 2016 growing season, and Underwood countersued, alleging fraud. A jury ruled in Underwood’s favor, awarding her $13.3 million in compensatory damages and $10 million in punitive damages. The jury also ordered the farmer to reimburse Tran for the $1.4 million overpayment.

Sriracha fans around the world are still feeling the sting of the consequences. For Tran, the dissolved partnership caused a sriracha shortage, leaving store shelves without the green-tipped bottles for more than three years, leading fans and restaurants to stockpile bottles.

For Underwood, the loss resulted in layoffs, loans, and poor sales, leading him to believe that Tran “really wanted to destroy him.” Since then, she started her own brand of sriracha, called Dragon Sriracha, which joins a growing list of Huy Fong competitors that offer alternative versions of the sweet and spicy sauce.

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